GM slapped with $35m fine by US agency

May 17, 2014 - 12:10:31 am
Secretary of Transportation Anthony Foxx (right) and Highway Traffic Safety Administrations Acting Administrator David Friedman speak to the media after announcing that General Motors has agreed to pay a $35m civil penalty, at the Department of Transportation, in Washington DC, yesterday.

WASHINGTON: General Motors Co was slapped yesterday with a $35m US fine for its delayed response to an ignition switch defect in millions of vehicles.

US Transportation Secretary Anthony Foxx announced the fine, which is the maximum the agency can impose. Other investigations into the automaker’s handling of the recall are being conducted by the federal government.

“What we cannot tolerate, what we will never accept, is a person or a company who knows danger exists and says nothing,” Foxx said. In a harshly worded statement leveled against the Detroit automaker, he added: “What GM did was break the law ...  They failed to meet their public safety obligations.”

The ignition-switch defect, first noticed by the largest U.S. automaker more than a decade ago, has been linked to at least 13 fatalities. But the first recalls began only in February of this year, despite years of consumer complaints.

The faulty ignition switches on Chevrolet Cobalts, Saturn Ions and other GM vehicles can cause their engines to stall, which in turn prevents air bags from deploying during crashes.  Also, power steering and power brakes do not operate when the ignition switch unexpectedly moves from the “on” position to the “accessory” position.

The fine is far from the end of GM’s problems.

Congress, the Department of Justice, the US Securities and Exchange Commission and several states are conducting their own investigations, and GM’s internal probe is expected to be completed within the next two weeks. The company is also weighing whether and how to broadly compensate victims.

The consumer group Center for Auto Safety called the $35 million fine a “slap on the wrist to a hundred billion dollar corporation.” It called on the Justice Department to impose a fine of at least $1 billion on GM.

GM in recent months has been trying to demonstrate that it is taking quality issues seriously, shaking up its internal safety team and taking other steps that it says will help protect consumers.

But consumer advocates have accused GM of resisting moves such as urging owners of the recalled cars to park them immediately until they are repaired.

The Transportation Department’s National Highway Traffic Safety Administration also has come under attack for failing to pursue GM aggressively after years of hints about a problem.

Under the steps announced by the government yesterday, GM also agreed to take part in “unprecedented oversight requirements,” including providing full access to its internal investigation and notifying the government of any changes to GM’s effort to make repair parts, the government said.

GM must also “make significant and wide-ranging internal changes to its review of safety-related issues,” NHTSA said.

Foxx and NHTSA also used Friday’s announcement to push Congress to reset the maximum financial penalty to $300m from $35m.

GM shares were down 0.3 percent at $34.25 yesterday afternoon after falling as much as 2.5 percent earlier in the session.

In a statement, GM confirmed it would pay the fine.

“We are working hard to improve our ability to identify and respond to safety issues,” said Jeff Boyer, vice president of Global Vehicle Safety, who is assigned to integrate safety policies across the company.

Friday’s announcement on GM came a day after the automaker announced five separate recalls covering nearly 3 million vehicles worldwide because of tail lamp malfunctions and potential faulty brakes. 

Lawyers around the country have filed individual and class-action suits on behalf of people injured and the families of those killed in accidents linked to the faulty ignitions. The damages could reach into the billions of dollars, industry analysts say. 

GM could be legally protected, in part, by its 2009 court-approved bankruptcy reorganization agreement from liability lawsuits related to problems prior to then.