GM Fined Maximum $35 Million Over Ignition Switch Recall

×
GM Fined Maximum $35 Million Over Ignition Switch Recall
Jeff Kowalsky/Bloomberg via Getty ImagesA technician replaces the ignition switch on a 2005 Saturn Ion at a GM dealership in Michigan.
By JOAN LOWY and TOM KRISHER

WASHINGTON -- U.S. safety regulators fined General Motors (GM) a record $35 million Friday for taking at least a decade to disclose defects with ignition switches in small cars that are now linked to at least 13 deaths.

It's the maximum penalty that the government can impose. But the amount is less than a day's revenue for GM, based on the $37.4 billion it took in during the first quarter, and safety advocates were quick to question its effectiveness.

As part of an agreement announced Friday by the Transportation Department and National Highway Traffic Safety Administration, GM also has agreed to government oversight on safety issues, and to report safety problems much faster than in the past.

NHTSA has been investigating GM's delayed recall of 2.6 million older small cars with defective ignition switches. GM has acknowledged knowing that the switches had problems as early as 2001, but it didn't start recalling the cars until February of this year. The department said in a statement that GM agreed that it was slow to report the problems.

The company says at least 13 people have died in crashes linked to the problem, but trial lawyers suing the company say the death toll is at least 53. Ignition switches on Chevrolet Cobalts and Saturn Ions 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 car's air bags.

Transportation Secretary Anthony Foxx, at a morning news conference in Washington, said the government won't accept a company failing to notify regulators about safety defects.

"Literally silence can kill," he said. "GM did not act and did not alert us in a timely manner. What GM did was break the law."

Acting NHTSA Administrator David Friedman said that a previously undisclosed 2009 memo from a parts supplier to GM clearly stated that the ignition switch problem could disable the small cars' air bags, which clearly is a safety problem.

"This is information that General Motors had from their supplier that General Motors never shared with us," he said.

Had the government possessed this information, it would have sought a recall at that time, Friedman said. The safety agency has been criticized for not requiring GM to recall the small cars despite numerous complaints from owners.

Automakers are required to report safety defects within five days of discovering them.

The $35 million penalty was doubled from last year. But Foxx still urged Congress to pass legislation that would raise the fine to $300 million. One consumer safety advocate said neither of those amounts is enough of a deterrent, and hoped that a Justice Department investigation will produce a much stiffer penalty.

Clarence Ditlow, executive director of the nonprofit Center for Auto Safety, wants Justice to impose a fine of $1 billion or more and bring individual criminal charges against GM engineers and their superiors.

"That's the only way you're going to change GM's behavior," he said.

Earlier this year, Justice made Toyota (TM) pay $1.2 billion for concealing unintended acceleration problems from government regulators. No individuals were charged with a crime, however.

Under Friday's agreement, GM will have to make "significant and wide-ranging internal changes" to its safety review process, the government said. The company also has to pay added penalties for failing to meet NHTSA's deadline to answer questions about the ignition switches.

NHTSA began fining GM $7,000 a day in early April after it missed the deadline.

In a separate statement announcing the agreement, GM CEO Mary Barra said, "GM's ultimate goal is to create an exemplary process and produce the safest cars for our customers -- they deserve no less."


GM Recalls 1.5 Million More Cars Over Steering Problem

Increase your money and finance knowledge from home

What are Penny Stocks

The lucrative and dangerous world of penny stocks.

View Course »

What is Short Selling?

Make a profit when stocks prices fall.

View Course »

Add a Comment

*0 / 3000 Character Maximum

8 Comments

Filter by:
a1623yankee

...and NO perp walks yet again.

The CORPORATE/FASCIST government of the USA strikes again with the CORPORATE/FASCIST needs over 'The People' mantra holding fast.

It's time, no, WA-A-A-AY past time, to rise up, beat the culture of GREED and POWER to a bloody pulp, kick it into the gutter where it belongs, burn the CORPORATE charters and start from scratch!!!

May 18 2014 at 6:29 AM Report abuse rate up rate down Reply
foxylynx

I want to know why NO prosecutions - this is manslaughter in the 1st degree - they took our money and let people die. This is the New America - every fraud and blunder is paid for and no one is held accountable. 2008 crash and zero prosecutions - WHY, because the banks are too big to fail. Big Brother taps into all phone calls, emails, etc - why didn't they tap into the BIG Banks? They keep selling us a bill of goods and we just take it, like the lemmings we have become. Corruption from the top down, both parties.

May 16 2014 at 10:00 PM Report abuse rate up rate down Reply
stevelauper

Dear GM:

I want my 12 Billion Dollars ($12,000,000,000.00) back.

Sincerely,

The American Taxpayer

May 16 2014 at 12:57 PM Report abuse rate up rate down Reply
stevendy1

lets start fining our senators and congress-people for doing nothing the last 7 years..

May 16 2014 at 12:53 PM Report abuse rate up rate down Reply
pdbliz

What a shame America has become.......And,,It is not over yet.!!!!!
THE BIG DOWN FALL IS WELL ON ITS WAY.!!!!!

May 16 2014 at 12:38 PM Report abuse +1 rate up rate down Reply
pdbliz

I have a idea,,,Let the Democrat voters pay this fine for GM.!!!!

May 16 2014 at 12:37 PM Report abuse rate up rate down Reply
floatgod

Just add it to what they already owe to the U.S. Treasury (aka taxpayers).

May 16 2014 at 12:24 PM Report abuse +1 rate up rate down Reply
juststeve35

35 whole million dollars??

Well gosh, that breaks down to about $13 per vehicle affected.

Another great lesson courtesy of the US Government and, this time, the DNC:

It is far cheaper to **** the American Public than it is to do right by them, so from the Federal Government to Corporate America:

Start Screwing!

May 16 2014 at 12:04 PM Report abuse +1 rate up rate down Reply