GM Expects to Pay $400 Million in Ignition Switch Claims

Announcing net revenue of $39.6 billion during 2014's second quarter, the company said it took a $400 million special charge for its ignition switch compensation program.

General Motors reported its second quarter 2014 financial results July 24, including in them its estimate that the company will spend $400 million compensating customers who submit claims in connection with the multiple recalls associated with an ignition switch problem.

The company also said this estimate "contains significant uncertainty and it is possible the total cost could increase by approximately $0.2 billion."

GM reported it is changing how it estimates future recall expense and will now accrue at the time of vehicle sale an amount representing management's best estimate of future recall costs in North America. As a result, GM has taken a $900 million non-cash, pre-tax special charge in the second quarter for the estimated costs of future possible recalls for up to the next 10 years on 30 million GM vehicles now on the road.

Net revenue during the quarter was $39.6 billion, compared to $39.1 billion in the second quarter of 2013.

Adjusted quarterly earnings before interest and taxes were $1.4 billion after $1.2 billion in recall-related costs and $200 million in restructuring costs, GM reported.

"Our underlying business performance in the first half of the year was strong as we grew our revenue on improved pricing and solid new vehicle launches," GM CEO Mary Barra said. "We remain focused on keeping our customers at the center of all we do and executing our plan to operate profitably in every region of the world."

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