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 The deal means GM will be charged criminally with hiding the defect
from regulators and in the process defrauding consumers, but the
case will be put on hold while GM fulfills terms of the deal, one
source said.
No individuals would be charged in the criminal case, one of the
sources said.
The company's expected $900 million payment, confirmed by a second
source, is less than the $1.2 billion that Toyota Motor Corp
<7203.T> paid to resolve a similar case.
GM declined to comment. Spokeswomen for U.S. prosecutors in New York
and in Washington also declined to comment.
The terms of GM's deal with the government were not immediately
known, including how many counts the automaker would be charged
with, whether the automaker agreed to hire an independent monitor,
or how long it would need to abide by the agreement before the case
may be dropped.
The agreement was expected to be announced on Thursday, the sources
said. Any deferred-prosecution agreement would require court
approval.
"I am very hopeful the Department of Justice will hold GM fully
accountable and presses for an acknowledgement of responsibility as
well as monetary penalties," Democratic Senator Richard Blumenthal
of Connecticut said in a telephone interview with Reuters.
Shares of GM were up 31 cents, or 1 percent, to $31.51 in
after-hours trading.
GM, the No. 1 U.S. automaker, took charges totaling $4.2 billion in
2014 to reflect costs associated with recalls, and a special fund
was established to compensate victims of the ignition switch defect.
It was not immediately clear whether GM would take additional
charges to account for a settlement of the criminal probe.
MILESTONE SETTLEMENT
The settlement is a milestone in a case that over the past two years
drove a transformation in the once cozy relationship between the
auto industry and regulators in the U.S. government.
Outrage over the GM ignition switch case prompted a much tougher
approach by Washington toward auto safety issues and compelled
automakers to act more quickly and comprehensively to recall
vehicles with potentially dangerous defects.
GM Chief Executive Mary Barra in 2014 undertook a series of actions
to atone for the ignition switch failure, including appointing a new
safety czar, overhauling GM's product engineering organization, and
pushing out 15 executives connected to the mishandling of the switch
defects in a scathing report prepared by former federal prosecutor
Anton Valukas, now a senior partner at the law firm Jenner & Block.
GM also recalled more than 30 million vehicles in North America in
2014 to fix a wide array of defects.
GM's approach contrasted with Toyota, which was slower to cooperate
with regulators in response to defects related to incidents of
sudden acceleration.
Toyota in March 2014 agreed to pay $1.2 billion to settle a charge
that it concealed a problem in its vehicles that caused them to
accelerate suddenly. That penalty remains the largest ever levied by
the United States on an auto company.
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PROBED SINCE 2014
Federal prosecutors based in New York have been investigating GM
since at least March 2014 over the company's disclosures to
regulators about vehicles equipped with the faulty ignition
switches.
The ignition switches on Chevrolet Cobalts, Saturn Ions and other GM
vehicles could cause their engines to stall, which in turn prevented
air bags from deploying during crashes. Also, power steering and
power brakes did not operate when the ignition switch unexpectedly
moved from the "on" position.
Engineers and managers at Detroit-based GM learned of problems with
the ignition switch more than a decade ago, but the first recalls
began only in February 2014, despite years of consumer complaints.
GM agreed with the U.S. Transportation Department in May 2014 to pay
a $35 million fine over its delayed response to the defect. Separate
from the action by the Justice Department, the fine was the maximum
the Transportation Department could impose.
Sources told Reuters in 2014 that the office of U.S. Attorney Preet
Bharara in Manhattan was interviewing present and former GM
employees as part of a criminal probe, and prosecutors were working
on a set of mail and wire fraud charges similar to the criminal case
that Toyota settled.
GM's Barra said in June that the automaker was cooperating fully
with prosecutors and that any settlement would be on their timeline.
The automaker said in securities filing in July that it was facing
related investigations by the U.S. Securities and Exchange
Commission, 50 state attorneys general and the Canadian government.
OVER 200 CIVIL LAWSUITS
GM is facing more than 200 civil lawsuits over the ignition switch
and other safety recalls from 2014, although the judge who oversaw
GM's 2009 bankruptcy has ruled that claims related to the company's
pre-bankruptcy conduct were barred.
Plaintiffs are seeking damages for deaths and injuries blamed on
vehicle defects, as well as economic losses such as lost vehicle
value. The first of the civil cases is slated for trial in January
2016.
GM funneled many of the injury and death claims linked to the
ignition switch into an out-of-court settlement program run by
Washington lawyer Kenneth Feinberg, who also oversaw compensation
programs for victims of high-profile incidents such as the Sept. 11,
2001, attacks and the Deepwater Horizon oil spill.
The program received more than 4,300 claims and has found nearly 400
of those eligible for compensation, according to an August report
from the program.
(Reporting by David Ingram and Nate Raymond in New York and Joseph
White in Detroit; Additional reporting by Jessica Dye and Jonathan
Stempel in New York and Richard Cowan in Washington, Editing by Ken
Wills and Noeleen Walder)
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