US Fine Hardly the End of GM Recall Saga
General Motors' agreement to pay a $35 million federal fine for concealing defects in small-car ignition switches and to give the government greater oversight of its safety procedures closes one chapter of the automaker's recall saga. But it's far from over.
Besides agreeing to pay the penalty - the largest ever assessed by the National Highway Traffic Safety Administration - GM admitted that it broke the law by failing to quickly tell the government about the problems. The automaker agreed to report safety problems a lot faster - it only started recalling 2.6 million small cars this February, more than a decade after engineers first found a flaw in the switches.
The switches in older-model small cars such as the Chevrolet Cobalt and Saturn Ion can slip out of the "run" position and shut down the cars' engines. That disables the power-assisted steering and brakes and can cause drivers to lose control. It also disables the air bags.
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.
GM faces issues both in the near-term and longer term related to the recall. Here's a breakdown:
- THE INTERNAL INVESTIGATION: Late this month or early in June, former U.S. Attorney Anton Valukas will finish an investigation for GM into why the company delayed recalling the cars. GM has promised an "unvarnished" report and said it will make at least some of the results public. The company must provide NHTSA with the full report.
- THE CRIMINAL INVESTIGATION: The U.S. Justice Department is investigating GM's conduct and may bring criminal charges. The same team that got Toyota to agree to a $1.2 billion penalty for hiding unintended acceleration problems from NHTSA is working on the GM case. In the Toyota case, the company agreed to a long statement of facts that included multiple allegations of cover-ups. That investigation lasted four years.
- CONGRESSIONAL ACTION: Two congressional subcommittees have promised to call GM CEO Mary Barra back to Washington for further hearings after the Valukas report is released. At hearings in April, Barra repeatedly said she couldn't answer questions because the internal investigation wasn't finished.
- RECALLS: Barra promoted longtime engineer Jeff Boyer as GM's safety chief, with the mandate to look into other safety issues that should have resulted in recalls. On Thursday, GM announced it would recall another 2.7 million cars and trucks. So far this year the company has had 24 recalls with a total of 11.2 million vehicles. GM is working to get new ignition switches as well as parts for the other recalls from suppliers. Its ignition switch maker plans to add two assembly lines this summer to the one already working. GM expects to have all the switches made by Oct. 4.
- BOTTOM LINE: So far, recall-related charges are up to $1.5 billion, mostly for repairing vehicles. GM also faces dozens of lawsuits from families of those killed in crashes and from people who were hurt. The company has hired compensation expert Kenneth Feinberg to negotiate settlements. Lawyers say they have at least 400 possible cases against GM. That could cost the company billions. GM also faces lawsuits from shareholders and people whose cars have lost value. In addition, GM must pay NHTSA $7,000 for every day it fails to answer a list of questions from the agency. The fines started April 4 and already are above $300,000.