General Motors Co. agreed to pay a $35 million fine to settle a U.S. auto-safety investigation that found GM had schemed to keep secret its information on faulty ignition switches installed on 2.6 million vehicles.
U.S. regulators for the first time disclosed details of the probe, including revealing that the Detroit company had coached workers against using "defect" and "Corvair-like" in communications. They also said the nation's largest auto maker had information that should have allowed it in 2009 to link the defective switches to air bags not inflating during crashes.
The auto maker's "decision making, structure and process stood in the way" of communicating safety problems, said David Friedman, acting administrator of auto-safety regulator National Highway Traffic Safety Administration. GM's employee training even "discouraged workers from using terms like defect, dangerous and safety related," he added.
GM admitted to the actions but said it has taken steps to improve its safety policies since the February recalls. "We encourage employees to be factual in their statements and will continue to work with NHTSA to improve our safety processes," a spokesman said.
The fine is the maximum allowed for violations of U.S. law requiring car makers to report safety defects within five days of their discovery. Regulators described a process that stymied attempts to learn early on about defective switches and their role in U.S. crashes that led to at least 13 deaths.
Bob Hilliard, a Texas attorney representing families suing GM over fatal crashes, called Friday's agreement "a complete victory for GM," and criticized the U.S. auto-safety regulator as a "toothless tiger."
"This $35 million agreement is pennies in a fountain," he said.
As part of the settlement, GM agreed to make "significant and wide-ranging internal changes to its review of safety-related issues in the United States," the Transportation Department said. GM's top vehicle-safety executives will meet quarterly with NHTSA officials to review its compliance with the deal, which will stay in effect for three years. Last month, the company created a "global product integrity" unit designed to improve safety oversight and encouraged employees to report any safety problems they uncover.
The settlement marks one step in GM's efforts to put the recall controversy behind it. The auto maker still faces a criminal investigation by the U.S. Justice Department and probes by state attorneys general and the Securities and Exchange Commission are continuing. It also faces dozens of suits by attorneys representing crash victims, vehicle owners and shareholders.
In court filings, the auto maker has denied fraudulently concealing information and has fought plaintiff-lawyer efforts to reopen its bankruptcy case. As part of its 2009 bankruptcy, the company was relieved of liabilities for injuries before its July bankruptcy-court petition. It also has said it is providing information to U.S. investigators pursuing a criminal probe.
"We have learned a great deal from this recall. We will now focus on the goal of becoming an industry leader in safety," GM Chief Executive Mary Barra said in a statement on Friday. "We will emerge from this situation a stronger company."
GM agreed to adhere to produce enough replacement switches by Oct. 4 to repair all the affected vehicles. GM said it expects to meet the production deadline.
Since the first ignition-switch recall in February, GM has ordered a series of safety recalls affecting nearly 13 million vehicles. It has taken charges to earnings totaling $1.5 billion to cover the costs of the repair campaigns.
The agreement "puts all manufacturers on notice that they will be held accountable if they fail to quickly report and address safety-related defects," Transportation Secretary Anthony Foxx said at a news conference in Washington, D.C.
Mr. Foxx reiterated his support for legislation to increase maximum penalties for delaying recalls to $300 million from $35 million. The Transportation Department separately is fining GM $7,000 a day for failing to meet an April 3 deadline to explain why GM delayed recalling vehicles to fix the ignition problems. The company has yet to complete that request.
Mr. Foxx and NHTSA have come under fire from members of Congress for not taking tougher steps years ago to force GM to recall the vehicles with the defective switches, despite hundreds of consumer complaints and evidence from crash investigations that pointed to the defective switch as a possible cause of air-bag failures.
Sen. Richard Blumenthal (D., Conn.) called the penalty a "mockery of justice" and urged Congress to lift the current $35 million cap on civil penalties. Mr. Blumenthal also urged legislators to bring legislation to prevent auto makers from winning court approval of sealed agreements in injury cases.
The auto maker discovered as far back as 2001 that the design of ignition switches used in Chevrolet Cobalt, Saturn Ion and other compact cars built in the mid-2000s could slip out of the run position while being driven, cutting power to steering, brake assist and air bags. But the auto maker didn't start recalling vehicles equipped with the suspect switches until early this year.
"Employees of General Motors, from engineers and investigators all the way up through executives were aware of information and were briefed on information associated with this recall," said Acting Administrator Friedman. "That is exactly why we entered into this consent decree and held them accountable for failing to act on a variety of levels."
The agreement included slides from an internal training program that encouraged workers to avoid phrases including "Corvair-like" and "rolling sarcophagus." The Corvair became a symbol of accident-prone vehicles in the 1960s after its mention in Ralph Nader's "Unsafe at Any Speed."
Mr. Friedman said the probe didn't show that Ms. Barra, earlier head of global product development, had early knowledge of the switch problems.
GM hasn't fired anyone over the ignition-switch recall matter. Two engineers involved with the design of the switch have been placed on paid leave. Two executives who oversaw inconclusive investigations of the problem before 2014 have recently retired, but the company says those decisions weren't connected to the recall. GM has said it would take "appropriate action" once its internal investigation is done. That probe is expected to be delivered before GM's annual meeting on June 10. NHTSA officials called the internal probe irrelevant to their investigation.
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