Borislav Tonev

More Death Claims Arrive in General Motors Company (NYSE:GM)'s Mailbox

by Borislav Tonev August 27, 2014

Customer satisfaction is very important for car companies. It also appears to be important for investors. Don't believe us?

Take a look at Tesla Motors Inc (NASDAQ:TSLA, TSLA message board). A couple of days ago, two Model S owners published an open letter to Elon Musk saying that a few design changes would make the ownership experience even more pleasant. Mr. Musk reacted quickly and on Saturday, he said that they are right and informed everybody that the suggestions will be implemented really soon. This helped TSLA gain as much as 2.25% on Monday.

General Motors Company (NYSE:GM) is another example. Yesterday, ACSI (the American Customer Satisfaction Index) published their 2014 report and according to it, Buick and Chevrolet were the only two American brands to score an increase in the number of happy customers. As a result, GM's stock registered a green session and it managed to briefly touch the $35 per share mark for the first time in almost a month.

Unfortunately, as you probably know, not everyone is happy about GM and their cars. USA Today reported on Monday that the number of death claims related to the faulty ignition switches has exceeded 100. This is in stark contrast to the company's own estimates of thirteen deaths caused by the safety defect. Of course, there can be no way of knowing how many of the claims will be deemed eligible for a payout, but Barclays apparently estimated that the total amount GM will have to part with hovers around $2.5 billion.

In addition to this, the law office of Alfred G. Yates Jr., P.C. announced that they are starting an investigation against GM without giving out too much details on what exactly they're unhappy about (though we can guess that it's related to the ignition switch).

Yesterday, another law firm that goes by the name Schubert Jonckheer & Kolbe LLP said that they also want a piece of the action. They were a bit more specific on the reasons, though – apparently, they reckon that the Board of Directors might have “knowingly or recklessly failed to timely report safety defects”.

As you probably know, the law firms won't be the first people coming after GM. Federal prosecutors are also probing into the company and are trying to see if everyone did what they were supposed to do when they found out about the dodgy ignition switches.

Despite losing quite a lot of ground after the company failed to meet the Q2 projections and despite the barrage of negativism, potential lawsuits, and serious allegations, the stock is still managing to remain relatively calm. If something does come out of all the investigations, however, this could change very quickly.

About forty minutes after today's opening bell, GM is around 0.1% in the red.

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