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GM fined $35 million for failing to report ignition switch defect for decade

| Saturday, May 17, 2014, 12:01 a.m.

WASHINGTON — Federal safety regulators slapped General Motors with a record $35 million fine on Friday for taking more than a decade to disclose an ignition switch defect in millions of cars that has been linked to at least 13 deaths.

Under an agreement with the Transportation Department, GM admitted it was slow to inform regulators, promised to report problems faster and submitted to more in-depth government oversight of its safety operations.

The fine was the maximum the department can impose.

“Literally, silence can kill,” Transportation Secretary Anthony Foxx said. “GM did not act and did not alert us in a timely manner. What GM did was break the law.”

Safety advocates said the fine, which is less than a day's revenue for GM, is too small to deter bad behavior by automakers.

Clarence Ditlow, executive director of the nonprofit Center for Auto Safety, said the Justice Department — which is conducting a parallel criminal investigation — should fine the company $1 billion or more and bring charges against GM engineers and their superiors.

“That's the only way you're going to change GM's behavior,” he said.

Congress is investigating GM, and the automaker faces hundreds of lawsuits over deaths and injuries attributed to the ignition switch.

The company has acknowledged knowing that the switches in its small cars had problems since at least 2001. But it was not until February that it began recalling 2.6 million of the cars, mainly Chevrolet Cobalts and Saturn Ions.

Automakers are required by federal law to report safety defects to the government within five days of discovering them.

When jostled, the ignition switches can slip out of the “run” position and shut off the engine. That cuts off the power steering and brakes, potentially causing drivers to lose control. It also disables the air bags.

GM says at least 13 people have died in crashes linked to the problem. Lawyers suing the company say the death toll is at least 53.

The Transportation Department's National Highway Traffic Safety Administration, which has been criticized for failing to take action on the switches despite thousands of complaints from car owners, used a news conference to turn the tables on GM, detailing some of the most damning evidence against the automaker.

Acting NHTSA Administrator David Friedman said a 2009 memo from a parts supplier to GM stated that the switch problem could disable the cars' air bags. Had the government been told that at the time, it would have sought a recall, Friedman said.

Friedman said it was clear many GM employees, from engineers to executives, knew about the bad switch years ago. But he said the agency has no records to contradict CEO Mary Barra's claim that she found out about it only recently.

He portrayed the scandal as part of a larger problem with the safety culture at GM, saying the automaker's training materials discouraged employees from using words like “defect” or “dangerous” when reporting trouble up the chain of command.

“The fact that GM took so long to report this defect says there was something very wrong with the company's values,” Friedman said.

GM received a $49.5 billion bailout from Washington during its 2009 bankruptcy, and the government was once the automaker's majority shareholder, but it sold off the last of its GM stock in December.

GM stock closed Friday down 36 cents, or 1 percent, at $34.

GM is making changes. It has named a new safety chief and has begun checking records for problems that could lead to recalls. The automaker has issued 24 recalls this year affecting 11.2 million cars and trucks.

While the maximum fine that the Transportation Department can impose was doubled to $35 million this year, Foxx urged Congress to raise it to $300 million.

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