GM faces multiple federal inquiries about a mechanical problem that led to 13 deaths


In this June 2010 photo, workers at General Motors' Lordstown Assembly plant in Lordstown, Ohio, put the final touches on Chevy Cobalts. (Mark Duncan/AP)

General Motors is the target of multiple federal inquiries launched to determine why the nation’s largest automaker took more than a decade to address a mechanical problem that the company admits played a role in 13 deaths.

Lawmakers in both the House and Senate have announced plans to summon GM officials to Capitol Hill for hearings, and a potential criminal investigation is underway at the Justice Department.

The U.S. attorney in New York has launched a preliminary inquiry to determine whether GM knowingly rolled out cars with a faulty ignition switch that stalled their engines and disabled their air bags, according to a person briefed on the inquiry. GM could be found criminally liable if the company knew about the problem, did not fix it and failed to notify federal regulators.

The National Highway Traffic Safety Administration — which is facing scrutiny for what consumer advocates call an inadequate response to the problem — is also grilling GM about the chain of events that led to the recall of 1.6 million cars last month. The agency said Wednesday that it has been in communication with the Justice Department as it has pursued its probe.

Meanwhile, consumer groups Wednesday demanded that GM set aside $1 billion to compensate victims of the defect. As a result of its 2009 bankruptcy, GM is not civilly liable for deaths and injuries linked to the faulty ignition switch.


A history of GM’s ignition problems

“By concealing the ignition key defect for at least 10 years, GM created more victims and then robbed them of their legal rights through the passage of time,” Clarence Ditlow, executive director of the Center for Auto Safety, and Joan Claybrook, a former NHTSA administrator and president emeritus of the consumer advocacy group Public Citizen, said in a letter to Mary T. Barra, who became GM’s chief executive in January.

House investigators have demanded that GM brief them by next week. And Sen. Claire McCaskill (D-Mo.) announced plans Wednesday to convene a hearing of her consumer-protection subcommittee in April.

“We have to get to the bottom of this,” McCaskill said in a statement. “We need to find out who dropped the ball and put millions of Americans at risk. We also need to make sure that General Motors and federal regulators are doing everything they can to prevent more tragedies like this now and in the future.”

The confluence of investigations is battering GM, which has been enjoying a strong resurgence in car sales after its 2009 bankruptcy and federal bailout. Now the company finds itself at risk of criminal penalties, new federal legislation and tens of millions of dollars in fines from federal regulators. Perhaps more important, the company could see its improved reputation tarnished in the marketplace.

GM shares have fallen more than 7 percent this week, closing Wednesday at $34.86.

“The company must come to a quick and satisfying resolution of the issue to assure that it won’t be tainted by sins of the past,” said Jack R. Nerad, a senior market analyst at Kelley Blue Book. “The fact that GM was rescued by the American taxpayers makes a resolution that is satisfactory to the average person on the street even more imperative than if such an issue arose in another company. “

The company has apologized and acknowledged that its recall process was not adequate. Barra has launched what she said would be a no-holds-barred internal review under the direction of a former federal prosecutor. The company has also promised to open its books to investigators.

“We are fully cooperating with NHTSA and will do so with the Congress, too. We welcome the opportunity to help both parties have a full understanding of the facts,” the company said in a statement.

In an updated chronology for federal safety regulators released late Wednesday, GM said it discovered problems with its ignition switches in 2001 when it was developing the Saturn Ion. But the company determined that a design change had addressed the flaws before the car went on sale.

In 2005, according to a timeline released Tuesday, GM learned that a Chevrolet Cobalt had lost engine power because the key moved out of the “run” position when the driver inadvertently jostled the key or the steering column. GM investigators were able to replicate the problem during test drives.

The company weighed several fixes, but ultimately did nothing. When similar problems cropped up in other cars, the company issued a service bulletin in 2005 alerting dealers to the possibility that drivers could “inadvertently turn off the ignition.”

At the same time, NHTSA launched an inquiry after a fatal car crash claimed the life of 16-year-old Amber Marie Rose in Southern Maryland. Investigators found that her car’s ignition switch was in the “accessory” position, preventing her air bag from deploying — a defect that probably cost her life, according to an investigator hired by Rose’s family.

After another fatal crash, in 2006, NHTSA determined that that car, too, had been turned off. But the agency said it never amassed enough firm information to order a recall.

That changed last year when GM — under pressure from an increasing number of lawsuits — hired an outside engineering firm, which pinpointed the ignition problem.

In February, GM announced its decision to recall the cars; the company said notices were mailed to owners this week. The company said dealers would offer free loaner cars to affected drivers as well as $500 discounts on new GM vehicles.

Michael A. Fletcher is a national economics correspondent, writing about unemployment, state and municipal debt, the evolving job market and the auto industry.
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