Financial News

  • 19 May 2014, 11:44

General Motors Fined $35m For Recall Delay

The US government has fined General Motors the maximum $35m (£21m) for delayed recalls of vehicles with faulty ignition switches.

Thirteen people died in crashes linked to the problem, the company says, but lawsuits put the actual death toll at 53. 

GM has admitted it knew about the problem for more than a decade.

But it did not recall the vehicles until this year, even though car-makers are supposed to report safety defects within five days of discovery.

The Justice Department is investigating GM's delayed recall of 2.6 million Chevrolet Cobalts, Saturn Ions and other cars.

The Department of Transportation's National Highway Traffic Safety Administration is also looking into the scandal.

But that agency has itself been criticised for failing to act on reports it received in 2007 and 2010 about the faulty switches.

The defective part was prone to turning off, causing the engine to shut down and disabling the air bags.

The Detroit-based firm first spotted the problem during pre-production in 2001.

However, it was not until February 2014 that it instigated a recall.

GM engineers held meetings about the issue in 2005, but decided against a fix because it would take too long and cost too much money.

Transportation Secretary Anthony Foxx said in a news conference on Friday: "Literally silence can kill.

"GM did not act and did not alert us in a timely manner. What GM did was break the law." 

The fine amounts to less than a day's revenue for the car-maker, which made $37.4bn (£22.2bn) in the first quarter.

Mr Foxx is urging Congress to pass legislation that would raise the fine against GM to $300m (£178m).

As part of its agreement with the US government, GM has also acceded to government oversight on safety issues.

In a statement confirming the agreement, GM chief executive Mary Barra said: "GM's ultimate goal is to create an exemplary process and produce the safest cars for our customers - they deserve no less."

She appeared before Congress in April and offered her "sincere apologies" for the scandal.

On Thursday, General Motors said it had issued five more recalls, covering about 2.7 million vehicles in the US, mostly for tail lamp malfunctions.