GM and NHTSA reach agreement over ignition switch reporting

by Jacques Gordon

In a press release dated today, General Motors announces they have “come to an agreement with the National Highway Traffic Safety Administration (NHTSA) for failing to report in a timely manner the ignition switch defect.” As part of this agreement, GM will pay a $35 million fine.

“We have learned a great deal from this recall. We will now focus on the goal of becoming an industry leader in safety,” said GM CEO Mary Barra. “We will emerge from this situation a stronger company.” GM has begun working with NHTSA to review company policies with the goal of avoiding similar recalls in the future. The announcement said that having signed this agreement, the company “now has its sights set on effectively serving customers and completing the ignition switch recall.”

Back in March, the company established a department called “Global Vehicle Safety” and appointed GM engineer Jeff Boyer as its vice president. Today Boyer announced the creation of the Global Product Integrity unit, saying they are “encouraging and empowering our employees to raise their hands to address safety concerns through our Speak Up for Safety initiative.” The company will also now require engineers to attain Black Belt certification through Design for Six Sigma (a business/process management method aimed at identifying and eliminating errors and meeting customers’ objectives: Black Belt is the second highest of four certification levels).

GM sought court protection from lawsuits related to ignition switch defects in cars sold before its 2009 bankruptcy and reorganization. A class action lawsuit had been proposed earlier this spring that, if allowed to go forward, would have declared that GM could not use bankruptcy protection to absolve itself from liabilities related to this defect. If that happened, GM would then be liable not only for accidents resulting from the faulty ignition switch but also for all the financial obligations set aside by the bankruptcy, something the company would undoubtedly not survive.

According to Transportation Secretary Anthony Foxx, the fine and agreement satisfy the company’s failure under the Tread Act, which requires auto makers to report safety defects to the government within five days of their discovery. The government also ordered the company to make “wide-ranging internal changes to its review of safety-related issues” and to “improve its ability to take into account the possible consequences” of safety-related defects. Thus the Global Vehicle Safety department.

In addition to paying the highest single penalty resulting from a NHTSA investigation, GM will pay additional penalties for failing to respond on time to the agency’s demand for documents during NHTSA’s ignition switch investigations in 2007 and 2010. The government will also be watching carefully to make sure the ignition switch recall progresses on schedule and includes the maximum possible number of vehicle owners.

So does this agreement with NHTSA mean it’s over?

Not quite. GM is still facing investigations by the U.S. Justice Department and several states Attorneys General and the Securities and Exchange Commission.


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