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| GM profits hit by recall problems | GM profits hit by recall problems |
| (35 minutes later) | |
| Earnings at the carmaker General Motors (GM) have slumped because of costs related to its vehicle recalls. | Earnings at the carmaker General Motors (GM) have slumped because of costs related to its vehicle recalls. |
| Second-quarter net profits fell 85% from a year ago, to $190m (£112m), the company said. | |
| The carmaker has recalled nearly 29 million vehicles this year, mostly due to faulty ignition switches. | The carmaker has recalled nearly 29 million vehicles this year, mostly due to faulty ignition switches. |
| The cost of recall-related repairs came to $1.2bn, with another $400m put aside for compensation payments to the affected car owners. | The cost of recall-related repairs came to $1.2bn, with another $400m put aside for compensation payments to the affected car owners. |
| However, the company said that this was an uncertain estimate. | |
| "There is no cap on this program, but this charge is the company's best estimate of the amounts that may be paid to claimants," GM said in a statement. | "There is no cap on this program, but this charge is the company's best estimate of the amounts that may be paid to claimants," GM said in a statement. |
| "Due to the unique nature of the program, this estimate contains significant uncertainty and it is possible the total cost could increase by approximately $200m," the statement continued. | "Due to the unique nature of the program, this estimate contains significant uncertainty and it is possible the total cost could increase by approximately $200m," the statement continued. |
| "At the end of the day, the ultimate cost of this will be determined by Ken Feinberg [the compensation expert appointed by the government],'' GM chief financial officer Chuck Stevens said. | |
| The defective ignition switch has been linked to 13 deaths so far. | |
| GM also said it was changing the way it would estimate future recall expenses, a move which involves putting aside a certain amount of money from the sale price of each vehicle. | |
| As a result the company has put aside another $900m as a best estimate of "future possible recalls for up to the next 10 years on 30 million GM vehicles on the road today". | |
| Mr Stevens also said the situation in Ukraine had led to GM cutting production there by 20-25% at its plant in St Petersburg, and that he expects more of the same in the second half. | |
| Those costs aside, GM expects to be profitable in Europe by about 2015. |