GM, DOJ reach $900M settlement over faulty ignition switches

by Keith Laing - 09/17/15 10:56 AM ET

The Department of Justice has reached a $900 million settlement with General Motors over its handling of vehicles with a dangerous ignition switch flaw that were subject to a high-profile recall in 2014.

Justice Department officials announced on Thursday that GM has agreed to pay the fines by Sept. 24 in exchange for deferred prosecution on criminal charges related to allegations the company covered up problems with its cars for years before the ignition switch recall was issued in 2014.

The company will also be assigned an independent monitor to review its safety policies, DOJ officials said.

“For nearly two years, GM failed to disclose a deadly safety defect to the public and its regulator,” U.S. Attorney of the Southern District of New York Preet Bharara said in a statement announcing the settlement.

“By doing so, GM put its customers and the driving public at serious risk,” Bharara continued. “Justice requires the filing of criminal charges, detailed admissions, a significant financial penalty, and the appointment of a federal monitor. These measures are designed to make sure that this never happens again.”

GM said Thursday that it is expecting to have a charge of $575 million to investors in the third quarter of 2015 because of the agreement, which brings to a close a year-long DOJ investigation into the company’s handling of its ignition switch recalls.

“The parties to these agreements have resolved difficult claims without the burden, expense and uncertainty of litigation,” GM Executive Vice President and General Counsel Craig Glidden said.

GM came under fire from lawmakers last year when it was revealed the faulty ignition switches that prompted the recall of about 2 million cars were first found to be defective years ago. The switches, which caused cars to shut off abruptly or have their airbags disabled, have been linked to 13 deaths.

GM CEO Mary Barra, who took control of the company as the recalls were becoming public, told lawmakers during a series of contentious hearings on Capitol Hill that she was “deeply sorry” for the failure to swiftly recall vehicles with a dangerous ignition switch flaw.

“Today’s GM will do the right thing. That begins with my sincere apologies to everyone who has been affected by this recall, especially the families and friends who lost their lives or were injured. I am deeply sorry,” Barra said during an April 2014 hearing.

The company was accused of having a “culture of cover up” for failing to report the ignition switch problems until the recall was issued in 2014.

Lawmakers who were critical of GM’s handling of the faulty ignition switch recall said the Justice Department should have gone even further than its $900 million to bring down the hammer on the auto company.

“Based on recent media reports, this outcome fails to require adequate and explicit admission of criminal culpability from GM and individual criminal actions,” Sen. Richard Blumenthal (D-Conn.) and Ed Markey (D-Mass.) said in a joint statement after the details of the agreement were announced.

“This is outcome is extremely disappointing,” Blumenthal and Markey continued. “The 124 families who lost loved ones deserved an explicit acknowledgment of criminal wrongdoing, and individual criminal accountability, as well as a larger monetary penalty.

“GM knowingly concealed information that could have prevented these deaths, and it is shameful that they will not be held fully accountable for their wrongdoings,” the lawmakers concluded. “We cannot continue to allow large auto companies to get away with deadly, deceptive conduct. Penalties for these actions must be stronger to stop more innocent lives from being taken.”

Tags Ed Markey General Motors GM GM recall Richard Blumenthal