General Motors said on Friday that it will pay the maximum $35 million fine to the U.S. Department of Transportation for delays in recalling 2003-2011 small cars with a potentially deadly ignition switch defect.
The fine is part of a consent agreement (full text below) with the DOT to settle its "timeliness" inquiry into whether GM notified the government within the required five business days after finding a safety defect. GM admits in the agreement that it did not. DOT says GM also agreed to make "significant and wide-ranging internal changes" in how it monitors safety issues.
In addition, GM agreed to give the DOT's National Highway Traffic Safety Administration "full access to the results of GM's internal investigation into this recall."
That's a big concession by GM. CEO Mary Barra told congressional committees in April that she wouldn't give them the full report but would hand over the parts directly related to safety. Anton "Tony" Valukas, chairman of the Chicago-based law firm Jenner & Block and a former U.S. attorney, is conducting GM's internal probe.
GM also agreed to pay an additional amount for not meeting NHTSA's deadline for submitting documents concerning events leading to the recall. The company has been fined $7,000 per day – the maximum -- since April 4 and agreed to continue paying that much per day until it gives NHTSA the Valukas report,expected no later than June 30.
The GM settlement "puts all manufacturers on notice that they will be held accountable if they fail to quickly report and address safety-related defects," said U.S. Transportation Secretary Anthony Foxx at a press conference about the agreement. Foxx urged Congress to support a proposal that would "increase the penalties we could levy in cases like this from $35 million to $300 million, sending an even stronger message that delays will not be tolerated."
An industry expert says actions such as this already are having an effect. "Car companies in general are, and will be much more, rigorous about pre-introduction testing," says Jack Nerad, executive editorial director and senior analyst for Kelley Blue Book's KBB.com.
But Nerad says he says there also could be an unintended consequence. "Ironically, this climate might also curb innovation even in safety systems. The reason? Product liability. For example, car companies may have second thoughts about autonomous cars and safety systems that override the driver."
GM told NHTSA Feb. 7 that it was recalling 619,122 of its 2005-2007 Chevrolet Cobalt and 2007 Pontiac G5 small cars. On Feb. 25 it expanded the recall by 748,024 vehicles to include: 2006-2007 Chevy HHR and Pontiac Solstice, 2003-2007 Saturn Ion, 2007 Saturn Skye.
Other model year of were added as GM tried to include all vehicles with similar switches and the total recalled for the switch problem now is 2.6 million vehicles worldwide.
GM documents show that it knew in 2001 there could be a problem with the key moving unexpectedly out of "run" into "accessory." That shuts off the engine, kills power assist to the steering and brakes and usually disables airbags.
It happened to a GM engineer testing a Saturn Ion. A technician reported a similar problem in 2003. And in 2004 a ranking GM small-car engineer had the switch problem in the Chevrolet Cobalt during final development of that car.
GM says it knows of 12 deaths and 46 injury or fatal accidents in the U.S. linked to the problem, and one fatal crash in Canada.
Two high-ranking engineers with links to the switches recently retired from GM and two others were put on paid leave.
In a statement on Friday, Barra said: "We have 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."
GM still faces a probe by the Justice Department into whether there was a criminal violation, a Securities and Exchange Commission probe and Congressional investigations. A number of lawsuits are pending.
Toyota faced a Justice investigation after its delayed recalls for unintended acceleration beginning in 2009. It settled the probe this year, paying a $1.2 billion fine.