28 October 2016
GM chief executive Mary Barra has undertaken a series of actions to atone for the ignition switch failure since last year. Photo: Bloomberg
GM chief executive Mary Barra has undertaken a series of actions to atone for the ignition switch failure since last year. Photo: Bloomberg

GM to pay US$900 mln to settle US case on ignition switches

General Motors Co. has agreed to pay US$900 million and sign a deferred-prosecution agreement to end a US government investigation into its handling of an ignition-switch defect linked to 124 deaths, two sources told Reuters.

The deal means GM will be charged criminally with hiding the defect from regulators and in the process defrauding consumers, but the case will be put on hold while GM fulfills terms of the deal, one source said.

No individuals would be charged in the criminal case, one of the sources said.

The company’s expected US$900 million payment, confirmed by a second source, is less than the US$1.2 billion that Toyota Motor Corp. paid to resolve a similar case. GM declined to comment. 

The terms of GM’s deal with the government were not immediately known, including how many counts the automaker would be charged with, whether the automaker agreed to hire an independent monitor, or how long it would need to abide by the agreement before the case may be dropped.

Any deferred-prosecution agreement would require court approval.

“I am very hopeful the Department of Justice will hold GM fully accountable and presses for an acknowledgement of responsibility as well as monetary penalties,” Democratic Senator Richard Blumenthal of Connecticut told Reuters in a phone interview.

The top US automaker took charges totaling US$4.2 billion last year to reflect costs associated with recalls, and a special fund was established to compensate victims of the ignition switch defect.

It was not immediately clear whether GM would take additional charges to account for a settlement of the criminal probe.

The settlement is a milestone in a case that over the past two years drove a transformation in the once cozy relationship between the auto industry and regulators in the US government.

Outrage over the GM ignition switch case prompted a much tougher approach by Washington toward auto safety issues and compelled automakers to act more quickly and comprehensively to recall vehicles with potentially dangerous defects.

Last year GM chief executive Mary Barra undertook a series of actions to atone for the ignition switch failure, including appointing a new safety czar, overhauling GM’s product engineering organization, and pushing out 15 executives connected to the mishandling of the switch defects in a scathing report prepared by former federal prosecutor Anton Valukas, now a senior partner at the law firm Jenner & Block.

GM also recalled more than 30 million vehicles in North America to fix a wide array of defects.

Federal prosecutors based in New York have been investigating GM since at least March 2014 over the company’s disclosures to regulators about vehicles equipped with the faulty ignition switches.

The ignition switches on Chevrolet Cobalts, Saturn Ions and other GM vehicles could cause their engines to stall, which in turn prevented air bags from deploying during crashes.

Also, power steering and power brakes did not operate when the ignition switch unexpectedly moved from the “on” position.

Engineers and managers at Detroit-based GM learned of problems with the ignition switch more than a decade ago, but the first recalls began only in February 2014, despite years of consumer complaints.

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