GM to pay maximum $35 million fine for recall delay – USA TODAY

Posted: Friday, May 16, 2014

General Motors said on Friday that it will pay the maximum $35 million fine to the U.S. Department of Transportation for delays in the recall of 2003-2011 small cars with a potentially deadly ignition switch defect.

The fine is part of an agreement with the DOT to settle its “timeliness” inquiry into whether GM told the government within the required five business days after finding a safety defect.

GM admits in the consent agreement with the government that it didn’t do so.

GM also agreed to provide the DOT’s National Highway Traffic Safety Administration “full access to the results of GM’s internal investigation into this recall.”

That’s a big concession by GM. CEO Mary Barra told congressional committees in April that she wouldn’t give them the full report but would hand over the parts directly related to safety.

Anton “Tony” Valukas, chairman of the Chicago-based law firm Jenner & Block, is conducting GM’s internal probe. He is a former U.S. attorney and was hired by the government to investigate the Lehman Brothers failure.

GM also agreed to pay an additional amount for not meeting NHTSA’s deadline for submitting documents concerning events leading to the recall. The company initially was being fined $7,000 per day – the maximum – in that issue.

DOT also says GM has agreed to make “significant and wide-ranging internal changes” in how it monitors safety issues.

The GM settlement “puts all manufacturers on notice that they will be held accountable if they fail to quickly report and address safety-related defects,” said U.S. Transportation Secretary Anthony Foxx at a press conference about the agreement. “We will continue to aggressively monitor GM’s efforts in this case.”

Foxx urged Congress to support a proposal that would “increase the penalties we could levy in cases like this from $35 million to $300 million, sending an even stronger message that delays will not be tolerated.”

GM told NHTSA Feb. 7 that it was recalling 619,122 of its 2005-2007 Chevrolet Cobalt and 2007 Pontiac G5 small cars. On Feb. 25 it expanded the recall by another 748,024 vehicles to include 2006-2007 Chevy HHR and Pontiac Solstice, 2003-2007 Saturn Ion, 2007 Saturn Skye. That pushed the total to nearly 1.4 million.

Others were added as GM tried to include all vehicles with similar switches. The recall for the switch problem now totals 2.6 million vehicles worldwide.

GM documents show that it knew in 2001 there could be a problem with the key moving unexpectedly out of “run” into “accessory.” That shuts off the engine, kills power assist to the steering and brakes and usually disables airbags.

It happened to a GM engineer testing a vehicle. A technician reported a similar problem in 2003. And in 2004 a ranking GM small-car engineer had the switch problem in the Chevrolet Cobalt during final development.

GM says it knows of 12 deaths and 46 injury or fatal accidents in the U.S. linked to the problem, and one fatal crash in Canada.

Two high-ranking engineers with links to the switches recently retired from GM. Two other engineers were put on paid leave.

In a statement, Barra said, “We have learned a great deal from this recall. We will now focus on the goal of becoming an industry leader in safety. We will emerge from this situation a stronger company.”

GM still faces a probe by the Justice Department into whether there was a criminal violation. Congressional investigations continue, as does an SEC probe. A number of lawsuits are pending.

Toyota faced a Justice investigation after its delayed recalls for unintended acceleration, and wound up paying a $1.2 billion fine.


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