GM Fined Record 35 Million Over Ignition Recall Delay

GM Fined Record $35 Million Over Ignition Recall Delay

May 16, 2014
"They had that information and they told no one,"  said U.S. Transportation Secretary Anthony Foxx. "Crashes happened, and people died."

WASHINGTON -- The National Highway Traffic Safety Administration imposed a record $35 million fine on General Motors (IW 500/5) for its failure to promptly recall cars with ignition faults linked to at least 13 deaths.

The regulatory agency said the automaker took years to report the deadly problem even though company engineers were well aware of it in Chevrolet Cobalts and other models in 2009.

GM only notified the agency and began recalling 2.6 million cars in early February, setting off a Justice Department probe and victim lawsuits that could ultimately cost it billions of dollars.

"Safety is our top priority, and today's announcement 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.

"They had that information and they told no one," Foxx said in a press conference. "Crashes happened, and people died."

Under the terms of the settlement, GM will have to undergo what the NHTSA called "unprecedented oversight" of its operations, including close monitoring of its handling of safety issues.

It also must open its files on its internal investigation into the ignition defects issue.

The problem centers on ignitions that, after a jolt, or simply due to a heavy keychain, can turn into the "off" or "accessory" position while a car is in motion.

That will switch off a car's electrical systems, including power steering and airbag deployment, even if the engine is still running, leaving drivers and passengers unprotected in a crash.

Under NHTSA rules, an automaker has to notify it within five working days after it notices a defect in an automobile may be safety-related.

GM Knew of Danger in 2009

GM knew of issues with the ignitions in the early 2000s before they were installed in cars, and it began receiving reports of problems from new car owners in 2005 and 2006.

By 2009 GM engineers clearly knew that the ignitions could turn off by themselves and shut down airbag deployment, creating a dangerous situation, said NHTSA acting administrator David Friedman.

And by 2012, "GM engineers knew about the defect, GM investigators knew about the defect, GM lawyers knew about the defect," he said.

Since announcing the recalls, GM says it has linked more than 30 accidents and 13 deaths to the ignition-airbag issue, while the independent Center for Auto Safety says it has tracked 303 accidents in the GM cars in which the airbags did not inflate.

GM, whose new chief executive Mary Barra has admitted that the company was lax in handling the problem, said it was already implementing extensive changes in its management and oversight systems.

In a statement, Barra said: "GM's ultimate goal is to create an exemplary process and produce the safest cars for our customers -- they deserve no less."

The $35 million fine was the highest possible the NHTSA could levy for a tardy recall; the agency used the occasion Friday to ask Congress to increase the maximum to $300 million.

The NHTSA fine -- and an ongoing $7,000-a-day penalty it is levying over GM's holding back data on its ignition probe -- are the first in what could ultimately result in billions of dollars of damages the company incurs over the mishandled ignition problem.

Lawyers around the country have filed individual and class-action suits on behalf of people injured and the families of those killed in accidents linked to the faulty ignitions.

The damages could reach into the billions of dollars, industry analysts say.

GM could be legally protected, in part, by its 2009 court-approved bankruptcy reorganization agreement from liability lawsuits related to problems prior to then.

But the company implicitly acknowledged it could pay out significant amounts to victims when it hired victim compensation expert Kenneth Feinberg to advise it.

GM meanwhile is also being investigated by the Department of Justice and Congress over its handling of the problems, amid speculation it could face criminal charges.

GM shares, which have lost about five percent of their value since the first ignition-related recall was announced, were down 0.2% at $34.21 in afternoon trade Friday.

- Paul Handley, AFP

Copyright Agence France-Presse, 2014

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