General Motors will pay a record $35 million fine as part of the U.S. government’s investigation into how it handled the recall of 2.59 million small cars over faulty ignition switches, the Transportation Department said Friday.
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.
“GM did not act and did not alert us in a timely manner,” U.S. Transportation Secretary Anthony Foxx said at a news conference. “What GM did was break the law. They failed to meet their public-safety obligations.”
The National Highway Traffic Safety Administration has been investigating why it took the largest U.S. automaker 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.
“General Motors’ decision making, structure and process stood in the way of safety at a time when air bags were failing to work properly in millions of GM products,” NHTSA Acting Administrator David Friedman said. “Our investigation also found that General Motors was training employees in ways that could’ve compounded these problems.”
The record fine “was a given,” said Clarence Ditlow, executive director of the Center for Auto Safety. “The only thing that was left to be decided was when they were going to impose the penalty.”
GM confirmed in an emailed statement that it had reached an agreement with NHTSA and said it has begun working with the agency to review processes and policies.
“We have learned a great deal from this recall,” Chief Executive Officer Mary Barra said. “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.
GM stock has dropped about 16 percent this year.
GM hasn’t fully complied with an extensive request for information by the regulator.
Since April 3, 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.
GM’s training materials “explicitly discouraged” employees from using words like “defect, dangerous, safety related and many more essential terms for engineers and investigators to clearly communicate up the chain when they suspect a problem,” Friedman said.
Slow to respond
Even before the ignition-switch recall, some within NHTSA were complaining about GM moving slowly in responding to safety concerns.
Documents released in April by a congressional panel reviewing the recall pointed to a history of contentiousness between GM and its regulator that continued beyond the automaker’s bailout by U.S. taxpayers.
The $35 million fine is the largest ever paid by a U.S. automaker for delays in issuing a safety recall.
Ford and Toyota 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.
“It’s disappointing that there’s no criminal prosecution,” Ditlow said. “This shows how hand-tied the Department of Transportation is under the Safety Act: The fine is too small, but that’s the maximum.”