General Motors Co (GM) was slapped on Friday with a US$35 million fine for its delayed response to an ignition switch defect in millions of vehicles, as US federal regulators accused a long line of company officials of concealing a problem that is linked to at least 13 deaths.
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 US federal government and could come with more severe punishments.
It was unclear how those additional probes might be influenced by Friday’s actions by the administration of US President Barack Obama, especially after Foxx said: “What GM did was break the law... They failed to meet their public safety obligations.”
The ignition-switch defect was originally noticed by the largest US automaker more than a decade ago. Yet the first recalls began only in February this year, despite years of consumer complaints.
Furthermore, National Highway Traffic Safety Administration (NHTSA) acting chief David Friedman told reporters that GM employees ranging from engineers “all the way up through executives” were aware of the information years before the recall of 2.6 million vehicles.
He did not name the executives, and said there was no information that chief executive Mary Barra had earlier knowledge about the problems. Barra took over as CEO in the middle of the January, becoming the first female to head a major automaker.
Friedman also slammed GM’s “corporate philosophy” and pointed to internal training documents that discouraged engineers from using the words “safety” and “defect” when identifying product risks.
Besides announcing the US$35 million fine, US officials said that GM will come under closer scrutiny by federal regulators.
The automaker will be required to hold regular meetings with the agency to report on efforts to catch safety problems and it also must give the agency monthly reports on any emerging defect issues, officials said.
US Democratic Senator Richard Blumenthal of Connecticut criticized the agency for failing to spot the defect earlier.
“There is no question NHTSA bears part of the blame, a large part,” he said.
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.
The US Congress, the US Department of Justice (DOJ), 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.
Carl Tobias, who teaches tort and product liability law at the University of Richmond School of Law, said that while the agency’s probe is separate from the ongoing criminal investigation, “I think it plays back on the DOJ investigation and I’m sure they will take it into account.”
He added that GM’s admission that it failed to make a timely report of the ignition defect could increase the company’s exposure to civil lawsuits “principally because people could have gotten hurt in the interim when GM wasn’t making sufficient and timely reports to NHTSA.”
The consumer group Center for Auto Safety called the US$35 million fine a “slap on the wrist to a hundred-billion-dollar corporation.”
It called on the Department of Justice to impose a fine of at least US$1 billion on GM.
US Transportation Secretary Foxx and the agency also used Friday’s announcement to push Congress to reset the maximum financial penalty to US$300 million from US$35 million. Prospects for passage of such legislation this year are uncertain.
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