Another Bad Day for GM: A Massive Recall

Detroit, MIAt a time when talk of bankruptcy swirls about the world's largest automaker, General Motors now has a massive recall to worry about. It has been announced that as many as 1.5 million potentially defective cars have been recalled over a risk for fire.

Passenger sedans manufactured between the years 1997 and 2003 are affected. It has been reported that owners of the vehicles will receive recall notices over the next month to repair a problem with the engine.

At issue is the Buick Regal and Pontiac Grand Prix manufactured and sold between 1997 and 2003. Also on the recall list are the 1998 – 2003 model year Chevrolet Lumina, Monte Carlo and Impala together with the 1998 – 1999 Oldsmobile Intrigue.

The problem originates with a naturally aspirated 3.8 liter V6 engine that uses atmospheric pressure to introduce air into the combustion chamber, rather than a mechanical blower or fan.

Specifically, the problem is said to involve the potential for an oil leak during hard braking. The oil has the potential to drip onto the super-heated exhaust manifold, which gets very hot in normal use. While all exhaust manifolds are equipped with a heat shield, any leaked oil migrating below the shield has the potential to ignite with flames spreading to plastic brackets, which hold the spark plug wires.

GM is recommending that the harness be changed, which will be done free of charge.

The fact remains, however that there are 1.5 million vehicles out there that could experience an engine fire. This could have a dramatic impact not only to the occupants of the affected vehicle, but any vehicle within close proximity.

Nor is this an isolated incident with the engine. It was reported that GM issued a similar recall last year, according to documents filed with a federal regulator in 2008. The problem in that particular case was found to be related to a faulty gasket on the engine rocker cover.

The recall was announced yesterday by the National Highway Traffic Safety Administration (NHTSA).

Owners of GM vehicles have taken some comfort of late, given federal efforts to financially prop up the massive company and float assurances that warranties will be honored, regardless of a potential bankruptcy filing.

As for the company, such a massive recall—even for a relatively simple repair—couldn't have come at a worse time, as bankruptcy rumors continue to swirl. While new management at the automaker has expressed confidence that GM can be returned to profitability, General Motors' CEO Fritz Henderson acknowledged in an interview with the Canadian Broadcasting Corporation last week that in tandem with strategies to keep the current company afloat, GM is also preparing for a potential bankruptcy filing should the need arise. Henderson described the preparations as prudent, regardless of whether or not bankruptcy would be needed.

However, federal regulators have suggested over the past few days that General Motors should prepare for a possible bankruptcy filing by June 1st, if needed.

In the meantime car sales are continuing to tank across the industry and GM's woes cannot be expected to translate into confidence for the car-buying public. Only one new model—the 2010 GMC Terrain crossover—was debuted at the New York Auto Show, and the mood at the GM floor was quiet and downbeat. Some members of the visiting public were openly hostile.

News of this latest recall involving nearly 1.5 million defective autos will not serve to help.