GM fined $35 million in ignition-switch safety case

General Motors has agreed to pay a $35 million dollar civil penalty over its failure to promptly report a defect that was discovered more than a decade ago. The faulty ignition switches have been linked to at least 13 deaths. (Reuters)

General Motors agreed Friday to pay a $35 million civil penalty for its slow action to address an ignition-switch flaw that has been linked to 13 deaths.

The fine marks the maximum penalty the National Highway Traffic Safety Administration can impose against an automaker for failing to disclose safety problems in a timely matter. Yet, it represents just a tiny fraction of the $37 billion in revenue GM generated in just the first quarter this year.

As part of the settlement, the nation’s largest automaker will also have to make “significant and wide-ranging” changes to how it reviews safety issues in the United States, the Department of Transportation said. The company has also agreed to “unprecedented oversight requirements” from the government.

GM will also be required to pay tens of thousands of dollars in additional civil penalties for not responding on time to demands from NHTSA for documents during the government’s investigation.

“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 Transportation Secretary Anthony Foxx. He also called on Congress to increase the maximum fine NHTSA can impose to $300 million.

Sen. Edward J. Markey (D-Mass.) called the $35 million penalty “a parking ticket in comparison to the toll this defect has taken on the lives of America’s families.” Markey, a member of a Senate panel that is investigating GM’s recall, said, “We need to increase the statutory caps for civil liability settlements to ensure that auto manufacturers know they will be held fully and fiscally accountable if they do not report safety issues in their vehicles in a timely and responsible manner.”

In February, GM issued the first of a series of recalls for 2.6 million Chevrolet Cobalts and other small cars equipped with ignition switches that can inadvertently switch to the “accessory” position, causing the car to stall, disable air bags, and stiffen brakes and steering.

GM acknowledged knowing about the problem for at least a decade before the recall, a delay that has triggered investigations by Congress and federal prosecutors, as well as federal and state regulators.

During their probe, congressional investigators determined that GM engineers who had been looking into complaints about faulty switches made a design change that largely addressed the problem in 2006. But they hid the change by not issuing a new part number for the improved switch, and they did not call for a recall to repair the faulty ones in cars already on the road.

Federal prosecutors are looking into possible criminal charges against the company that analysts say could result in penalties approaching — or exceeding — the $1.2 billion fine Toyota paid earlier this year for misleading investigators and consumers about the scope of unintended acceleration problems with several of its models.

GM is also facing the prospect of expensive legal settlements over the ignition-switch flaw. In the wake of the delayed recall, GM also has been hit by a flurry of lawsuits from accident victims and their survivors. The company has hired mediation expert Kenneth Feinberg to explore establishing a compensation fund for victims.

The automaker is also fighting suits from others, including shareholders and owners of recalled cars, who are claiming economic loss because of the ignition problem.

GM has since become much more vigilant about recalls. The company has issued 24 recalls this year covering 11 million vehicles, and they are taking a serious financial toll. In the first quarter, GM set aside $1.3 billion to pay for the recalls. The automaker said Thursday that it would set aside an additional $200 million in the second quarter to cover recall costs.

GM chief executive Mary Barra, who has been grappling with the recall debacle since shortly after assuming her post in mid-January, said the company has worked hard to address the systemic problems that caused it.

She has created a new, executive-level post for global vehicle safety. The company also is encouraging employees to speak up about safety concerns to try to change a corporate culture that Barra has said stifled bad news, contributing to the problem.

Barra also has commissioned an internal investigation being led by a former federal prosecutor who is expected to complete a report by the beginning of June.

“We have learned a great deal from this recall,” Barra said in a statement. “We will emerge from this situation a stronger company.”

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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