In an amended submission to the U.S. National Highway Traffic Safety
Administration, GM also said it had identified an issue with the
ignition switch, the central failing in the recall of more than 1.6
million cars, in 2001 preproduction testing on the Ion.
That is three years earlier than the company previously had
reported. Before Wednesday, GM had said that it became aware of the
problem in 2004, in the Chevrolet Cobalt.
GM says the switch has been connected with at least 34 crashes and
is linked to at least 12 deaths. Congress, regulators and GM itself
are investigating why it took the company so long to recall the
GM issued its first recall of more than 600,000 Chevrolet Cobalts on
Feb 7 of this year. On Feb 25 it expanded the recall by nearly
750,000 vehicles to include the Ion and several other compact models
that shared the faulty ignition switch that could cause the engine
to shut down and disable the airbags, sometimes at high speed.
Asked why GM had waited before expanding the recall, a spokesman on
Wednesday told Reuters the company had decided to conduct a "more
in-depth analysis" of vehicles listed in previous communications
with car dealers. That led to the second round of the recall.
A GM document released earlier on Wednesday said that even after the
vehicles in its ignition-switch recall are repaired, owners should
avoid weighing down their key rings with anything more than the key
Also on Wednesday, U.S. Senator Claire McCaskill said a Senate
subcommittee plans to hold a hearing in early April on GM's recall.
"We have to get to the bottom of this," said McCaskill, a Missouri
Democrat. "We need to find out who dropped ball and put millions of
Americans at risk."
The failure is believed to be caused when weight on the ignition
key, road conditions or some other jarring event causes the ignition
switch to move out of the "run" position, turning off the engine and
most of the car's electrical components mid-drive, with sometimes
GM said in an earlier filing Wednesday that it will offer loaner
cars in some cases to unhappy owners affected by the recall.
The company also said it is not buying back affected vehicles if
owners ask for that, but is offering a $500 cash allowance, through
April 30, to buy a 2013, 2014 or 2015 model-year vehicle.
On Tuesday, a source said federal prosecutors have opened a probe of
GM, examining whether the company is criminally liable for failing
to properly disclose problems with some of its vehicles that led to
The New York office of the Federal Bureau of Investigation is
involved in the probe, a source familiar with the matter told
Reuters on Wednesday.
The federal probe by the FBI and the U.S. attorney in Manhattan adds
to a growing list of U.S. authorities examining the recall.
McCaskill said the Senate Commerce Committee's consumer protection
subcommittee will examine the responses of GM and the federal
traffic safety administration, NHTSA to the discovery of faulty
ignition switches. She told Reuters that the congressional probe is
"more challenging" now that the Justice Department also has opened
its own investigation.
"While we would like to get as much information as possible and have
General Motors as witnesses," McCaskill said her panel's review is
"really about how NHTSA has handled this and what are the challenges
that NHTSA faces in being an effective cop on the beat."
She said she has concerns about whether NHTSA had insufficient
expertise and also about a lack of transparency at the agency. She
did not know which GM executives would be called to testify.
[to top of second column]
Safety advocates have criticized NHTSA for failing to catch the GM
issue and failing to demand a recall despite tracking the problems
at different points over the past decade.
Kelley Blue Book senior analyst Karl Brauer said NHTSA's lack of
action suggests the agency's own review process may be ineffective
despite changes made after the high-profile Ford-Firestone tire
recall in 2000.
However, NHTSA's chief said U.S. auto-safety regulators did not
force GM to recall the cars sooner because the connection between
defective ignition switches and failing airbags was not clear.
"If we had that information, if GM had provided us with timely
information, we would have been able to take a different course with
this," David Friedman, acting administrator for NHTSA, told
Bloomberg on Wednesday in Washington.
Transportation Secretary Anthony Foxx told reporters in
Washington on Wednesday that he had a "high level of confidence" in
NHTSA, "but we'll continue watching as facts unfold and see where we
Foxx said his department is having a "dialogue" with the U.S.
Department of Justice about the GM recall. "They're looking at the
same information we're looking at. They will make that
The U.S. House Energy and Commerce Committee also has ordered GM and
NHTSA to turn over information about the automaker's ignition-switch
problems. [ID:nL2N0M81N6] A House committee aide said on Wednesday
that while the Justice probe may complicate what information can be
received, the committee expects NHTSA and GM to comply with
GM has declined to comment on news of the criminal probe, but has
said it is cooperating on all the various probes.
"We are fully cooperating with NHTSA and will do so with the
Congress, too," GM spokesman Greg Martin said in an email on
Wednesday. "We welcome the opportunity to help both parties have a
full understanding of the facts."
GM faces a fine of up to $35 million from NHTSA, and several
analysts have estimated the recall could cost the company $70
million to $280 million.
The automaker has not disclosed what the recall will cost. Analysts
agreed that the biggest costs could come from lawsuits likely to
result from the recall and probe.
Barclays analyst Brian Johnson said in a research note that
Tuesday's 5 percent stock decline was "overdone" as the $3.2 billion
hit to the company's market cap was likely well above any potential
settlements with the U.S. Department of Justice, state attorneys
general and plaintiffs' lawyers.
However, Johnson added that it was unclear what might make the stock
rise in coming months as continued media headlines were likely to
weigh heavily on GM shares.
GM shares fell 0.9 percent to close at $34.86 on the New York Stock
Exchange on Wednesday.
(Additional reporting by Emily Flitter
in New York and Eric Beech and Karey Van Hall in Washington; editing
by Matthew Lewis)
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