Through its National Highway Traffic Safety Administration Acting Administrator, the DOT has been investigating the Detroit-based automaker's delayed recall of 2.6 million older-model small cars due to faulty ignition switches since earlier this year. The defective parts have been linked to at least 13 deaths and 32 crashes.
DETROIT, MI- When announcing a record $35 million fine and "unprecedented" oversight for General Motors over the delayed recall of millions of vehicles, federal officials put the U.S. auto industry on alert.
"Together these penalties should put all automakers on notice that there is no excuse and zero tolerance for failing to notify the federal government when a defect puts safety at risk," said U.S. Transportation Secretary Foxx during a press briefing and teleconference Friday to announce the actions.
Foxx was very blunt about the department's feelings on automakers not reporting recalls: "Literally, silence can kill," he said.
Through the National Highway Traffic Safety Administration Acting Administrator, the DOT has been investigating the Detroit-based automaker's delayed recall of 2.6 million older-model small cars due to faulty ignition switches since earlier this year. The defective parts have been linked to at least 13 deaths in more than 30 crashes.
The DOT also is urging Capitol Hill to enact the "Grow America Act" which would raise the maximum penalty for not reporting recalls within the five days required by law from $35 million to $300 million. The paid fines go into the general treasury.
Unprecedented order, sanctions
GM has agreed to pay the fine and make significant changes in how it approaches auto safety issues under a new consent order.
David Friedman, the acting head of the National Highway Traffic Safety Administration, testifies on Capitol Hill in Washington, Tuesday, April 1, 2014, before the House Energy and Commerce subcommittee on Oversight and Investigation. The committee is looking for answers from Friedman about safety defects and mishandled recall of 2.6 million small cars with a faulty ignition switch that's been linked to 13 deaths and dozen of crashes. (AP Photo/Evan Vucci) Officials say the agreement will hold GM accountable, push the automaker to make needed institutional change, and ensure that replacement parts are produced quickly and recalled vehicles are repaired promptly.
"The evidence we found behind that failure was deeply disturbing," said NHTSA Acting Administrator David Friedman, who was part of the Friday morning press briefing. "Our timeliness investigation found that General Motors' decision making, structure and process stood in the way of safety at a time when airbags were failing to work properly in millions of GM products."
Friedman, who was grilled on Capitol Hill in April for NHTSA's delayed action to the problems, said the investigation also found that GM also was training employees in ways that could have made the problem worse.
According to testimony and documents submitted to a Congress subcommittee, GM knew about the faulty ignition switches in the early-2000s, but did not officially start recalling the vehicles until February of this year.
Under the order, GM also will provide NHTSA with full access to the results of its internal investigation into this recall and pay additional civil penalties for failing to respond on time to the agency's document demands during NHTSA's investigation.
"This historic civil penalty and reforms that we have ordered today should send a clear message: All manufacturers will be held responsible, and will be held accountable by NHTSA if they fail to quickly report and address safety defects," Friedman said.
NHTSA has fined six automakers $124.5 million in the past five years as a result of recall probes, Friedman said.
GM will continue to incur a $7,000 per day penalty until it completely responds to NHTSA with information about the faulty ignition switches. The original deadline was April 3, which means GM currently owes roughly $300,000 due to missing the deadline. GM has said it will not be forced to release the information prematurely.
The consent order – immediately enforceable in federal court if GM does not fully comply – also requires GM to submit reports and meet with NHTSA so that the agency may monitor the progress of GM's recall and other actions required by the agreement.
Barra, GM
Friedman said GM engineers, investigators and senior executives all knew about the ignition switch defect that could make the vehicle lose power and cause the airbags not to deploy in the event of a crash.
General Motors CEO Mary Barra takes her seat on Capitol Hill in Washington, Tuesday, April 1, 2014, prior to testifying before the House Energy and Commerce subcommittee on Oversight and Investigation. The committee is looking for answers from Barra about safety defects and mishandled recall of 2.6 million small cars with a faulty ignition switch that's been linked to 13 deaths and dozen of crashes. (AP Photo/Evan Vucci) "It is hard to point to one single fault in the system. That's why we have required such extensive oversight of General Motors," he said. "Their process was broken."
When asked if there is evidence that current CEO Mary Barra was briefed on the problem before earlier this year, he replied: "I don't have any records of that."
Barra, who became CEO on Jan. 15, testified on Capitol Hill in April that she learned about the problem Jan. 31.
Since the ignition recall began in February, Barra has led GM's efforts to publicly ensure customers and federal regulators that the automaker does not put a price on customer safety, like the "old GM" may have done.
GM has already announced numerous changes to its inspection and recall operations, including an entire restructuring of its global engineering department and enhanced safety measures under newly appointed Vice President of Global Vehicle Safety Jeff Boyer.
Barra said the company will continue to review its processes to avoid future recalls.
"We have learned a great deal from this recall. We will now focus on the goal of becoming an industry leader in safety," she said in a statement from GM on Friday. "We will emerge from this situation a stronger company."
As of May 15, GM had issued 24 safety and non-compliance recalls for roughly 12.8 million vehicles worldwide, including nearly 11.2 million in the U.S. Many of which came following the ignition switch recall and changes to its evaluation processes. The recalled amount is roughly 4.2 million vehicles more than the automaker recalled in the past five years combined.
Since succeeding Dan Akerson as CEO on Jan. 15, Barra has continued to preach customer focus. But that message has somewhat been overshadowed by its current recall troubles, which have spawned numerous internal and external investigations.
Future fines?
GM's ignition switch troubles remain far from over, as it continues to face numerous lawsuits and investigations from the U.S. Justice Department, two congressional committees, the U.S. Securities and Exchange Commission and others.
Attorney General Eric Holder, right, accompanied by U.S. Attorney for the Second District Preet Bharara, announces a $1.2 billion settlement with Toyota over its disclosure of safety problems, Wednesday, March 19, 2014, during a news conference at the Justice Department in Washington. (AP Photo/Susan Walsh) In March, the U.S. government announced a $1.2 billion settlement with Toyota Motor Corp. in connection to the company withholding information regarding sudden acceleration problems with some of its vehicles.
The penalty, according to the Justice Department, is the largest of its kind ever imposed on an auto company.
Some analysts have speculated that GM could be headed for that same path due to its ignition switch recall.
When asked if the Transportation department would recommend a criminal investigation by the Justice Department, Foxx said that's an "independent determination" for the DOJ to make.
"The considerations that the Department of Justice would give to a situation like this are really up to the Department of Justice," he said. "We, of course, would participle and comply with any request that they would have of us."
Ignition switch recall
The ignition switch recall started Feb. 13 with 780,000 compact cars, including Chevrolet Cobalts, Pontiac G5s and Pontiac Pursuits from the 2005-2007 model years. GM expanded the recall Feb. 25 to include Saturn Ions and three other vehicles. The total then was 1.6 million vehicles worldwide.
Then, on March 28, GM again expanded the recall to include 971,000 vehicles from the 2008-2011 model years, which may have gotten the defective switches as replacement parts.
The nearly 2.6 million vehicles affected by the ignition switch recall include 2003-2007 Saturn Ions, 2007-2010 Saturn Skys, 2005-2011 Chevrolet HHRs, 2006-2010 Pontiac Solstices, and 2005-2010 Chevrolet Cobalt and Pontiac G5 models.
The problem can be caused by a heavy key ring or jarring from rough roads that can cause the ignition switch to move out of the run position and shut off the engine and electrical power. In the fatalities, the air bags did not inflate, but the engines did not shut off in all cases, GM said.
Repairs to fix the millions of vehicles connected to the recall are underway. GM has shipped thousands of kits consisting of ignition switches, ignition cylinders and key sets for the older model small cars.
Before the DOT announcement Friday, GM released a new statement, saying it is working with Delphi, which supplied the ignition switches, to accelerate its production plan of the new parts.
"Given that the ignition switch was in very limited production for several years, GM's supplier, Delphi, increased production, pulled machinery out of storage, and found new suppliers for some of the part components," wrote Boyer Friday on GM FastLane. "We are buying new machinery and equipment to make parts quickly."
GM and Delphi are working to get two additional production lines up and running this summer.
Michael Wayland covers the automotive industry for MLive. Email him at MWayland@mlive.com & follow him on Twitter @MikeWayland or Google+.