A GM Ignition Switch Recall Primer

This story has been updated to note the cost GM expects to cover for its various recalls during the first quarter of 2014.

Recalls have become an almost every day norm in the automotive world.  Just over the weekend, for example, Honda announced a service action impacting almost 900,000 minivans sold in the U.S., and Chrysler recalled roughly 100,000 vehicles last week.  But the recall of 1.6 million General Motors vehicles last month has created shock waves throughout the industry – and headlines around the world.

It has already been dubbed “Switch-gate,” and generated Watergate-style questions about who knew what and when because of GM’s own admission it had warning signs that faulty ignition switches could cause vehicles to stall, and possibly crash, as early as 2001.

With at least 12 deaths linked to the problem, a number of investigations are now underway that could see GM hammered with massive fines, possible civil and criminal charges, and class-action lawsuits claiming millions, perhaps even billions, in damages.

With new headlines popping up seemingly every other day, here’s a quick summary of the key dates, numbers and details:

* On 2/13, GM announced plans to recall almost 800,000 compact models due to an ignition switch problem. A heavy key ring or jouncing on a rough road could cause the ignition to switch out of the ON position, causing engine stalling and the disabling of the vehicle airbag system. GM initially said the issue was linked to 6 deaths.

* Two weeks later, after facing heavy pressure from critics, the maker doubled the size of the recall – to 1.6 million — and said 13 deaths were linked to the problem.  NOTE: GM later reduced the number to 12 deaths, saying it “double-counted” one.

(Switch-gate: what did GM know and when did it know it? Click Here for more.)

* A preliminary timeline issued by GM raised serious concerns, indicating the maker apparently had early reports of the problem dating as far back as 2004, and that it abandoned a quick and relatively inexpensive fix.

* Subsequent information, as well as revised timeline information now indicates the first signs of trouble were reported by a GM engineer as far back as 2001, even before one of those models, the Saturn Ion, went into production.

* Along with the second recall, GM’s North American President Alan Batey apologized for the lack of a “robust” recall process.  The maker has since issued several more apologies, including one from new CEO Mary Barra who has said she will personally take over the internal investigation of the switch recall mess.

* The maker is offering $500 cash to owners of the recalled vehicles — of which about 1.4 million are still on the road — that can be used towards a trade-in. Owners also can ask for a loaner vehicle until dealers have the necessary parts to complete repairs.

(Click Here for more on GM’s offer to assist owners of the recalled vehicles.)

* GM has hired two major law firms to do the internal investigation, including one whose head, a former US prosecutor, had led the investigation into the collapse of Lehman Brothers.

* Separate Senate and House Committees have now gotten into the flap, one holding a hearing last week.

* GM is facing an investigation by the National Highway Traffic Safety Administration and could face record fines for failing to act on a known safety defect as quickly as required by law. But NHTSA is also taking heat as some critics believe the safety agency might have shown lax oversight instead of stepping in on the issue earlier. NHTSA’s acting director insists GM didn’t provide enough information to respond to.

(NHTSA takes head. Click Here for the story.)

* The US Justice Dept. is now in the midst of its own preliminary investigation that could result in potential criminal charges against GM.

* There are now a variety of lawsuits and a possible class action suit targeting the problem.

* One of the more intriguing angles to the story: when GM emerged from bankruptcy in July 2009 it left behind most debts and liabilities.  Among other things, any product liability or wrongful death lawsuits stemming from incidents that occurred before that time cannot be filed against the “new” GM.  Instead, lawsuits would have to target the “old” GM left behind in bankruptcy court.  In legal terms: good luck. Critics want GM to waive that immunity.

* Clarence Ditlow, head of the Center for Auto Safety, along with former NHTSA Joan Claybrook, call on GM to set up a $1 billion victim’s compensation fund — though Ditlow told TheDetroitBureau.com he had no specific reason to justify that number.

* Likewise, Ditlow and Claybrook issue a letter to NHTSA claiming 300 or more deaths are linked to the recalled vehicles but a closer inspection raises just as many questions about the source and accuracy of their numbers.

(12 deaths or 300? Click Here for the story.)

* GM itself on Monday announced three new recalls — and said it will take a $300 million hit to earnings for the first quarter of 2014 to cover those, and the ignition switch, recalls.

* All this is happening even as GM tries to demonstrate that it really is a “new” company.  Just last week, it landed more vehicles on the US News & World Report list of Best Family Vehicles than any other maker.  Its scores have soared in various third-party quality and reliability metrics, like the JD Power Initial Quality Survey and in Consumer Reports’ annual automotive rankings.  In some, GM is actually now ahead of arch-rival Toyota.

* Toyota, you may recall, faced a safety crisis of its own, a few years back, over so-called unintended acceleration.  It was hit with then-record fines and has paid several billion out in legal settlements and jury verdicts.  But its image has all but fully recovered.  The question is whether GM can turn its own image around, a major challenge for new CEO Barra.