Today: General Motors Agrees To $900 Million Criminal Fine For Faulty Ignition Switches

September 17, 2015

In February 2014, General Motors recalled 780,000 older Chevrolet and Pontiac cars to replace flawed ignition switches. It seemed like a very large recall, but we had no way of knowing just how large it would become.

A year-and-a-half down the road, GM's ignition switches have been linked to at least 124 deaths and 275 injuries, and the company expects to make $575 million in payouts to victims and their families. Add in the costs of repairing 2.6 million vehicles and a $35 million civil penalty, and those switches have cost GM a very pretty penny.

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But that's not all. According to Detroit News, federal officials have hit GM with an additional $900 million criminal fine for the Switchgate fiasco. That fine comes at the end of a lengthy investigation, which revealed that GM knew about the problem with its ignition switches for more than a decade before issuing its first recall.

The News cites three people familiar with the terms of GM's settlement with the feds. They say that the automaker will be charged with two felonies (and possibly more) -- one for hiding information from the National Highway Traffic Safety Administration, the other for wire fraud. Though GM won't have to plead guilty to those charges, it will have to pay the $900 million fine and be overseen by monitors for an unspecified period of time. It doesn't appear that any individual(s) will be charged with criminal wrongdoing.

You might recall that Toyota was hit with a $1.2 billion fine last year following a federal criminal investigation of recalls related to unintended acceleration in Toyota and Lexus vehicles. Why is GM paying less? Analysts think that it has everything to do with GM's willingness to cooperate with investigators. Toyota, by contrast, treated its own recall fiasco "as if it were a public relations problem", according to then-Attorney General Eric Holder.

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That said, GM isn't out of the woods yet. It still has to deal with:

  • 172 lawsuits from U.S. owners who say they were injured or family members were killed because of GM's faulty ignition switches and chose not to file with the compensation fund GM set up;
  • 9 such lawsuits in Canada;
  • 100 class-action lawsuits from GM owners in the U.S. who claim that the ignition recalls reduced the re-sale values of their vehicles;
  • 21 such class-action lawsuits in Canada;
  • An uncertain number of lawsuits from GM shareholders, alleging a number of varied wrongs.

Depositions in some of those cases begin next month.

None of the parties, from GM to NHTSA, have commented publicly on the settlement yet. That will likely change later today when details are announced in New York City.

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