GM agrees to pay $900M US to settle ignition switch probe
General Motors admitted it failed to disclose to the public a deadly problem with small-car ignition switches as part of a $900 million deal reached with U.S. federal authorities to avoid criminal charges, authorities announced Thursday.
The automaker will retain an independent monitor to review and assess its policies to ensure compliance with the agreement with the government, according to court papers released by U.S. Attorney Preet Bharara in Manhattan.
The deal does not have any application in Canada, though there are Canadian deaths linked to the GM ignition switch fault.
"The agreement reached is part of the U.S. legal system, applies to GM USA, and falls outside of Canadian legal purview," a Transport Canada spokeswoman said in an email.
Besides the $900 million forfeiture and the monitor, the deal calls for two criminal charges to be dismissed if the company complies with terms of the agreement for three years. The $900 million must be paid by Sept. 24.
The two-count criminal information accuses GM of wire fraud and scheming to conceal material facts from a government regulator.
Last year, GM recalled 2.6 million older small cars worldwide to replace the faulty switches. Those included the Chevrolet Cobalt and Saturn Ion.
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The faulty switches can unexpectedly slip out of the run position to off or accessory. That shuts off the engine and disables power-assisted steering, power brakes and the air bags.
The problem caused crashes that killed at least 124 people and injured 275 more, according to lawyers in charge of a fund set up by GM to compensate victims. Families of those who died will get at least $1 million. GM has set aside $625 million to compensate people who accept a settlement with the fund. GM also faces multiple lawsuits related to the problem.
The company acknowledged that some of its employees knew about the problem for more than a decade, but no cars were recalled until early last year. GM hired former federal prosecutor Anton Valukas to investigate the matter, and he found no wrongdoing on the part of top executives. Instead, he blamed the problem on a bureaucratic corporate culture that hid problems and failed to take action.
It was unclear if any individuals would be charged in the ignition switch probe. After the Valukas report was released, GM fired 15 employees including engineers and lawyers, for failing to act to resolve the switch problem.
Clarence Ditlow, executive director of the Center for Automotive Safety, a non-profit advocacy group and frequent auto industry critic, said it appears that no GM employees will be charged.
"GM killed over a 100 people by knowingly putting a defective ignition switch into over 1 million vehicles," he said. "Today thanks to its lobbyists, GM officials walk off scot-free while its customers are 6 feet under."
Prosecutors likely chose to charge GM with wire fraud because the company used electronic communications to interact with the government's National Highway Traffic Safety Administration, the agency that it is required by law to notify when it finds out about a safety defect.
In May 2014, NHTSA levied a record civil penalty of $35 million against GM. It said the company violated federal law when it failed to notify the government of safety-related defects within five days of learning about them. NHTSA said GM also failed to respond in a timely manner to the government's requests for information during its investigation of the defective switches.
The deal with GM comes roughly a year and a half after Toyota agreed to a $1.2 billion penalty from the Justice Department, admitting that it hid information about defects that caused Toyota and Lexus vehicles to accelerate unexpectedly and resulted in injuries and deaths. The Justice Department said at the time that it was the largest penalty of its kind ever imposed on an auto company.
GM's fine was likely less than Toyota because the company co-operated with the investigation, according to legal analysts.