Bleak, scary and upsetting are three words that might describe consumer reaction to headlines, hearings, and stories detailing auto manufacturer negligence in the still unfolding General Motors faulty igniton switch scandal.
But as more details are revealed, will it impact car buying and lease trends, which in turn, could trickle down and affect the overall health of GM related asset backed securities?
For the near term at least, fallout from the recent GM recalls should be limited, according to Fitch Ratings. However, potential reputational damage to the company’s brand could be a risk in the longer term, Fitch said in a release Thursday.
“Due to robust credit enhancement structures designed to address such risks, we expect stable ratings performance for U.S. auto lease ABS with GM vehicle exposure,” according to the ratings agency.
Current Fitch-rated auto lease pools have little exposure to the ignition switch and power steering recalls that affect models from the compact car to full-size truck segments with model years from 2003 to 2015.
Recent ABS pools from GM Financial and Ally Financial each contain recall-affected vehicles to varying degrees. Notably, GMFALT 2014-1 includes material exposure to the Chevrolet Cruze, one model included in the recall.
The most recent recall that got the sort of media coverage seen with GM now was Toyota’s sudden acceleration 2009-2010 recall of over 10 million vehicles.
Fitch said that in that case, some perception deterioration was evident, although ultimately, there was minimal long-term residual value deterioration.