GM gets fine of $35 million over deadly defect
Published: Wednesday, May 21, 2014 at 2:34 p.m.
Last Modified: Wednesday, May 21, 2014 at 2:34 p.m.
Federal safety regulators slapped General Motors with a record $35 million fine Friday for taking more than a decade to disclose an ignition-switch defect in millions of cars that has been linked to at least 13 deaths.
* Fine for failing to disclose switch problem: $35 million
* GM recall costs so far this year: $1.5 billion
* Small car recall: 2.6 million older-model small cars, including the Chevrolet Cobalt and Saturn Ion, for defective ignition switches. (2.2 million in the U.S.)
* Number of vehicles GM has recalled in the U.S. this year: 11.2 million
* Number of recalls: 24
* Smallest recall: 355 Buick, Chevrolet and GMC vehicles from the 2014 model year for a transmission defect that was caught in the pre-production phase.
* Record year for GM recalls: 2004, with 11.8 million vehicles recalled.
* Loaner cars provided by the company so far: 52,000
* U.S. industry recalls in 2014: 15.4 million
* Most U.S. recalls after GM in 2014: Toyota, with 2.9 million
* Record year for recalls in U.S.: 2004, with 30.8 million
Sources: The Associated Press, National Highway Traffic Safety Administration, GM
Under an agreement with the Transportation Department, GM admitted it was slow to inform regulators, promised to report problems faster and submitted to more in-depth government oversight of its safety operations.
The fine was the maximum allowed under the law.
"Literally, silence can kill," Transportation Secretary Anthony Foxx said, adding: "GM did not act and did not alert us in a timely manner. What GM did was break the law."
Safety advocates said the fine, which is less than a day's revenue for GM, is too small to deter bad behavior by automakers.
Clarence Ditlow, executive director of the nonprofit Center for Auto Safety, said the Justice Department — which is conducting a criminal investigation — should fine the company $1 billion or more and bring charges against GM engineers and their superiors.
"That's the only way you're going to change GM's behavior," he said.
Congress is also investigating GM, and the automaker faces hundreds of lawsuits over deaths and injuries attributed to the bad ignition switch.
The company has acknowledged knowing that the switches in its small cars had problems since at least 2001. But it was not until February that it began recalling 2.6 million of the cars, mainly Chevrolet Cobalts and Saturn Ions.
Automakers are required by federal law to report safety defects to the government within five days of discovering them.
When jostled, the ignition switches can slip out of the "run" position and shut off the engine. That cuts off the power steering and brakes, potentially causing drivers to lose control. It also disables the air bags.
GM says at least 13 people have died in crashes linked to the problem. Trial lawyers suing the company say the death toll is at least 53.
The Transportation Department's National Highway Traffic Safety Administration, which has been criticized for failing to take action on the switches despite thousands of complaints from car owners, used a news conference to turn the tables on GM, offering some of the most damning evidence yet against the automaker.
Acting NHTSA Administrator David Friedman said a previously undisclosed 2009 memo from a parts supplier to GM stated that the switch problem could disable the cars' air bags. Had the government been told that at the time, it would have sought a recall, Friedman said.
Friedman said that it was clear many GM employees knew about the bad switch years ago, from engineers to investigators to executives. But he said the agency has no records to contradict CEO Mary Barra's claim that she found out about it only recently.
He portrayed the scandal as part of a larger problem with the safety culture at GM, saying the automaker's training materials discouraged employees from using words like "defect" or "dangerous" when reporting problems up the chain of command.
"The fact that GM took so long to report this defect says there was something very wrong with the company's values," he said.
GM received a $49.5 billion bailout from Washington during its 2009 bankruptcy, and the government was once the automaker's majority shareholder, but it sold off its last GM shares in December.
GM is already making changes. Barra has named Jeff Boyer as the company's new safety chief, and it has begun checking records for safety problems that could lead to recalls.
Carl Tobias, a law professor at the University of Richmond, said the government's action Friday "makes GM's exposure to liability greater, or the damages for which families ultimately settle larger."
Under the agreement, GM has to give NHTSA full access to the results of an internal investigation being done for the company by a former federal prosecutor.
General Motors is recalling about 8,200 midsize cars to fix a problem with the front brakes.
The latest recall affects 2014 Buick Lacrosse and Chevrolet Malibu models.
GM says in documents posted Friday by U.S. safety regulators that rear brake rotors were mistakenly installed on the front. The rear rotors are thinner, so brake pads will wear faster and could lose contact with the brake calipers. That could cause longer stopping distances and brake failure.
The company says it has no reports of crashes or injuries due to the problem.
Dealers were told to stop delivering the cars on May 1. Owners will get letters starting May 29. Dealers will inspect the brakes and replace rotors and pads if needed at no cost to owners.