GM to Pay Fine for Slow Response to Safety Issues

GM

Following a U.S. safety inspection, General Motors (GM) is set to pay a $35 million fine for their less than swift response to inform the public of faulty ignition switches in approximately 2.6 million of their vehicles. The company’s slow response in addressing their safety issues resulted in a reported 13 deaths.

At Friday’s hearing before the Department of Transportation, GM will be receiving the maximum penalty by U.S. law and the highest fine ever handed down to an American automaker. Following the ruling, GM says they plan to make changes internally regarding addressing and responding to safety issues among their vehicles and will oblige to periodic government inspections.

Executives at GM sat idle for almost 10 years before announcing and implementing in February of this year a massive recall of nearly 2.6 million of their vehicles known to have faulty ignitions. It was revealed that engineers and executives at GM knew of the problem with their cars but chose to do nothing. The defective cars had reported safety issues of failed power brakes, faulty air bags and engines that shut off. By paying the fine and complying to making internal changes, General Motors is far from over in fixing this controversy.  The slow response to recall the faulty cars also has the company dealing with criminal indictments from the U.S Justice Department along with ongoing investigations by state attorney generals and the SEC. GM is also dealing with a number of lawsuits from families of crash victims, vehicle owners and shareholders.

In addition to the $35 million fined by regulators, GM has also been slapped with a daily fine of $7000 by the National Highway Traffic Safety Administration in their negligence to respond to questions from regulators. According to reports, GM could possibly face even greater fines from the Department of Justice that could reach as much as $1 billion. The Toyota Corporation was fined $1.2 billion by regulators for failing to reveal acceleration problems with their cars.

Following Friday’s ruling, GM promises to replace the defective ignition switches of all of their affected cars by an October 4 deadline. General Motors Chief Executive, Mary Barra confidently said GM will work on focusing to become an industry leader in safety and come out of the scandal a much better company.

The fallout from General Motors’ failings sets a precedent and puts other automakers on notice. In a press conference Transportation Secretary Anthony Foxx said all car makers will be held accountable should they neglect to report and respond to safety defects. Foxx says he is also supportive of legislation to raise penalties for recall delays to $300 million from the current maximum fine of $35 million, a mere drop in the bucket for a company like GM that makes approximately $35 million in one day. General Motors’ blind eye and slow response were related to a number of their models including Saturn Ions and the Chevrolet Cobalt. With such negative press in recent years, GM did pay for its issues with poor consumer confidence in American auto buyers who opted to purchase foreign cars.

By Hal Banfield

Sources:
Wall Street Journal 
New York Daily News
Reuters

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