The US government has fined GM $35 million for delays in recalling small cars with faulty ignition switches.
The fine is the maximum allowed by US law.
General Motors said it had already begun reviewing its processes and policies to avoid future delays to recalls of this nature.
To date, the carmaker has recalled 2.6 million cars with the defective switch, which has been linked to 13 deaths.
The National Highway Traffic Safety Administration Board (NHTSA) said it was the single highest civil penalty ever levied as a result of a recall 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 in a statement announcing the fine.
The US government has fined GM $35 million for delays in recalling small cars with faulty ignition switches
As a result of the settlement, GM has also agreed to provide NHTSA with access to the results of its internal investigation as well as to speed up its process for determining when to recall vehicles.
“We have learned a great deal from this recall [and] we will emerge from this situation a stronger company” said GM CEO Mary Barra in astatement.
GM was fined for not reporting a problem with ignition switches in its Chevrolet Cobalt and other models.
The faulty switches prevented the airbags from working and have been linked to at least 13 deaths in the US.
The NHTSA received reports in 2007 and in 2010 about the problems with the switches, but each time it “determined it lacked the data necessary to open a formal investigation”.
Both GM and the agency have been criticized by customers for their slow response to investigating safety concerns.
US car manufacturers are required to report safety defects within five days of discovering them.
In April, Mary Barra testified in front of Congress and said she was “deeply sorry” over the company’s handling of the defect.
Last month, GM revealed it had taken a $1.3 billion hit to cover the cost of the recall.
However, GM has asked a judge to ban cases “alleging purely economic damages” due to the recall, and has argued it is not responsible for problems with cars manufactured before 2009, when it was bailed out by the US government.
GM has seen its 2014 Q1 profits hit by a $1.3 billion charge to cover the cost of a huge recall of cars over defective ignition switches.
The faulty switches could turn off the engine, disabling the airbags and have been linked to at least a dozen deaths.
General Motors says it also incurred $300 million in restructuring costs, mostly in Europe.
As a result net income was $125 million, compared with $865 million in the same period last year. Sales came in at $37.4 billion, up from $36.9 billion in 2013.
GM said that of the $1.3 billion recall charges, some $300 million was to cover the cost of courtesy cars.
GM has seen its 2014 Q1 profits hit by a $1.3 billion charge to cover the cost of a huge recall of cars over defective ignition switches (photo Reuters)
“Obviously, the recall campaign charges in the first quarter overshadows the headline results, but if you look underneath that, we had strong performance across the board,” chief financial officer Chuck Stevens said.
It was GM’s worst quarterly performance since it posted a net loss after leaving bankruptcy protection in 2009.
The company had raised vehicle costs during the quarter, which helped boost operating profits by $1.8 billion.
In North America, GM experienced higher sales of its more lucrative versions of its redesigned Chevrolet Silverado and GMC Sierra full-size pickup trucks.
“The performance of our core operations was very strong this quarter, reflecting the positive response of customers to the new vehicles we are bringing to market,” said GM CEO Mary Barra.
“Our focus remains on creating the world’s best vehicles with the highest levels of safety, quality and customer service, while aggressively addressing our business opportunities and challenges globally.”
During 2014 Q1 the company was also hit by another charge of $419 million, “related to changing the exchange rate GM uses for re-measuring the net assets of its Venezuelan subsidiaries”.
GM has asked a US court to bar some lawsuits relating to its recall over faulty ignition switches.
The faulty switches could turn off the engine, disabling the airbags and have been linked to at least a dozen deaths.
The recall was issued earlier this year but GM has admitted some employees knew about the problem as early as 2004.
General Motors has asked the court to ban cases “alleging purely economic damages” due to the recall. It does not affect cases relating to accidents or injury.
The company has been hit by various lawsuits since the recalls began this year.
GM has asked a US court to bar some lawsuits relating to its recall over faulty ignition switches
“The lawsuits that are the subject of this motion, most of which purport to be class actions, are brought by or on behalf of individuals who were not injured as the result of any failure of the ignition switch,” the carmaker said.
GM has so far recalled nearly 2.6 million cars over the issue.
However, it has claimed that the problem affects cars that were manufactured in the years preceding its bankruptcy and subsequent bailout by the US government in 2009.
It said the “new GM” – referring to the post bailout firm – had committed to replacing the defective ignition switches as a result of the recall.
“New GM’s recall covenant does not create a basis for the plaintiffs to sue new GM for economic damages relating to a vehicle or part sold by old GM,” the company was quoted as saying in its filing by the Reuters news agency.
However, the company acknowledged in a statement that “it has civic and legal obligations relating to injuries that may relate to recalled vehicles”, and that it was looking at what options may be available to it to deal with those obligations.
Some of those suing the carmaker have alleged the firm hid the information about the problem from the US government while it was being bailed out.
They claim that as result of concealing this information GM was not entitled to protection from liability arising from the issue.
“GM’s argument suggests that the US Government would have agreed to extend $40bn of taxpayer money for GM’s restructuring, and supported shielding it from liability through the sale order, had it known of GM’s intentional misconduct,” Reuters quoted the plaintiffs as saying in their lawsuit.
GM is already facing an inquiry from US authorities over its handling of the issue.
General Motors is accused by US Congress of a potentially criminal cover-up of its defective ignition switches.
Lawmakers on Capitol Hill fumed at the lack of answers from GM’s new CEO Mary Barra during a second day of hearings Wednesday into why the carmaker waited a decade to recall cars with the deadly flaw.
Members of a Senate subcommittee also said GM should tell owners of the 2.6 million cars being recalled to stop driving them until they are repaired.
However, Mary Barra gave assurances that the cars, mainly Chevrolet Cobalts and Saturn Ions, are safe to use while owners wait for the replacement part, saying she would let her own son get behind the wheel if he took certain precautions.
GM has linked the switch to 13 deaths and dozens of accidents. Others, including relatives of some victims, have a higher count of fatalities.
The automaker has said the ignition switch can move from the “run” position to the “accessory” position because of weight on the key chain. That causes the engine to shut off, disabling power steering, power brakes and the front air bags.
As she did Tuesday at a House hearing, Mary Barra said many of the answers Congress is seeking will come out in an internal GM investigation that should be completed in 45 to 60 days. She also said she was unaware of certain details about GM’s handling of the problem – an assertion that frustrated some of the senators.
“You don’t know anything about anything,” Senator Barbara Boxer, D-California, said.
Image source Wikimedia
Mary Barra also tried to assure lawmakers that GM is now more focused on safety and the consumer. Few sounded convinced.
Senators aggressively questioned Mary Barra about how GM approved a replacement switch in 2006 but never changed the part number. Failing to change the number makes the part harder to track. In this case, anyone investigating the cars wouldn’t know why earlier switches were failing at a higher rate than later ones.
While Mary Barra called the failure to change the part number “unacceptable,” several members of the panel implied that it was done intentionally by a person or group within the company.
“I don’t see this as anything but criminal,” said Senator Kelly Ayotte, R-New Hampshire, a former prosecutor.
Senator Richard Blumenthal, D-Connecticut, who is also a former prosecutor, told Mary Barra that the more he learns about GM, “the more convinced I am that GM has a real exposure to criminal liability”.
The Justice Department is conducting a criminal investigation of GM’s handling of the recall. The GM CEO promised the company will cooperate.
Mary Barra said the company has not yet fired any employees in connection with the recall. But she said if inappropriate decisions were made, GM will take action, including firing those involved.
As she began her testimony, Mary Barra faced an angry and skeptical Senator Claire McCaskill, D-Missouri – the head of the subcommittee – who recounted the story of a woman who died in an accident involving a faulty switch.
Claire McCaskill said GM had “a corporate culture that chose to conceal rather than disclose.”
She also dismissed Mary Barra’s claim that there is a new culture at GM. She said that when emerging from bankruptcy in 2009, GM had ample time to recall cars with the faulty switch.
GM did not begin recalling the vehicles until February.
Mary Barra said GM has already provided 13,000 loaner cars to drivers who are concerned. But she said the company’s testing on different types of roads shows the cars are safe as long as there is nothing but the ignition key on the key chain.
In 2015, GM entering a deferred prosecution agreement with the New York Office.
In September, 2018, U. S. District Judge Alison Nathan dismissed the criminal cases against General Motors. New York prosecutors told Nathan the car maker paid over $2.6 billion in penalties, fines and settlements.
GM still faces pending civil lawsuits, but the government has finished monitoring the company as per bringing state or Federal charges.
General Motors is recalling 824,000 more cars over defective ignition switches that have caused some engines to shut off and to disable airbags.
GM said it was recalling a variety of models made between 2008 and 2011, in addition to 1.6 million cars made before 2007 that were recalled last month.
The carmaker said it was unaware of deaths caused by the flaw in the 2008-2011 models.
But the problem has been linked to between 12 and 303 deaths in crashes.
Separately on Friday, GM halted sales of some models of the popular Chevrolet Cruze car.
General Motors is recalling 824,000 more cars over defective ignition switches
GM did not give details of the reasons behind its move, which affects models with 1.4 litre turbo diesel engines, nor did it say whether the sales halt affects markets outside the US.
The recall of the 2008-2011 models announced on Friday adds to the 1.6 million cars the company has already recalled over reports of the faulty ignition switch.
“We are taking no chances with safety,” GM chief executive Mary Barra said in the company’s announcement.
“Trying to locate several thousand switches in a population of 2.2 million vehicles and distributed to thousands of retailers isn’t practical. Out of an abundance of caution, we are recalling the rest of the model years.”
The models affected by Friday’s recall are the Chevrolet Cobalt and HHR, Pontiac G5 and Solstice, and the Saturn Ion and Sky.
At issue is a flaw in the manufacture of the ignition switch that causes the key to shift on its own from the “run” position to the “accessory” or “off position”, even while the car is driving at full speed on the road.
That can shut off the car’s engine and disable the airbags, with potentially disastrous consequences.
Until the cars can be recalled and the ignition switches replaced, GM recommends customers remove all items, including the key fob, from their key rings, using only the vehicle key in the ignition switch.
GM has admitted that some employees knew about the issue as early as 2004.
The carmaker has linked the issue to 12 deaths. But a report by the Center for Auto Safety has put the number at 303 – a figure that GM has disputed.
The delay in recalling the vehicles has triggered two congressional enquiries against General Motors.
Mary Barra is scheduled to testify to both chambers of Congress next week on the issue and address why it did not recall vehicles earlier.