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General Motors to pay record $35 mn US fine on ignition-switch recall

LiveMint logoLiveMint 16-05-2014 Jeff Plungis

General Motors Co. (GM) will pay a record $35 million fine as part of the US government’s investigation into how it handled the recall of 2.59 million small cars over faulty ignition switches, the transportation department said.

GM’s agreement with regulators includes significant and wide-ranging internal changes to how it reviews safety issues and decides on recalls, the department said in a statement.

Friday’s announcement puts all manufacturers on notice that they will be held accountable if they fail to quickly report and address safety-related defects, US transportation secretary Anthony Foxx said in the statement.

The National Highway Traffic Safety Administration (NHTSA) has been investigating why it took the largest US auto maker years to address engineering concerns and consumer complaints about engine stalling dating from 2004. At least 13 fatalities have been linked to the defect, which can deactivate air bags.

Foxx and NHTSA acting administrator David Friedman will discuss the agreement with Detroit-based GM at a news conference in Washington on Friday.

GM hasn’t fully complied with an extensive request for information by the regulator. Since 3 April, the company has been accruing fines of $7,000 per day. GM said it was waiting for an internal investigation to be complete before answering some of NHTSA’s questions.

‘Stronger company’

GM confirmed in an e-mailed statement that it had reached an agreement with NHTSA and said it has begun working with NHTSA to review processes and policies to avoid future recalls of this nature.

“We have learned a great deal from this recall”, chief executive officer Mary Barra said on Friday in a statement. “We will now focus on the goal of becoming an industry leader in safety. We will emerge from this situation a stronger company.”

GM has said heavy key rings or jarring can cause ignition switches on some cars to slip out of the on position, cutting off power and deactivating air bags.

The company’s shares rose 0.8% to $34.63 at 10.52am New York time. They dropped 16% this year through on Thursday.

The $35 million fine is the largest ever paid by a US auto maker for delays in issuing a safety recall. Ford Motor Co. and Toyota Motor Corp. previously paid $17.4 million, the maximum allowable at the time.

Congress has since changed the maximum NHTSA fine to $35 million. Regulators are pushing lawmakers to approve fines of as much as $300 million for a bigger deterrent effect, the transportation department said.

The agreement was reported earlier by CNBC. Bloomberg

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