The Federal Trade Commission, alleging a five-year pattern of misleading acts by General Motors Corp., yesterday accused the nation's largest auto maker of failing to notify customers of major defects in at least 4 million cars.
The defects, which involve transmissions, camshafts, and diesel fuel pumps in 1975 to 1980 models of Chevrolets, Pontiacs, Buicks, Oldsmobiles and Cadillacs, may eventually cost as much as $50 million in repairs.
Although the filing of the complaint is only the first stage of what could prove to be a lengthy administrative and judicial proceeding, GM could be forced to notify owners of the defects, and either repair the defective parts at company expense or repay consumers for work already done.
GM, which has reported losses of $257 million for the first half of the year, said only that the complaint is "unwarranted" and that the company would "contest it vigorously."
The GM complaint may be the FTC's most significant action since Congress clipped its wings a little last spring in a major fight over its owners and whether -- as business groups charged -- it was exceeding its mandate to protect consumers.
The FTC complaint zeroed in on three particular components in GM cars.
Most important are transmissions, particularly the "THM 200" transmission units produced by GM's Hydra-Matic Division since 1975.
Those transmission units were installed in about 4 million compact or midsized autos manufactured by all five GM divisions, the FTC said, noting that the word "Metric" appears on the button cover plate of the transmission.
The commission has received more than 1,500 complaints about the transmission defects. Tracy Westen, deputy director of the agency's Bureau of Consumer Protection, said the problems encountered include slipping gears, gear shifts that would only move into reverse and difficulties in changing gears. Consumers have said repairs on these transmissions have cost as much as $600.
Western said the commission could not say specifically how many cars contained the transmission units because it is an optional feature of those models. Further, Western said the FTC has had difficulty obtaining information from GM on the transmission problems.
"They should have simply disclosed the fact that the transmissions break down," Western said in an interview. He said the matter of when the company knew of the defects would become public during the course of the litigation.
THE FTC says companies are required by law to disclose significant defects in their products when they learn of them. The agency says in these cars GM did know and did not disclose the problems.
The second problem noted by the FTC was premature wear of camshafts and lifters in gas engines, particularly 305-cubic-inch or 350-cubic-inch displacement engines produced by Chevrolet since 1974.
The camshafts, which control the timing and amount of air and gas flowing in and out of the engine, can only be repaired by virtually taking the entire engine apart at a cost of $400 or more.
Use of the proper engine oil -- labeled "SE," "SECC," or "SF," -- could limit the camshaft wear. "General Motors has never told owners of the affected cars that serious engine damage can result from use of improper oils," Western said during a briefing.
The final defect cited by the FTC involves all diesel engines sold by GM's Oldsmobile division since 1978. Western said that about 500,000 such engines have been built for 1979 and 1980 cars.
GM failed to notify owners of cars with these engines that water enters the engine's fuel system, resulting in rust and corrosion, the FTC staff said.
Western said the FTC staff views this complaint as a step in the direction of providing a "Bill of Rights" for American automobile consumers and said the commission could not and never has considered a company's financial status in considering whether or not to issue a complaint.
An FTC administrative law judge will hear the case, a process which could take as long as two years. The judge's decision could then be appealed by either GM or the FTC staff to the full commission. GM could then take the case to federal court.
Although the FTC unanimously approved the parts of the case involving camshafts and transmissions, FTC member Robert Pitofsky said the FTC does not have reason to cite GM on the diesel engine problem.
"It's particulary important that the government be cautious in making allegations of this sort so as not to burden innovative efforts by auto companies," Pitofsky said in a concuring statement.
The carefully worded complaint says the three problems cited are only "typical and illustrative" of some of the GM systems which "are or have been subject to serious problems of defects."
Western said the wording would not prevent the commission from citing other possible defects if they were discovered while the case is in the discovery stage.