NEW YORK (TheStreet) -- On Tuesday, shares of General Motors (GM) were drilled, falling more than 5% on reports that the U.S. Attorney General will investigate the company's massive recall of 1.6 million vehicles. In mid-day trading, shares changed hands a $34.80, down about 1%.
The federal investigation follows a similar investigation by the National Highway Transportation Administration into GM's handling of the recalls.
The enormous recall and ensuing investigations stem from an ignition switch issue, where the car's key is at risk of turning off, shutting down the engine and disengaging power throughout the car -- including airbags.
As of now, there have been 13 reported deaths due to this issue.
However, the problem isn't that General Motors had an ignition switch issue. It's that this information was known as early as 2004. It was again brought to its attention in 2007, this time by a "federal safety official," according to a USA Today report.
After all of these reports and these types of headlines, it's not surprising that shares of General Motors got whacked yesterday. In fact, it was the worst day for the stock in two years. Again, not all that surprising really.
So what should General Motors do?
The fact that the company recently named Mary Barra as the new CEO is a good thing in this situation. I mean, I think it's a great thing that she was named CEO in the first place. But in this case, I also view it as a positive. Let me explain why.
Because Barra was not the CEO when these ignition switch issues were first brought up -- and subsequently handled in settlements with undisclosed amounts early on -- she's not tied to any of it.
She doesn't bear responsibility for how it was handled by past management, and therefore can see clearly when deciding what to do next.
Barra will do the right thing, because it's in everyone's best interest -- including hers.
I suspect she'll be fully cooperative and try to handle the PR situation as best as possible. Not only does Barra have nothing to do hide, but she certainly doesn't want to begin her tenure at GM by trying to bury a criminal investigation.
From a CNN report, "She said the company acted "without hesitation" and that it went "well beyond" the recommendations of technical experts."
So what happens to the stock price in all of this?
On Tuesday, the traders from CNBC's "Fast Money" TV show all offered their suggestions, which can be read here: Fast Money Recap: Driving the News.
Personally, I would avoid buying the automaker at current levels, at least for the next few weeks.
This recent news is not good and remember, this is just the beginning in terms of the investigation. Plus, auto sales have not been knocking anyone's socks off over the past few months.
Assuming sales eat into next quarter's earnings report, or at least hinder it, there just aren't any near-term catalysts to get excited about it. In fact, over the next few weeks, there are more negative catalysts that exist, as more information about the investigation will likely surface, (which isn't good).
Currently, the stock is trading just north of $35.
The black horizontal line indicates decent support near $34 in the past. I would look for this level to at least provide some type of short-term support.
The diagonal purple line shows that the stock is very close to giving up its long-term trend support. It would be quite bearish for the stock to lose this trend and break $34 to the downside.
Although the dividend yield is currently at 3.4% and shares are down nearly 14% year-to-date, I'm not a buyer at current levels. I just think there will be better buying opportunities two to six weeks down the road.
I definitely think shares around $30 to $32 offer a very, very good value though, and I would certainly be a buyer in that range.
-- Written by Bret Kenwell in Petoskey, Mich.
At the time of publication the author had no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.