Turmoil surrounding General Motors pushed down its closing share price Friday below $32, first time since June 28 last year the shares have closed below the IPO price of $33.
The stock topped recently at $41.85 Dec. 17, after the federal government sold its remaining stake in GM. The closing price of $31.93 Friday is a 23.7% drop since then.
While markets were down roughly 1% Friday, GM shares fell 4.1%.
“GM’s ongoing recall situation is an unfortunate setback that is detrimental to valuation,” Wall Street auto analyst Ryan Brinkman of J.P. Morgan wrote to clients earlier Friday. But he noted that investors’ pummeling of the stock now is a reason to consider buying.
Still, he said there’s plenty about GM to chew on: “The firm also made a bevy of other related and unrelated announcements, including increasing the expected costs of announced recalls…taking disciplinary actions against employees preliminarily implicated” in approving faulty ignition switches.
The switches can slip out of “run,” shutting off the engine and disabling the airbags. GM earlier this year recalled some 2.6 million 2003 – 2011 small cars worldwide, nearly all of them in the U.S., to replace the switches.
GM links the switches to 31 accidents and 12 deaths in the U.S. and one fatal crash in Canada.
Thursday it recalled the same cars for another problem involving the components surrounding the ignition switches, but for a separate fault.
The biggest buzz Friday, however, was over an unrelated issue.
It was spurred by a document within a blizzard of paperwork provided by GM to the House Energy and Commerce committee, and then made public by the committee. It is a 2011 email to CEO Mary Barra — who was a product development executive at the time — discussing whether the company’s Saturn Ion small car should be included in a then-current recall of Chevrolet Cobalts to fix the power steering system.
Those cars are among the models now recalled for the ignition switch fault, and the email raised questions about whether Barra might have known more, in general, about GM cars’ defects than she has been saying.
In testimony before House and Senate subcommittees April 1 and April 2, she said she only learned of the the ignition switch problem in December 2013, shortly before she became CEO in January this year. The recall was announced in February and expanded to include more cars later in February and again in March.
GM said on Friday: “The email to Mary Barra dated Oct. 3, 2011, references a Saturn Ion steering issue – an issue completely separate from the ignition-related recalls. The email in no way contradicts Ms. Barra’s previous statements or testimony before the House or Senate subcommittees.
“The email was among the thousands of documents GM willingly provided to the Energy & Commerce Committee of the U.S. House of Representatives upon the Committee’s request.”
Also battering GM Friday:
•Senators asked U.S. Attorney General Eric Holder to force GM to set up a fund to compensate people whose loved ones were killed in the ignition switch crashes, and people injured in those crashes.
The letter was signed by Senators Richard Blumenthal (D-Conn.), Barbara Boxer (D-Calif.), Edward Markey (D-Mass.), Bob Casey (D-Penn.) and Mazie Hirono (D-Hawaii).
Barra has said GM will “do the right thing” but hasn’t specified what. The automaker has hired Kenneth Feinberg, famous for his work on victim compensation in high-profile cases such as the 2010 BP oil spill and the Boston Marathon bombing.
•The same letter asked Holder and the Justice Department to prevent GM from escaping responsibility for death, injury and damage in crashes that took place before the GM bankruptcy reorganization that created the “new GM” in July 2009, which was freed from most “old GM” obligations.
Most switch-related deaths happened before “new GM” was formed.
•Standard & Poor’s Ratings Services said Friday it expects GM’s investment-grade credit rating now will be delayed until 2015.
Responding to a GM announcement late Thursday that it expects to take a $1.3 billion charge in the first quarter for the costs of the recall, the service said, “While our positive outlook on the company’s rating still remains, an upgrade to investment-grade is less likely in 2014 and more so in 2015.”
GM’s $28 billion in cash means it “has the capacity to absorb its settlement costs” from lawsuits, the rating service said.