General Motors profit hit by recalls, faulty ignition switch compensation fund

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General Motors has reported a much lower second-quarter profit.

Net income fell to $190 million from $1.2 billion in the same period last year.

That reflected the cost of numerous recalls of vehicles and an expected $400 million for a compensation fund.

The money is being set aside because of the deaths and injuries that resulted from a defective ignition switch, which has been linked to at least 13 deaths.

GM earlier this year recalled 2.6 million vehicles to replace ignition switches. They are blamed for causing engines to stall which meant power steering and power brakes did not work and air bags were not deployed.

The company is under investigation by US safety regulators, lawmakers in Congress and the US Department of Justice over its failure to detect the problems for more than a decade.

GM reiterated that it expected a moderately improved operating profit this year and that its future recall costs would be slightly higher than historic rates.

with Reuters

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