General Motors is hoping to begin closing the door on its ignition switch scandal with the payment of a $1 million penalty to the U.S. Securities and Exchange Commission.
The SEC was one of the many government agencies to pursue GM after the maker was found to have improperly responded to internal data showing a faulty switch design could cause some of its vehicles to shut off unexpectedly. The defect has been blamed for at least 124 deaths and hundreds of injuries. The securities probe focused not on safety but whether improper accounting kept the company from properly disclosing the potential financial impact of the defect to shareholders.
The fine is relatively modest when compared to the more than $2 billion the defect has so far cost the largest of the Detroit automakers. That includes a $900 million settlement GM reached with the U.S. Justice Department to close a criminal investigation in September 2015. The automaker also paid a $35 million penalty to the National Highway Safety Administration.
Separately, GM’s then-new CEO Mary Barra launched a compensation fund that paid out $600 million to victims and their families. And the automaker has been embroiled in legal battles with those who did not settle their claims – though it has so far won several so-called bellwether cases intended to set guidelines for settling other outstanding lawsuits.
(Takata pleads guilty, 3 indicted in airbag scandal. Click Here for the latest.)
The automaker announced the SEC settlement on Wednesday, noting that the $1 million payment, “does not call into question any of GM’s current or prior financial statements or its disclosures. Also, no material weakness or significant deficiency was found by the SEC.”
GM acknowledged the ignition switch defect in spring 2014, triggering the recall of about 2.6 million vehicles. It also fired more than a dozen employees, while also taking action against a number of former workers and executives. The problem, internal documents revealed, had been known for more than a decade and appeared to be the result of an improper design. That defect could lead to switches unexpectedly turning to the “off” position, especially if the ignition key was attached to a heavy key ring.
In such an instance, the motor would be disabled, but so would the vehicle’s power brakes and steering, as well as its airbags.
(VW agrees to $4.3 billion criminal settlement in diesel scandal. For more, Click Here.)
Even after some GM managers learned of the problem they failed to correct it, some company documents suggesting they wanted to avoid the significant cost of a recall.
The scandal broke just after Dan Akerson retired as GM Chairman and CEO, and it proved the first real test for his successor – and the first woman to run a major auto company, Mary Barra. The GM veteran quickly acknowledged the problem, setting up a victims fund managed by Kenneth Feinberg, the same specialist who oversaw both the 9/11 compensation fund and a separate fund set up for victims of BP’s Gulf of Mexico oil spill.
As part of the Justice Department’s settlement, GM also agreed to having an outside monitor put in place for three years to ensure it changes its internal safety practices.
But critics have questioned whether the criminal probe was resolved adequately. Within recent months, Justice investigations of both the Volkswagen diesel emissions and the Takata airbag scandals have resulted not only in fines but charges leveled against company employees.
When the VW deal was announced earlier this month, U.S. Attorney General Loretta Lynch said she wanted to hold “flesh-and-blood humans,” and not just “faceless corporations” accountable. She declined to discuss why no charges were leveled during the GM case.
While the SEC settlement appears to wrap up the ignition switch case at a federal level, GM is still facing possible action by various state agencies, and a number of lawsuits filed by victims and families continue to be pursued in court.
(Senior VW managers warned to stay away from U.S. to avoid possible criminal charges. Click Here for the story.)