The U.S. Department has concluded a year-longer investigation into General Motors’ handling of a deadly ignition switch defect with a settlement that requires the automaker to pay a $900 million fine. The maker separately negotiated $575 million settlement to conclude various civil suits related to the ignition switch issue now blamed for at least 124 deaths.
The settlement was significantly less than many had expected. And federal investigators did not bring charges against anyone connected with the defect despite GM’s acknowledgement that it waited a decade to deal with the problem. The Justice Dept. had extracted a $1.2 billion fine from Toyota Motor Co. last year to settle charges it had delayed action on defects related to unintended acceleration.
For her part, General Motors CEO Mary Barra told employees at a town hall meeting at the company’s Vehicle Engineering Center in Warren, Michigan that GM had “let (its) customers down.
“We didn’t do our jobs,” she said, adding that, ““As part of our apology to the victims, we promised to take responsibility for our actions,” she said. So we accept the penalties being announced today because they are part of our being accountable.”
The settlement comes 19 months after GM announced the recall of 2.5 million vehicles equipped with a faulty ignition switch that could unexpectedly turn off. In such a case, a motorist could lose control and, if the vehicle crashed, its airbag system would fail to operate.
The recall was announced barely two months after Barra became GM’s first female CEO and was an immediate test of her management and integrity. She quickly created a new post, appointing a safety czar with broad powers and reporting directly to the CEO. By the end of the 2014, GM had ordered more than 70 different recalls covering over 30 million vehicles – a major reason why total 2014 recalls for the industry doubled the previous record.
Barra also ordered the creation of a special victims’ compensation fund, appointing lawyer Kenneth Feinberg – who previously handled funds for 9/11 and BP oil spill victims. The program wrapped up a month ago after determining 124 deaths were linked to the ignition switch defect.
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GM committed $625 million to cover costs related to the fund. But after factoring in the Justice Department agreement, civil lawsuit settlements and a $35 billion fine levied by the National Highway Traffic Safety Administration, the ignition switch debacle has so far cost GM around $5 billion. And the cost could continue to climb with additional litigation. A number of states attorneys-general are continuing their own ignition switch probes.
“I have said many times how sorry I am for what happened. On behalf of all of us, I have apologized to the families who lost love ones and to those who were injured. I do so again today,” Barra said during the GM town hall meeting.
While Barra apologized, U.S. Attorney Preet Bhahara defended the settlement during a news conference in New York. Justice leveled two felony counts against the automaker for fraud and for misleading regulators. But it agreed to defer potential prosecution for three years – a similar move to what was included in the Toyota settlement in March 2014. So, while GM did not legally acknowledge guilt it will be on probation for those three years, prosecutors and regulators closely watching how it handles other safety issues.
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The most controversial aspect of the agreement was the decision not to prosecute any individuals connected with the delayed recall. GM had itself fired 15 employees as a result of its own internal investigation last year.
“GM killed over a 100 people by knowingly putting a defective ignition switch into over 1 million vehicles,” said Clarence Ditlow, a long-time critic of the industry and head of the Washington-based Center for Auto Safety. “Today thanks to its lobbyists, GM officials walk off scot-free while its customers are 6 feet under.”
For his part, Bharara stressed “We’re not done.” The investigation will continue, he said, adding that “If there is a criminal case to bring, we will bring it.”
Bharara also said the investigation has sent a message to the rest of the auto industry that safety matters and that manufacturers face serious penalties if they ignore the rules. NHTSA, meanwhile, has increased its own scrutiny of the industry after coming under fire for not catching the ignition switch issue earlier.
GM still faces a multitude of other investigations and lawsuit. The civil settlement only cover about 60 % of the multi-district litigation the maker was facing, and doesn’t resolve the various state investigations.
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Meanwhile, the U.S. Securities and Exchange Commission and the Federal Trade Commission are also continuing their own probes, Barra noted, concluding, “It’s not possible to estimate the remaining exposure.”
(Joe Szczesny contributed to this report.)