"I think perhaps people worry less about the recalls than the newspapers do," said Herb Chambers, CEO of Herb Chambers Cos, the 14th largest U.S. auto dealership group with dealerships covering several brands in greater Boston.
Rummaging through a box in his office, Mark Scarpelli pulls out packages containing parts for recalls, including a simple-looking gray plastic sheaf with a piece of black foam. It is a fix for a seatbelt in the Chevy Traverse, a large SUV. In a comprehensive safety review that followed the Cobalt recall, GM found the Traverse seat belt connector could fatigue and separate over time, and it recalled the vehicles.
The automaker pays the dealership for 45 minutes of labor to install the new part, said Scarpelli.
AutoNation, the largest U.S. auto dealership group, had already planned to hire 400 additional auto technicians for its 273 franchised stores in 15 U.S. states. Because of the GM recall, it will hire "hundreds" more, said CEO Mike Jackson.
However, while analysts had expected recalls by GM and other car companies to boost AutoNation sales and profits, Jackson said the overall financial impact of the GM recall on his business would be negligible.
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GM's legal liability from the recalls is unclear, although it took a $400 million charge this week, which could rise, to set up a victims fund. It has taken $2.5 billion in charges for recalls announced this year, which is an average of about $85 per vehicle recalled, although fixes vary in complexity and the labor needed to implement them. Many of the recalls involve adding a piece of plastic to a key.
GM declined to discuss recall cost details. The company, which says it typically repairs 85 percent of cars within two years of a recall, also pays for campaigns to contact customers, such as sending a postcard every three months for two years to remind them their car is part of a recall, managing the fix, and rental cars.
Analysts say the largest share of the cost is labor.
In the case of the Cobalt ignition switch recall, GM pays for 0.6 hour of labor for the ignition switch replacement, and a further 0.9 hour for a related lock cylinder and key replacement, according to Ray Huffines, owner of the Huffines Auto Group in Lewisville, Texas, near Dallas.
Labor rates vary by dealer, but at $100 per hour, that would be $150, with another $89.68 for parts, he said, for a total $240. Dealers make a profit on the parts and technician labor, and the work helps pay for other service staff and overhead, Huffines said by email. A service manager at Raymond Chevrolet put the total cost of a Cobalt recall fix from his lot at $260 for GM. GM said the repair took 90 minutes and declined to comment on the cost.
Huffines concluded, "Does the dealer lose money on recalls? Generally, no. Does the dealer make a very nice profit on recalls? Generally, no."