The issue could prove costly to GM as the automaker faces a
potential fine from the U.S. National Highway Traffic Safety
Administration, the cost of replacing the ignition switches in
question and the possibility of costly lawsuits.
"The National Highway Traffic Safety Administration has opened an
investigation into the timeliness of General Motors' recall of
faulty ignition switches to determine whether GM properly followed
the legal processes and requirements for reporting recalls," the
safety agency said in a statement released on Wednesday.
GM, which went through a bankruptcy restructuring in 2009, could
face a maximum fine of $35 million if it failed to notify NHTSA
within five days of a recall after learning of a vehicle safety
The company did not say how much the recall would cost, but LMC
Automotive analyst Jeff Schuster said the biggest cost to the
automaker could result from the flurry of lawsuits likely to be
triggered by the defect and the company's actions.
Toyota Motor Corp <7203.T> last year paid more than $1 billion to
resolve economic-loss claims related to the recall of millions of
vehicles for unintended acceleration. The Japanese automaker is
still trying to settle personal-injury lawsuits.
GM's recall was to correct a condition that may allow the engine and
other components, including front airbags, to be unintentionally
GM previously said the weight on the key ring, road conditions or
some other jarring event may cause the ignition switch to move out
of the "run" position, turning off the engine and most of the car's
NHTSA urged owners to follow GM's recommendation to "use only the
ignition key with nothing else on the key ring" when operating the
vehicle and seek the repair as soon as replacement parts become
available. GM said the initial replacement parts will be available
in early April.
NHTSA said it will monitor the recall and take additional action as
needed. Up to now, Toyota Motor Corp <7203.T> and Ford Motor Co <F.N>
have paid the largest fines of more than $17 million to NHTSA for
On Tuesday GM more than doubled its recall related to the issue,
saying it was "deeply sorry" and that the company was reviewing its
recall process, acknowledging it was not as "robust as it should
GM said then that it was aware of 31 reported incidents, including
13 front-seat fatalities, involving frontal crashes in which the
condition may have caused or contributed to the front airbags not
On Thursday, GM Chief Executive Mary Barra declined to address the
issue at an event in Boston. But the company said in a statement:
"We deeply regret the events that led to the recall and this
investigation. As our detailed chronology indicates, we intend to
fully cooperate with NHTSA and we welcome the opportunity to help
the agency have a full understanding of the facts."
GM previously said all the crashes occurred off-road and at high
speeds, where the probability of serious or fatal injuries was high
regardless of airbag deployment. Failure to wear seat belts and
alcohol use also were factors in some cases, the company said.
Clarence Ditlow, executive director of the Center for Auto Safety, a
Washington advocacy group that pushed for the wider recall, said the
whole recall system is broken. "GM doesn't get a
get-out-of-jail-free card just because NHTSA did a sloppy job," he
In light of GM's bigger recall, U.S. Sen. Edward Markey, a Democrat
from Massachusetts, on Wednesday called on NHTSA to require
automakers to provide detailed information to the agency when they
become aware of accidents involving deaths. He said GM was aware of
fatal accidents in Maryland and Wisconsin in 2005 and 2006 involving
safety issues and notified dealers, but did not recall the vehicles
"The current early warning reporting system is too little, too
late," he said in a statement. "We need to overhaul the early
warning reporting system so that NHTSA is not looking at auto
defects through a rear-view mirror."
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David Strickland, who was head of NHTSA from January 2010 until
December 2013 and oversaw NHTSA's investigation of Toyota, said it
was too soon to blame NHSTA for failing to act sooner.
Strickland, now a partner at Venable LLP, a law firm that represents
the auto industry, said the agency's probe will focus more on the
timeliness of GM's response to the problem than on the number of
deaths or injuries related to the ignition issue.
"They'll try to figure out when the manufacturer knew it had a
defect that posed a risk to safety," he said.
Kelley Blue Book senior analyst Arthur Henry said recalls typically
do not hurt automakers' brand image. GM's recall and the media
fervor around it is reminiscent of what Toyota went through in 2009
and 2010, he said, when it recalled more than 19 million vehicles
globally related to unintended acceleration.
"Toyota has shown that a brand can recover from an incident like
this and what may help GM is the fact that the majority of the
models recalled are discontinued," he said. "This may dissolve any
negative projection toward its new products."
Earlier this month, GM said it was recalling 778,562 Chevrolet
Cobalt and Pontiac G5 compact cars from model years 2005 through
2007. On Tuesday, it added 842,103 Saturn Ion compact cars from 2003
through 2007 model years, Chevy HHR mid-sized vehicles from 2006 and
2007, and the Pontiac Solstice and Saturn Sky sports cars from 2006
A spokesman for GM's Europe unit, Opel, said the 2007 Opel GT
Roadster, which was based on the same platform as the Solstice and
Sky, also is affected, adding around 2,300 more vehicles to the
GM no longer makes any of the affected cars.
It previously said it is working with suppliers to increase
production of replacement parts. GM said the ignition switch torque
performance may not meet company specifications. The involved parts
were made in Mexico, according to documents previously filed with
Of the cars recalled, 1,367,146 vehicles are in the United States,
235,855 are in Canada, 15,073 are in Mexico and 2,591 were exported
outside North America, according to GM.
GM said in documents filed with NHTSA that it first learned of the
issue in 2004, around the time of the 2005 Cobalt launch with a
report of at least one incident where a Cobalt lost engine power
because the key moved out of the "run" position.
The company later issued a bulletin alerting dealers to advise
owners of the issue.
In March 2007, NHTSA officials alerted GM to a fatal Cobalt crash
from July 2005 in which the front airbags did not deploy, according
to the NHTSA documents. While GM's legal department had opened a
file on that crash in September 2005, GM employees meeting with
NHTSA in 2007 were unaware of the crash.
In late July 2011, a meeting of GM legal staff and engineers led to
the an investigation of crashes in which airbags did not deploy,
according to the NHTSA documents.
(Additonal reporting by Bernie Woodall
and James B. Kelleher in Detroit, Eric Beech in Washington, Richard
Valdmanis in Boston and Edward Taylor in Frankfurt; Editing by Chizu
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