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GM to pay $900 million to settle criminal case over ignition switch scandal

Sep 17, 2015

GM CEO Mary Barra testifies in 2014 before a House panel investigating the ignition switch recalls
Credit screen grab / U.S. House of Representatives

Updated: 4:22 pm

The U.S. Justice Department has agreed to dismiss two criminal charges against General Motors related to its handling of an ignition switch recall - that is, if the automaker forfeits $900 million, and cooperates for three years on an agreement that includes the appointment of an independent monitor.

GM admits it delayed recalling millions of Cobalts and other small vehicles with a defective and potentially deadly ignition switch for 10 years.

The switch could unexpectedly turn off the vehicle, disabling its safety systems, if the car went over a bump - especially if the owner had other keys and objects on the key ring.

GM CEO Mary Barra called an employee town hall to explain the terms of the settlement.  She urged employees to focus on the future - but to never forget the mistakes that led to the delayed recall.

"People were hurt and people died in our cars,"  Barra said.  She called the agreement "tough," but said GM's cooperation was key in lessening its severity.

"The steps we took at every turn to do the right thing persuaded the Justice Department to defer

GM CEO Mary Barra at September, 2015 employee town hall to explain a settlement with the Justice Department
Credit Steve Fecht / General Motors

prosecution," she said.

"General Motors not only failed to disclose this deadly defect," Transportation Secretary Anthony Foxx said in a statement, "but as the Department of Justice investigation shows, it actively concealed the truth from NHTSA and the public.  Today's announcement sends a message to manufacturers: deception and delay are unacceptable, and the price for engaging in such behavior is high."

The price for General Motors has already been high.

The automaker previously set aside $600 million for a special compensation program for victims who were barred from suing because of legal protections afforded by GM's 2009 bankruptcy.

GM will also pay $575 million to settle hundreds of other personal injury lawsuits.  Hundreds more are pending in the courts. 

The automaker also paid a $35 million fine levied by the National Highway Traffic Safety Administration.

Barra last year fired 15 people deemed most responsible for the delayed recall. 

GM also revamped its quality and recall programs to break down communication barriers and allow any employee to report defects up the command chain.  Barra went so far as to urge employees to contact her personally if they felt superiors were not responding to a safety issue.

GM also created a new position, Vice President of Global Vehicle Safety, and appointed 30 additional safety investigators in North America.

The automaker recalled more than 30 million vehicles last year, including the 2.6 million Cobalts and other small cars with the faulty switch. Many of the other recalls also involved defective ignition switches.

"Reaching an agreement with the Justice Department does not mean we are putting the issue behind us," said Barra.  "Our mission has been to take the difficult lessons from this experience and use them to improve our company.  We've come a long way, and we will continue to build on our progress."

The scandal rocked not only GM, but also NHTSA, which faced criticism for not catching the defect, as well as the U.S. auto industry, which set a new record for recalls in 2014.

Large-scale vehicle recalls have continued in 2015.

The scandal does not appear to have damaged General Motors in terms of sales.  Its U.S. sales rose 5.3% in 2014 compared to 2013.