GM To Pay Settlement On Recalled Vehicles

By on September 24, 2015


The criminal investigation into General Motors’ failure to disclose an ignition defect that killed at least 124 people is now closed. G.M. has agreed to pay $900 million to settle the case with the Justice Department, according to documents released by the agency.

The Justice Department did not file charges against any individual G.M. employees. It has also agreed to defer prosecution for three years on one count of wire fraud and one count of engaging in a scheme to conceal a deadly safety defect, provided that the automaker pays the financial penalty, submits to independent monitoring and continues to accept and acknowledge responsibility for its conduct. Ultimately, it is a type of “enterprise probation”.

Though the settlement may smear G.M.’s reputation, the company will pay less than Toyota, which agreed to pay $1.2 billion last year after concealing unintended acceleration problems in its cars. G.M. must pay the penalty by Sept. 24th.

The deal, which highlights the limitations of new Justice Department rules that emphasize criminal charges against corporate employees, is not sitting well with some family members of the people who were killed in crashes tied to the defect.

“You shouldn’t get probation when hundreds of people have been killed or injured,” said Laura Christian, the birth mother of 16-year-old Amber Rose, who was killed in a July 2005 crash in Maryland.

As part of the settlement, G.M. agreed that it had failed to disclose the defect to its regulator, the National Highway Traffic Safety Administration, and “falsely represented to consumers that vehicles containing the defect posed no safety concern.” The company also acknowledged that employees knew no later than 2005 that its ignition switches in Chevrolet Cobalts and other small cars were prone to too-easy movement from the “run” position to the “accessory” or “off” position.

By 2012, certain employees were aware that the switches, which could unexpectedly turn off, cutting power to the engine and disabling airbags, presented a safety defect, but it was not until February 2014 that G.M. notified its regulator and the public of the deadly flaw.

G.M.’s troubles came to light in February 2014, when it began recalling 2.6 million small cars with the defective switches. Soon after, the company disclosed that employees had been aware of clues pointing to the defect for more than a decade.

Though the automaker initially linked 13 deaths to the flaw, eventually the death toll rose to at least 124.

Senators Richard Blumenthal and Ed Markey, Democrats who have been involved in multiple congressional hearings over the last year and a half on auto safety problems, said the settlement did not go far enough to penalize G.M.

“This outcome fails to require adequate and explicit admission of criminal culpability from G.M. and individual criminal actions,” they said in a joint statement. “This outcome is extremely disappointing. The 124 families who lost loved ones deserved an explicit acknowledgment of criminal wrongdoing, and individual criminal accountability, as well as a larger monetary penalty.”

The ignition switch crisis prompted a flurry of additional recalls by G.M. for various safety issues, and by other automakers as well. More than 60 million vehicles were recalled in the United States last year, double the previous annual record in 2004, and G.M., along with Honda and Chrysler, set corporate records for recalls.

The National Highway Traffic Safety Administration also found itself under increasing pressure last year as the recall count rose. A New York Times investigation into the agency’s handling of major safety defects over the last decade found that it had often been slow to identify problems, tentative to act and reluctant to use its full legal arsenal against automakers.

G.M. has set aside almost $4 billion to cover the cost of its recalls, including the ignition switch action, and it also paid a $35 million penalty, a record at the time, for failing to disclose the defect to regulators in a timely manner.

G.M. did not immediately comment on the Justice Department settlement. In related news on Thursday, the company announced that it would take a $575 million charge in the third quarter related to a number of civil lawsuits connected to its ignition switch recall.