DETROIT (AP) — Shares of General Motors Co. sank to a 10-month low Friday amid continuing fallout from a mishandled recall of 2.6 million small cars.
Standard & Poor’s raised doubts that GM’s credit rating would be restored to investment grade status this year after the automaker boosted its estimated for costs related to a series of recalls announced since February. And documents released by a House subcommittee raised further questions about GM’s handling of safety issues.
The stock fell $1.37, or 4.1 percent, to close at $31.93, with most of the decline in the middle of the afternoon. It’s the first time the shares have dropped below GM’s 2010 initial public offering price of $33 since June of last year.
Late in the trading day, an email released by a U.S. House subcommittee showed that CEO Mary Barra, then the head of product development, was told in 2011 that the Saturn Ion could be included in an ongoing recall of small cars for a power-steering problem. GM was resisting an expansion of the recall. The Ion wasn’t recalled for the steering problem until last week.
At the time, GM’s safety and recall operations reported to Barra, spokesman Kevin Kelly confirmed Friday. The power steering recall, which included the Chevrolet Cobalt, is separate from the recall of 2.6 million small cars for an ignition switch problem that GM says is linked to 13 deaths.
Barra has repeatedly stated that she first learned of the ignition switch problem last December, just after being named CEO. The email released Friday doesn’t indicate that Barra had prior knowledge of the switch defect. But it does show that she at least was aware of a separate safety problem more than two years before GM issued a recall.
GM began recall cars including the Cobalt for the ignition switch problem on Feb. 13. The switch can unexpectedly slip out of the “run” position and shut down the cars’ engines, which cuts off power steering and stops air bags from deploying.
On Thursday, GM announced that the recalled small cars need to have another part repaired, boosted the estimated cost of recalls announced in the past two months to $1.3 billion from an initial $300 million. In addition to the small cars, the company has recalled 3.7 million other vehicles for various problems.
The company said that despite the recall charge, it expects to report “solid core operating performance” in the first quarter. If it reports a quarterly net loss, it would be GM’s first since 2009.
S&P said an upgrade of GM’s credit to an investment grade rating is less likely this year, and more likely in 2015. GM’s debt has below investment grade, or at “junk” status, since 2005.
The company has acknowledged that it knew about the ignition switch problem for at least a decade. Yet it didn’t recall the cars until this year. The admission has brought investigations from two congressional committees, the Justice Department and the National Highway Traffic Safety Administration, the government’s road safety agency.
On Thursday, GM announced that it had placed two engineers on paid suspension for their roles in the mishandling of the ignition switch issue.
S&P did keep its positive outlook on GM, but said it’s assuming a 0.5 percent drop in the company’s North American market share this year. Last September, Moody’s Investors Service upgraded GM’s credit rating to investment grade, but S&P kept its rating one notch below that at BB-plus.
S&P also said it would consider “a negative rating action” if “recall-related developments become worse than we expect.”
The ratings agency said it expects to see several billion dollars of cash outflows from recall-related costs, fines and settlements during the next several years, but notes that GM has a $28 billion cash stockpile to withstand that.
GM wouldn’t comment on the S&P note.