GM Ignition Swtich
201510.05
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GM’s Ignition Switch Settlement Means Large Fine and Deferred Criminal Charges

Federal prosecutors and General Motors recently settled a criminal investigation in which GM was accused of covering up a safety defect that has caused at least 124 deaths.

The problem involved faulty ignition switches that would cut off engine power and disable airbags. While the total fatalities due to the defect will not be likely to reach the level of the Ford Explorer-Firestone tire deaths—270 people killed in the late 1990s and early 2000s—the ignition switch debacle is notable because GM hid the defect for at least a decade. It was in early 2014 that GM revealed they had not told federal regulators about the ignition switches, which could cause vehicles to stall and turn off power to the air bags as well. Only in 2014 did the automaker begin recalling 2.6 million cars.

The prosecutors plan to levy a penalty of nearly $1 billion, but no charges are expected to be filed against any GM employee. While it may seem like an enormous fine, it’s not a record for the industry. A record penalty didn’t occur mostly because the automaker cooperated during the investigation by admitting fault and setting up a $600 million fund for ignition switch crash victims. The company started the fund after an internal investigation revealed several dozen employees knew about the problems for years but hadn’t fixed them. The CEO then established a new position of safety czar to prevent such a lack of safety defect disclosure from happening again.

Some GM officials had thought that the company would end up paying more than Toyota did last year—$1.2 billion—for concealing unintended acceleration problems. The possibility that GM would have to plead guilty to a crime was also on the table. However, GM signed what is known as a deferred prosecution agreement, essentially defined as probation for corporations.

The deal did not sit well with the families of some of the victims. Laura Christian, the birth mother of a 16-year-old who died in 2005 because of the ignition switch, said, “We buried our loved ones because GM buried a deadly defect. And yet today all GM has to do is write another check to escape.”

The CEO of GM characterized the settlement as “tough,” stating that GM would change the way it handles such problems in the future.

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