WASHINGTON -- Three months after announcing the start of a safety recall that has swelled to include 2.6 million cars, General Motors has agreed to pay the federal government $35 million -- the maximum penalty -- for failing to report the potentially deadly defect earlier.
In a hastily called news conference in Washington today , federal transportation officials blasted GM's culture and practices, saying company investigators, engineers and executives knew for years there was a problem with ignition switches in Chevrolet Cobalts, Saturn Ions and other similar vehicles. They also said GM knew since at least 2009 that air bags would not deploy if the ignition was inadvertently bumped or jostled out of "run" position.
"They had that information and they told no one," said Transportation Secretary Anthony Foxx. "Crashes happened and people died. Had GM acted differently perhaps some of this tragedy might have been averted."
GM CEO Mary Barra issued a statement saying the company has "learned a great deal from this recall. We will now focus on the goal of becoming an industry leader in safety. We will emerge from this situation a stronger company."
Thirteen deaths and 42 crashes in North America have been linked to the defect, which company documents have traced back as far as 2001 on the Saturn Ion. Over the years, hundreds of complaints to the company and regulators at the National Highway Traffic Safety Administration (NHTSA) reported incidents of stalling and loss of power brakes and steering.
But no recall was ordered until February of this year when NHTSA announced what it called a timeliness query to see what had changed and whether GM had ignored -- purposely or otherwise -- evidence that a recall should have been ordered earlier.
That investigation led Foxx and NHTSA Administrator David Friedman today to describe a company culture that failed to alert federal regulators of possible defects, even telling its employees in a 2008 presentation not to use words such as "defect," "dangerous" or "problem" in describing any issues arising with company products.
"GM engineers knew about the defect, GM lawyers knew about the defect, but GM did not act to protect the public from the defect," said Friedman, whose agency's actions are also being investigated by the Transportation Department's inspector general to determine if it acted appropriately. As early as 2007, some officials at NHTSA suspected a problem involving vehicle shutoffs and air bag deployment, but a panel review concluded there was not enough evidence to warrant a full investigation.
Laura Gipe Christian, whose biological daughter Amber Rose died in a 2005 Cobalt crash in which the air bags failed to deploy, said the fine is a good step but it is not enough.
"I believe GM needs to be held criminally liable," she said. "They knew, they knew for years, they did nothing."
Friedman said GM was told by the company that supplied sensors for its air bags as early as 2009 that they would not deploy if the key was moved out of position. He suggested that GM should have reported that information immediately to federal regulators, calling his investigators' findings "deeply disturbing."
But as late as last December, GM officials responsible for ordering a recall and notifying NHTSA were still hesitating, he said. It wasn't until late January when a company panel finally signed off on the first recall which, over the months to come would more than double and lead to congressional and federal investigations and a reshuffling of executives inside the car company.
"Something was very wrong with the company's values," said Friedman, who announced the details of a consent order with the company that is immediately enforceable through federal court if GM fails to comply. The fine will be paid into the U.S. Treasury.
GM made numerous investigations into ignition switch problems over the years and, unknown widely inside the company, even redesigned the switch in 2006 to make it less likely to move out of position. But the company never changed the part number or ordered a recall. Meanwhile, GM's legal department reached settlements in some cases where vehicles stalled and air bags failed to deploy.
"What we cannot tolerate, what we will never accept, is a person or a company that knows danger exists and says nothing," said Foxx. "Literally silence can kill."
The consent order calls for GM to make wide-ranging changes to its review of safety issues in the U.S. and to improve its response to potential defects. The company also faces additional civil penalties -- believed to be close to $300,000 already -- for not turning over documentation NHTSA asked for by April 4. Regulators are also requring GM to hold monthly safety meetings with them where the company will have to detail any safety issues under internal review.
The company is not expected to deliver all that information until sometime in the weeks to come when former U.S. Attorney Anton Valukas concludes an investigation at GM about what went wrong.
"What is interesting is the level of detail in terms of the level of reporting that NHTSA is requiring. It's pretty clear NHTSA is getting more demanding," said independent automotive analyst Michelle Krebs.
The consent order will also ensure that replacement parts are produced quickly and recalled vehicles are repaired promptly. GM has said it could take until October to replace the ignition switches in all 2.6 million recalled vehicles.
Federal law requires all auto manufacturers to notify NHTSA within five business days of determining that a safety-related defect exists or that a vehicle is not in compliance with federal motor vehicle safety standards and to promptly conduct a recall. GM admitted that it failed to do so.
GM has already taken a number of steps to identify potential defects more quickly and take corrective action. In March the company appointed Jeff Boyer, vice president of global vehicle safety, who is assigned to integrate safety policies across the company. It is more than doubling its number of safety investigators from 20 to 55.
"We are working hard to improve our ability to identify and respond to safety issues," Boyer said.
NHTSA officials couldn't immediately say whether additional staff would be needed to meet the demands of the consent order. NHTSA, with an annual budget of about $850 million, has 51 safety investigators.
Congressional leaders said their investigations will continue and called for an increase in the maximum fine from $35 million to $300 million.
U.S. Sen. Claire McCaskill, D-Mo., who chairs the Consumer Protection Subcommittee, said she is still concerned that "GM employees appear to have engaged in criminal behavior concealing this defect."
"This penalty shows that the federal agency acted as forcefully as possible, but its hands were tied. The victims deserve stronger justice, and GM deserves harsher penalties," added U.S. Sen. Richard Blumenthal, D-Conn.
Other members of Congress said there is much more work to be done to determine what happened.
"GM's admission that it failed to follow the law is an important milestone, but our investigation into how the system failed is far from over," said House Energy and Commerce Chairman Fred Upton, R-St. Joseph. " There are still many unanswered questions."
The $35 million won't be the end of GM's costs from the ignition switch crisis. The automaker is also under investigation by the Securities and Exchange Commission and the Justice Department.
In March, Toyota agreed to pay $1.2 billion in what U.S. Attorney General Eric Holder said was the largest criminal penalty ever levied on an automaker in the U.S. to settle a criminal probe into sudden unintended acceleration that led to the recall of more than 10 million vehicles.
GM has asked a bankruptcy court in New York to rule that it is protected from economic loss claims associated with the recalled vehicles. GM went through a government-backed bankrutpcy reorganization in 2009, which voided any liability claims tied to products made before July 2009.
Attorneys for some owners of the recalled cars are arguing that GM knew about the defect and kept it from the bankruptcy judge and creditors. According to NHTSA, the document from GM's air bag sensor supplier that said the sensors wouldn't work if the igniton switch was out of postion is dated May 11, 2009.
-- More recalls: GM issues 5 new recalls for 2.7 million U.S. vehicles
Contact TODD SPANGLER at 703-854-8947 or at firstname.lastname@example.org. Staff writer Nathan Bomey contributed to this story.
(c)2014 the Detroit Free Press
Visit the Detroit Free Press at www.freep.com
Distributed by MCT Information Services
Original headline: GM to pay $35-million fine from NHTSA for acting too slowly in recall
Most Popular Stories
- Shia LaBeouf Plea Deal, Alcoholism Treatment
- Stop-Start Engines Save Gas, Reduce Emissions
- Ohio State Band Chief Fired After Probe
- Hispanic Leader Goes the Extra Mile
- Ricky Martin Joins 'The Voice ... Mexico'
- Ukraine Says Russians Firing Across the Border
- Jennifer Lopez, Pitbull to Perform at Fashion Rocks
- Ford Q2 Net Profit up 6 Percent
- U.S. Weighs Refugee Status for Immigrant Kids
- Morgan Stanley Ponies Up $275 Million to Settle SEC Charges