General Motors recall spreads to Canada

The General Motors Co. recall involving a faulty ignition switch that is being blamed for 12 deaths in the United States has spread to Canada.

General Motors of Canada Ltd. began sending out letters this week to about 235,000 owners of Pontiac, Saturn and Chevrolet vehicles that are the subject of a recall in the United States as well as a Department of Justice investigation and probes by two U.S. congressional committees and U.S. safety regulators.

The problem is that the ignition switch may move out of the "run" position, causing a partial electrical failure, turning off the engine and rendering the air bags useless if the vehicle is involved in a crash, GM Canada said in a memorandum to dealers. The risk increases if the key ring is carrying more than the car key.

Until the vehicles are repaired, "customers should be advised that it is very important that they remove all the items from their key rings, leaving only the vehicle key," the memo said in boldfaced type.

The recall, which now involves 1.6 million vehicles worldwide, threatens to derail the auto maker's recovery from bankruptcy protection in 2009 and damage the reputation it has gained since then for vastly improving the quality of its vehicles.

GM has acknowledged that it knew about the problem a decade ago and new chief executive officer Mary Barra has promised a thorough internal review so the situation will not repeated.

GM Canada joined its parent company Wednesday in offering owners of the recalled vehicles a $500 rebate toward the purchase of a new 2013, 2014 or 2015 Chevrolet, GMC, Buick or Cadillac model. Customers worried about driving their vehicles before they are fixed will be offered loaners.

The vehicles affected in Canada are: 2005-2007 Chevrolet Cobalts; 2006-2007 Chevrolet HHR and Pontiac Solstice models; 2005-2006 Pontiac Pursuits; 2007 Pontiac G5 and Saturn Sky cars; and 2003-2007 Saturn Ions.

The $500 cash rebate will not be used as a marketing tool, the memo to dealers said.

"This allowance is not a sales tool; it is to be used to help customers in need of assistance."

The company said it expects to have replacement parts for repairs to vehicles by April 7.

The recall has hurt GM's share price, but any product liability should be restricted to pre-bankruptcy GM, Barclays Bank PLC analyst Brian Johnson said in a note to clients.

GM's trip through Chapter 11 bankruptcy protection limited any liability from lawsuits and other actions that were filed before the 2009 bankruptcy filing.

It is possible, Mr. Johnson noted, that regulators could issue fines and customers could file lawsuits against "new" GM.

"The timing of when GM learned of fatalities related to the faulty ignition switches could potentially determine if GM will be held criminally liable," he wrote. The cost of the recall could reach $100-million (U.S.), he said.

Transport Canada said Wednesday that it is still assessing questions asked about the recall.

With files from Associated Press