GM to Pay $900M in Criminal Settlement Over Faulty Ignition Switches

September 17, 2015

General Motors Co agreed to pay $900 million and admit to misleading the government and the public about the safety of its vehicles to end a U.S. criminal investigation into its handling of defective ignition switches linked to 124 deaths.

The settlement and charges, which were detailed in papers filed on Thursday in Manhattan federal court, have transformed the relationship between the automaker and the U.S. government, which had bailed out GM during the financial crisis.

GM admitted to failing to disclose to its U.S. regulator and the public a potentially lethal safety defect with the switches that kept airbags from deploying in some vehicles.GM General Motors logo

The largest U.S. automaker also admitted to misleading consumers about the safety of vehicles affected by the defect.

GM was criminally charged with scheming to conceal a deadly safety defect from its U.S. regulator, as well as wire fraud.

Under a three-year deferred prosecution agreement, GM must hire an independent monitor to oversee its safety practices, including its ability to fix defects and handle recalls.

The company’s shares were up 14 cents at $31.27 in trading before the market opened.
GM’s $900 million payment will be treated as a penalty, including for tax purposes. It is less than what Toyota Motor Corp recently agreed to pay to resolve a similar case.

The ignition switch defect caused some Chevrolet Cobalts, Saturn Ions and other GM vehicles to stall, preventing airbags from deploying during crashes. It also prevented power steering and power brakes from operating in some vehicles.

GM Chief Executive Officer Mary Barra has taken many steps to address problems linked to the defects, including appointing a new safety czar and pushing out 15 executives.

The company faces more than 200 civil lawsuits over the ignition switch and other recalls from 2014. It set up a special fund last year to compensate victims of the ignition switch defect.

(Reporting by Jonathan Stempel in New York; Editing by Lisa Von Ahn)

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