GM Will Pay $900 Million Fine, Is It Enough?
Automotive recalls may still be an almost weekly occurrence, but it appears that one of the big ones is beginning to wind down. General Motors has agreed to pay $900 million to end the criminal investigation into its delaying a recall of 2.6 million cars that had a faulty ignition switch. The company has also admitted that it misled the public about the safety of its vehicles. To date, the defect has led to 124 confirmed deaths, and as a result, GM agreed to pay upwards of an additional $575 million to 1,380 victims of the defect through its own victims compensation fund.
The defect stems from a faulty pin in the ignition switch that could be turned off on a bumpy road or with a heavy key ring, causing cars to lose safety features like power brakes, power steering, and airbags. The bulk of the cars affected were GM’s 2000s-era Delta Platform cars, specifically the ’03-07 Saturn Ion, ’05-’07 Chevy Cobalt, ’06-’07 Chevrolet HHR, ’06-’07 Pontiac Solstice, and ’07 Saturn Sky (if you own any late model GM, please go here to see if your car is at risk, just to be safe). GM knew about the defect as early as 2004, but actively misled the public over the issue, and didn’t order a recall until a decade – and potentially dozens of deaths – later.
The U.S. government charged the country’s largest automaker with two felonies: wire fraud and scheming to conceal material facts from a U.S. regulator. Both politicians and citizens have objected to the penalties being too light, and have called for individual executives to face criminal charges. That’s unlikely to happen, but the damage caused by this investigation could have long-term affects for the company, which is still regaining its footing after emerging from bankruptcy just six years ago.
Speaking with Reuters, Laura Christiansen, who lost her daughter in a 2005 crash, said: “We buried our loved ones because GM buried a deadly defect,” adding “And yet today all GM has to do is write another check to escape.” Senators Richard Bleumenthal (D-Conn.) and Edward Markey (D-Mass.), who introduced both the Motor Vehicle Safety Act of 2015 and the Hide No Harm Act earlier this year issued a joint statement, saying:
Based on recent media reports, this outcome fails to require adequate and explicit admission of criminal culpability from GM and individual criminal actions. This is outcome is extremely disappointing. The 124 families who lost loved ones deserved an explicit acknowledgment of criminal wrongdoing, and individual criminal accountability, as well as a larger monetary penalty. GM knowingly concealed information that could have prevented these deaths, and it is shameful that they will not be held fully accountable for their wrongdoings. We cannot continue to allow large auto companies to get away with deadly, deceptive conduct.
While the GM case draws ugly parallels with Ford’s ruinous Pinto recall of the late ’70s, a closer comparison is the Toyota unintended acceleration case of 2014, where that automaker paid a record $1.2 billion for its misleading actions. Compared to Toyota’s settlement, GM seems to have been let off easy, and by most accounts, it was. According to The Detroit News, the corporation largely cooperated with government investigations and, as a result, was given leniency.
In 2014, the GM was slapped with an initial $35 million fine by the National Highway Safety Traffic Administration, and entered a three-year consent agreement with the agency. GM CEO Mary Barra also followed up by creating the victim’s compensation fund, fired 15 executives, and disciplined five more. Still, it was too little, too late. In a statement issued after the latest ruling, Barra said, “The mistakes that led to the ignition switch recall should never have happened,” adding, “We have apologized and we do so again today.” Barra became CEO just before the scandal broke, and while she was largely left holding the bag afterward, the apology doesn’t do much to undo the culture of corruption that led to a mounting number of deaths, or using a legal tactic to try and absolve the corporation of any responsibility.
Once the dust settles, General Motors will enter another three year agreement with the government to let an independent monitor oversee its safety practices, and disperse money to victims and their families, though most will be going to lawyer fees. But none of this changes much. GM execs will go to work tomorrow, bonuses will be awarded at the end of the year. But for the families of the 184 people confirmed to have died (there are up to 16 deaths still being investigated), a freshly-cut check won’t do anything to bring their loved ones back. A dozen standard airbags, backup cameras, emergency braking, and electronic traction control all sound great, but as long as automakers can knowingly sell defective cars and get away with it, we’ll all be in a lot of trouble.
Follow Derek on Twitter @CS_DerekS