General Motors will pay $900 million to settle a criminal probe on its failure to recall cars with faulty ignitions linked to at least 124 deaths, officials announced Thursday.
The largest American automaker agreed to a deferred prosecution agreement to settle the probe into why GM took no action to recall millions of cars despite knowing about the defect for more than a decade.
The government charged GM with wire fraud, in addition to concealing the defect to regulators at the National Highway Traffic Safety Administration. The government agreed not to seek a conviction in exchange for the fine and the appointment of an independent monitor at the company.
“GM admits that it failed to disclose to its U.S. regulator and the public a potentially lethal safety defect that caused airbag non-deployment in certain GM model cars, and that GM further affirmatively misled consumers about the safety of GM cars afflicted by the defect,” prosecutors said in a letter to Anton Valukas, who conducted an internal investigation of the case for GM.
GM began recalling some 2.6 million cars worldwide in February 2014 after years of avoiding acknowledgement of the dangerous problem.
The defective switches can cause the ignition to unintentionally switch out of the “on” position, disabling airbags and other functions while the car continues to run.
GM personnel knew by 2005 that the ignition switch was prone to shutting accidentally, even when a car hit a few small bumps, and by 2012 knew that the defect not only impaired the car’s power steering and power brakes, but also the airbag, the government said.
But GM continued to sell the cars and offered assurances on safety. When GM understood that the defect was “undeniably” a safety problem around the spring of 2012, it did not recall the vehicles.
“Instead, it concealed the defect from NHTSA and the public, taking the matter ‘offline,’ outside the normal recall process, so that the company could buy time to package, present, explain, manage the issue,” the government said. “Fearing an adverse impact on the company’s business, GM engineers and executives wanted to have answers to all questions that NHTSA, the media, and consumers might pose about the defect before alerting the regulators and the public to it.”
The defect has been linked to 124 confirmed fatalities and about 275 serious injuries, according to data from administrators of a GM fund to pay ignition claims. GM also said Thursday that it had reached a memorandum of understanding to settle as many as 1,380 individual death and injury claims related to the ignition switch problem.
RBC Capital Markets called the Justice Department settlement “a slight positive,” saying it had expected a penalty of $1.5 billion.
GM said it would take a $575 million charge in the third quarter to settle civil lawsuits on recalls, including the ignition switch recall.
Copyright Agence France-Presse, 2015