Dealers Say GM Customer Anxiety Rising, Sales May Take Hit

An ignition switch defect linked to deadly crashes and mounting recalls are raising anxiety in General Motors Co showrooms, according to dealers who increasingly are fielding calls from customers concerned about the safety of GM cars.

The Ancira Auto Group in San Antonio, Texas, expected a banner March after a strong February, but it came up 28 vehicles short of its goal of selling 200 cars and trucks, Vice President April Ancira said in an email.

GM<GM.N> Chief Executive Mary Barra on Wednesday endured a withering attack at a U.S. Senate hearing that opened with accusations that the company fostered "a culture of cover-up", and Ancira said the bad news centered on the ignition switch issue contributed to her group's sales miss.

"It will take some time for the brand to gain back the customers it lost," she said. "But I have got to believe that General Motors will use this opportunity to really focus on improving the safety of their product."

Interviews with more than 20 U.S. GM dealerships this week revealed concerns that sales would be pressured, even in a recovering auto market. Dealers also made clear there's an escalating number of jittery current GM owners, and demands for repairs threaten to clog some repair facilities.

"They are calling for information. People are a little confused about what they need to do. There are a lot of these cars out there," said Al Belford, fixed operations director at Ed Bozarth Chevrolet in Las Vegas, which has been getting about 50 customer calls a day for the last three weeks.

Jacqueline Aguilar, service coordinator at Brickell Buick GMC in Miami, said the dealership handles was getting up to 40 calls a day between 2 p.m. and 6 p.m.

Holland, Michigan's DeNooyer Chevrolet has been getting 10-15 calls per day, sales manager Dominique DeNooyer told local television, adding that the dealership was finding the "influx" of people challenging.

Since February, GM has recalled 2.6 million vehicles due to concerns about ignition switches that unexpectedly turn off engines during operation and leave airbags, power steering and power brakes inoperable. And so far this year, GM has recalled a total of nearly 7 million vehicles, or about the same number recalled in the previous four years combined.

TOYOTA'S RECALL OF 2010

In January 2010, Toyota Motor Corp<7203.T> recalled nearly 2.6 million vehicles in the United States and Canada to fix sticky accelerator pedals. The recall and the controversy leading up to the decision punished sales.

Less than two weeks after the recall, Toyota reported a 16 percent drop in January 2010 U.S. sales. Sales fell again in February before rebounding in March. Still, the automaker's U.S. market share hasn't regained its peak of 17 percent, set in 2009.

In contrast, GM's numbers improved in March, the month after the first stages of the recall were announced. Dealers delivered 256,047 vehicles in the United States in March, fueling a 4 percent increase in total sales from year-ago levels. Retail sales were up 7 percent and GM said it gained retail market share.

Overall, the auto market is in recovery mode, and a lot of dealership executives, are staying optimistic, including Brad Sowers, owner of Jim Butler Chevrolet in the St. Louis suburb of Fenton.

"I'm still in the mode that it's going to be a good year for us and the marketplace has cars that are 11 or 12 years old and rates are really low," Sowers said.

"Our sales have been average," said James Mardenli, general sales manager at Cerrone Chevrolet Buick & GMC Truck dealership in South Attleboro, Massachusetts. "April should be a good month in terms of sales because April, May, and June are usually the months where the most cars are bought."

But Morgan Stanley analyst Adam Jonas wrote in a research note that his uncle, a car dealer in Canton, Ohio, was concerned.

"I think April's gonna hit rock bottom for us. We know we'll get through this, but are just hoping this issue passes as soon as possible," Jonas quoted his uncle as saying. Jonas didn't name his uncle or respond immediately to a call about the discussion.

At GM dealerships near the major U.S. cities of Boston, Cleveland, Los Angeles, Miami, and San Antonio, managers agreed they were spending a lot more time allaying customer concerns.

They reported offering more rental cars, agreeing to more trade-ins and telling customers to lighten their key chains.

Several dealership executives conceded the bad news is distracting their teams from making their sales pitch in the showroom.

Some customers, however, don't want to wait weeks for their cars to be repaired. GM has offered some incentives for trade-ins and dealers say the offer is being taken up.

Andy Sweis, general manager at Jennings Chevrolet in the north Chicago suburb of Glenview, Illinois, said the dealership has taken in about a half a dozen Chevy Cobalts for trade-in since the recall.