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GM Fined $900 Million for Mishandling of GM Ignition Defect

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On Thursday, September 17, 2015, the United States Justice Department announced it had reached a settlement agreement with General Motors (GM) to resolve the criminal investigation into the company’s much-criticized reaction to the ignition switch defect. This is the same defect that caused the ignition switch in some GM vehicles to turn inadvertently to the “off” position, robbing the steering, brakes, and air bags of power. The defect has been linked with 124 deaths and over 200 injuries.

The gist of the agreement is that GM will pay $900 million, and will cooperate with independent monitoring of its safety practices. In addition, the government agreed to a deferred prosecution of false statement and wire fraud charges. As long as the company adheres to the agreement, it will have its record wiped clean in three years.

GM to Pay $900 Million Plus $575 Million in Private Litigation

Though GM started recalling vehicles in February 2014 because of the ignition switch defect, there was evidence that the company was aware of the problem as much as a decade earlier, yet failed to take meaningful action to protect consumers.

The Department of Justice (DOJ) started their investigation last year, to determine just how much GM knew and when. The company was accused by critics of actually covering up the problem while putting people at risk. This announcement by the DOJ represents the end of their investigation. GM agreed to pay the fines by September 24, 2015, and will cooperate with an independent monitor who will be reviewing its safety policies.

According to Reuters, GM has stated that they are expecting a $1.475 billion third-quarter charge to investors, in addition to the $575 they’ve set aside to resolve private litigation.

Families Feel Fine Isn’t Steep Enough

Though GM has made significant changes in their personnel and safety processes since the recalls began in 2014, and would now like to put the ignition switch fiasco behind them, critics remain unsatisfied by the DOJ’s settlement agreement.

Families of victims killed in GM-ignition-switch related crashes, in particular, didn’t feel like the fine was steep enough. The mother of Amy Rademaker, who was killed in 2006, stated that she didn’t understand how the company could “buy their way out of it,” and that she believed the company knew what they were doing, yet kept doing it anyway.

Buffalo News noted that some families were also disappointed because no particular person was held responsible for the deaths. Instead, the DOJ credited GM with terminating wrongdoers. The mother of Amber Marie Rose, who was killed in 2005, felt like the DOJ made a mistake in not charging GM executives. “While nothing can bring my daughter back,” she told CNN magazine, “we need a system where auto executives are accountable to the public and not just corporate profits.”

GM CEO Apologizes, Takes Responsibility

USA Today noted that as part of the settlement, GM “admitted to having defrauded customers by marketing its vehicles as safe….” In total, the company has paid $2 billion in fines and settlements because of the ignition switch defect, and that doesn’t include the costs of repairing the recalled vehicles. CEO Barra apologized again for the way the company handled the issue, and stated that she has made changes to the company’s internal procedures that encourage more efficient communication about problems such as these.

“We promised to take responsibility for our actions,” she stated in a town hall meeting. “So we accept the penalties being announced today because that’s what it means to be held accountable.”