Recall woes put brakes on General Motors profits

Recall expenses chopped $1.5 billion from General Motors' bottom line in the second quarter, as it added up the costs of repairs for nearly 30 million cars and set aside at least $400 million for a compensation fund for those killed or injured by a defective ignition switch linked to between 13 and 100 deaths.

The company reported Thursday that its North American operating profit fell about 30 percent to $1.39 billion.

Earlier this year GM recalled 2.6 million cars for the faulty ignition switches, which stalled engines, turned off power steering and power brakes and prevented air bags from deploying. The company is under investigation by U.S. safety regulators, Congress and the U.S. Department of Justice over its failure to detect the problems for more than a decade. GM says at least 13 people have died in crashes caused by the switches, while lawmakers say the total is closer to 100.

GM set aside $400 million to fund a compensation plan for families of those killed and people injured in crashes caused by the switches. Chief Financial Officer Chuck Stevens said the figure could go as high as $600 million and there was no cap on the size of the fund.

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

Lawyers suing the company called the $400 million figure arbitrary and too small.

GM has announced a total of 60 recalls so far this year. CEO Mary Barra told analysts on a conference call Thursday that a companywide review of safety issues is "substantially complete."

Wire services