Feds fine GM $35 million over recall

New York TimesMay 16, 2014 

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Secretary of Transportation Anthony Foxx announced Friday that General Motors has agreed to pay a $35 million civil penalty – the largest penalty allowed. Foxx said during a news conference that GM violated federal safety laws for not reporting an ignition defect in 2.6 million cars.

MARK WILSON — GETTY

— General Motors will pay $35 million in a civil settlement with the federal government over its failure to report in a timely manner a defective ignition switch in 2.6 million smaller cars, the Department of Transportation announced Friday.

In addition, regulators said that as part of the consent order, GM agreed to make “significant and wide-ranging internal changes to its review of safety-related issues in the United States, and to improve its ability to take into account the possible consequences of potential safety-related defects.”

The faulty ignition switch, in Chevrolet Cobalts, Saturn Ions and other cars, was prone to turn off if it was jostled or weighed down, shutting off the engine, and disabling the air bags and power-assisted systems such as steering and brakes. GM has linked the defect to 13 deaths and 32 crashes.

“Safety is our top priority, and today’s announcement puts all manufacturers on notice that they will be held accountable if they fail to quickly report and address safety-related defects,” Transportation Secretary Anthony Foxx said.

The National Highway Traffic Safety Administration of the Transportation Department demanded documents from GM on March 4 so the agency could “evaluate the timing of GM’s defect decision-making and reporting of the safety defect.”

The record fine is the maximum allowable under law, but regulators are pushing lawmakers to increase that level to $300 million. GM is also facing a $7,000 daily fine over its failure to fully answer 107 questions that regulators had asked.

In a news conference Friday, David Friedman, the acting administrator of the safety agency, said the defect and its grave implications were widely known within GM in 2012, when an engineer connected the problem to air bag failure in an internal email.

“GM engineers knew about the defect, GM investigators knew about the defect, GM lawyers knew about the defect,” Friedman said.

And long before that, GM received multiple warnings of the defect, its filings with regulators have shown.

Friedman said employees, including engineers and executives, were briefed on the safety defect in the years running up to the recall.

When asked if GM’s chief executive, Mary T. Barra, specifically, was briefed, he said: “I don’t have any records of that.”

GM has already made changes to its safety practices since it began recalling the cars in February. It has appointed a new global head of vehicle safety, Jeff Boyer, and named a new vice president in charge of global product integrity, Ken Morris. It has also hired a team of product investigators to examine consumer complaints and warranty claims for potential product safety issues in vehicles.

“We have learned a great deal from this recall,” Barra said in a statement Friday. “We will now focus on the goal of becoming an industry leader in safety. We will emerge from this situation a stronger company.”

GM is awaiting the results of an internal investigation by Anton Valukas, a former U.S. attorney.

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