GM fined $35m over recall scandal in deal with Department of Transportation

General Motors HQ Detroit

General Motors was fined $35m and agreed to take part in “unprecedented oversight requirements” on Friday over its massive recall of cars with faulty ignition switches that have been linked to 13 deaths.

The US Department of Transportation imposed the record civil penalty for the automaker’s “failure to report a safety defect in the vehicle to the federal government in a timely manner.”

The fine comes amid a separate criminal investigation by the Justice Department into GM’s failure to address its deadly safety problems.

The ignition fault in certain Chevrolet Cobalt and other GM models went unreported to the US authorities for a decade and resulted in the non-deployment of airbags. The issue led to the recall of some 2.6m vehicles. Since the first ignition switch recall in February, GM has recalled nearly 13m vehicles over safety concerns.

The DOT said the action represented the single highest civil penalty ever paid as a result of a National Highway Traffic Safety Administration (NHTSA) investigation of violations stemming from a recall.

The agency also ordered GM to make significant changes to its review of safety-related issues in the United States and to pay additional civil penalties for failing to respond on time to the agency’s document demands during the 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 US transportation secretary Anthony Foxx. He said he would continue to “aggressively monitor GM’s efforts in this case” and called on Congress to support a move to increase the penalties the regulator can levy in cases like this from a maximum of $35m to $300m, “sending an even stronger message that delays will not be tolerated.”

Auto manufacturers are required to notify the NHTSA within five business days of determining that a safety-related defect exists or that a vehicle is not in compliance with federal motor vehicle safety standards and to promptly conduct a recall. GM admits in the Consent Order that it did not do so.

The NHTSA reviewed data related to the non-deployment of airbags in certain Chevy Cobalt models in 2007 and 2010 but in both cases determined that it did not have enough information to open a formal investigation.

On 7 February, GM announced the recall of vehicles the NHTSA had studied citing a defect with the vehicle’s ignition switch that could result in the air bag not deploying in the event of a crash. “GM had failed to advise NHTSA of this defect at the time of the agency’s earlier reviews,” the DOT said in a statement.

“No excuse, process, or organizational structure will be allowed to stand in the way of any company meeting their obligation to quickly find and fix safety issues in a vehicle,” said NHTSA acting administrator David Friedman.

GM is currently conducting an internal investigation into the recall and agreed to hand over its report to the NHTSA. It has also agreed to take steps to ensure employees report safety-related concerns to management, and to speed up the process for GM to decide whether to recall vehicles.

Last month Mary Barra, GM’s chief executive, was grilled by Congress over the recalls. Congressional investigators have accused the company of neglecting to warn customers for more than 10 years about faulty ignition switches capable of disabling airbags in Chevrolet Cobalt and Saturn Ion vehicles.

At the hearing Barra apologized for the deaths but avoided questions about whether GM would take “responsibility” for the deaths. GM emerged from bankruptcy in 2008 and is technically a new company, and therefore not liable for lawsuits related to deaths before that time.

Kenneth Feinberg, a lawyer who specializes in a restitution payments in major disasters, including the terrorist attacks of 9/11 and the BP oil spill, has been appointed by GM to look at the case.

Powered by Guardian.co.ukThis article was written by Dominic Rushe in New York, for theguardian.com on Friday 16th May 2014 15.30 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

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