For hiding a fatal ignition-switch defect tied to at least 174 deaths, General Motors employees will face no criminal charges and the automaker will pay a $900 million fine — less than a third of its $2.8 billion in profit last year.
The settlement with the Department of Justice, announced Thursday, signals a close to the criminal investigation that has long tarnished the car giant. But critics say the automaker got off easy for mishandling one of the worst auto safety crises in history, and years of lying to safety regulators and leaving Americans at risk.
“I have a saying about GM: There’s no problem too big that money can’t solve,” said Clarence Ditlow, executive director of the Center for Auto Safety. GM “is buying [its] way out of a criminal prosecution.”
The DOJ agreed to hold off on prosecuting General Motors for charges of wire fraud and scheming to hide the defect from regulators, as well as drop the criminal case in three years, if the Detroit automaker continues to acknowledge responsibility, accept independent monitoring and cooperate with authorities.
Critics point out the $900 million fine is a fraction of the automaker’s $156 billion in revenue last year and the $50 billion taxpayers gave to GM during the bailout. No executives will face jail time, even after the company acknowledged how high-level delays and deception had contributed to roadway deaths.
GM’s penalty is also less than the record-setting $1.2 billion fine levied on Toyota last year after the Japanese car giant failed to recall cars that could suddenly accelerate, even though federal regulators say the defect has been linked to at least five deaths.
“People were hurt and people died in our cars,” GM chief executive Mary Barra told employees at a Thursday town hall in Detroit. She said the agreement was “tough” but added, “We didn’t do our job, and as part of our apology to the victims we promise to take responsibility for our actions.”
Safety advocates said the laws governing vehicle safety leave big holes that prevent automakers’ employees or executives from being held accountable for injury or death. To pursue homicide charges, prosecutors would have to prove a company representative knowingly intended to kill someone.
Other federal safety laws, including those under the Occupational Safety and Health Administration (OSHA), allow for criminal prosecution of executives whose “willful violation” led to deaths. In this case, “the facts are good, but the law is weak,” Ditlow said. “The law is just inadequate to the crime.”
In a news conference Thursday, Preet Bharara, the U.S. Attorney in New York known for aggressive prosecution of white-collar crimes, said the GM investigation had led to more recalls, more transparency and “more focus on how to keep the driving public safe.”
He credited GM for its “extraordinary cooperation” in the federal probe.
The settlement comes a week after the DOJ told federal prosecutors to place a sharper focus on investigating and punishing not just companies, but employees, in cases of white-collar crimes. But Bharara responded Thursday to suggestions the settlement was a disappointment by saying prosecutors’ hands were tied by what the law could allow.
“Criminal intent can be hard to prove. But if there is a case to bring, we’ll bring it,” Bharara said. “We’re not done, and it remains possible that an individual could face some charge. But the law doesn’t always let us do what we wish we could do.”
U.S. senators Richard Blumenthal (D-Conn.) and Edward J. Markey (D-Mass.) in a statement called the outcome “extremely disappointing,” and said “it is shameful that they will not be held fully accountable for their wrongdoings.” The senators have proposed legislation that would subject automakers and executives to criminal penalty if they willfully violate auto-safety rules.
The “families who lost loved ones deserved an explicit acknowledgment of criminal wrongdoing, and individual criminal accountability, as well as a larger monetary penalty,” they said. “We cannot continue to allow large auto companies to get away with deadly, deceptive conduct. Penalties for these actions must be stronger to stop more innocent lives from being taken.”
GM also announced Thursday that it will pay $575 million to settle more than 1,300 pending death and injury lawsuits.
Attorney Bob Hilliard said those class-action suits include at least 50 deaths not included in the 124 deaths counted by Washington attorney Kenneth Feinberg, who was hired by GM to help assess claims and compensate victims. Hilliard has estimated the total death count could rise above 200 after all cases are settled or closed.
Faulty ignition switches in millions of Chevrolet Cobalts, Saturn Ions and other small GM cars could suddenly turn off, stalling the engine, disabling steering and brakes, and preventing air bags from inflating. But after GM engineers first learned of the danger more than a decade ago, the automaker hid the defect from regulators, dealerships and car buyers despite a flood of driver complaints.
The automaker waited until last year to notify regulators of the defect and begin recalling more than 2 million cars, years after a lead engineer had called it “the switch from hell.” Prosecutors said the defect could have been fixed for less than a dollar per vehicle, but the automaker chose not to, because of the cost.
“The worst part about this tragedy is that it was entirely avoidable,” said Christy Goldsmith Romero, special inspector general for the Troubled Asset Relief Program. GM’s criminal conduct “defies comprehension,” she said, adding the company “must step up and make substantial corporate changes to prevent anything like this from happening again.”
Spearheaded by Barra, who became chief executive last year, GM has implemented a series of company-wide reforms, including appointing a high-ranking safety czar and bulking up its staff of product-safety investigators. Fifteen executives deemed complicit in mishandling the defect have been forced out.
The automaker has agreed to pay $150 million into a compensation fund for the families of those killed and injured because of the defect, and $35 million to settle civil charges with the National Highway Traffic Safety Administration, the maximum possible fine. GM also paid billions of dollars to recall more than 30 million defective cars and trucks last year.
But not everyone is satisfied. Laura Christian, the Maryland mother of Amber Marie Rose, a 16-year-old girl killed in a 2005 crash because of the defect, told the Detroit News on Wednesday, “This is one of the worst days since Amber died. …I was really hoping, really, really hoping that the Justice Department would hold GM accountable.”