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Fri May 16, 2014
Feds Slap GM With $35 Million Penalty For Safety Law Violations
Originally published on Fri May 16, 2014 3:00 pm
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The federal government is hitting General Motors with its maximum fine for delays in an auto recall, $35 million. It's a response to GM's recall of cars with faulty ignition switches, a defect that's been linked to 13 deaths.
And as NPR's Sonari Glinton reports, today's agreement with the Department of Transportation won't close the books on the problem.
SONARI GLINTON, BYLINE: In the last several years, General Motors has been taken to the woodshed a more than a few times by politicians, but not quite like today.
Here's Transportation Secretary Anthony Foxx.
SECRETARY ANTHONY FOXX: What GM did was break the law. They failed to meet their public safety obligations. And today they have admitted as much.
GLINTON: GM admitted to wrongdoing in failing to inform the public about a problem with ignition switches, in Chevy Cobalts and several other cars. It's a problem that GM knew about as far back as 2001, but didn't tell regulators or the public about until this year.
David Friedman is the head of the agency that overseas the auto industry, the National Highway Traffic Safety Administration, in Washington they call it NHTSA. He says today's fine is not just a punishment for GM but a warning to other automakers.
DAVID FRIEDMAN: The question is not whether or not you're going to get caught. You're going to get caught. You're going to get found out. The question is: Are you going to pay now to fix your vehicles and ensure that your company is seen as a responsible company? Or are you going to pay later and be subjected to significant oversight by NHTSA, because you failed to do so
GLINTON: As part of the agreement, GM will accept more oversight and report to the government in ways that other automakers don't have to. Today's $35 million fine is the largest amount the department can impose. But for context, General Motors brought in about $34 billion in total revenues just last quarter. And Secretary Fox says he wants to raise the maximum fine allowed from 35 million to 300 million.
This penalty however does not end the civil suits of the criminal or congressional investigation. But how much has this recent recall scandal affected the company.
Eric Lyman is with TrueCar.com. He says just look at sales, GM's are up
ERIC LYMAN: And we generally see that recalls, in and of themselves, don't have an issue on sales or used car values, or transaction prices, or brand value, of what people think of the brand of the automaker that is having the recall issue.
GLINTON: Lyman says there have been some notable exceptions The Ford rollover recall at the beginning of the century. And more recently, the Toyota recall for unintended acceleration which that company was fined a billion dollars for just this year.
LYMAN: And the big difference because Toyota and Ford were almost in a state of denial and finger pointing to other organizations, saying they weren't to blame. And consumers react to that. They have a negative reaction when they see that perhaps the organization isn't looking out for their best interests.
GLINTON: Lyman says so far GM has responded differently and every automaker has now set a much lower bar for recalls. GM is already on pace to beat its own record for recalls. And the industry as whole will likely crush its record 30 million recalled vehicles in a year.
Lyman says don't expect that to end any time soon. So check your mailbox for your latest recall notice.
Sonari Glinton, NPR News. Transcript provided by NPR, Copyright NPR.