GM Could Be Held Criminally Liable For Ignition Switch Flaw And Pay A Record Penalty For Not Disclosing The Problem Sooner

More than a year after General Motors began recalling 2.6 million Chevrolet Cobalts, Saturn Ions and other 2003 to 2010 model-year sedans for a faulty ignition switch that has led to the death of more than 100 people, the U.S. Justice Department has concluded the Detroit automaker committed criminal wrongdoing for failing to act sooner.

People briefed on the issue told the New York Times in a Friday report that GM could wind up paying a record penalty -- one higher than the $1.2 billion Toyota paid last year for “concealing and making deceptive statements” to the U.S. public about a flaw that caused unintended acceleration in 9 million of its cars worldwide -- and arrive at settlement sometime this summer.

Unlike Toyota, which fought U.S. prosecutors, GM has been cooperating with federal investigators, which will help mitigate the amount the company will have to pay. GM is reportedly negotiating with the U.S. government over what misconduct the company will admit to. Some former GM employees are also under investigation and could face criminal charges for allegedly covering up the defect, which causes the key to slip out of the “on” position while the vehicle is in motion, cutting off the engine, power steering and power brakes, and, most crucially, disabling airbags. GM could be found liable because employees at the company have admitted they were aware of the problem for years before GM disclosed the flaw to the U.S. National Highway Traffic Safety Administration. Some employees identified the problem dating back to 2001, and in 2005 GM engineers advised against fixing the problem because it was too costly.

As of May 15, GM has identified 104 deaths and 191 injuries, including a dozen life-altering injuries like amputations and brain damage. Twenty-six more death claims and 417 injury claims are under review at the company’s compensation fund headed by renowned mediation attorney Ken Feinberg, who GM says has complete autonomy in deciding who gets compensation of at least $1 million per death, up to $500,000 for non-life-altering injury and more for life-altering injury.

GM filed for bankruptcy in 2009 amid an auto industry crisis during the Great Recession, which absolved it of product liability for vehicles sold prior to emerging from Chapter 11 proceedings. GM is no longer liable for injuries caused by flaws in its vehicles if the accidents occurred prior to the bankruptcy. The company established the ignition switch compensation fund in part to allow people injured by the flaw to file for compensation even if they were injured before GM filed for bankruptcy.