GM to pay $900 million, makes agreement with federal prosecutors

Staff/wire report

NEW YORK

General Motors agreed to pay $900 million to fend off criminal prosecution over the deadly ignition-switch scandal, striking a deal that brought criticism down on the Justice Department for not bringing charges against individual employees.

The switches, which can slip out of the “run” position and cut off the engine, have been linked to at least 169 deaths. The faulty switches led to the recall of millions of vehicles, including the Lordstown-built Chevrolet Cobalt.

Despite evidence that GM’s legal and engineering staffs concealed the problem for nearly a decade, no employees were charged Thursday, though U.S. Attorney Preet Bharara said the investigation is still on- going.

Also Thursday, GM announced it will spend $575 million to settle the majority of the civil lawsuits filed over the scandal.

Under the deal with prosecutors, an independent monitor will be appointed to oversee GM’s handling of safety problems. Two charges drawn up against GM — wire fraud and scheming to conceal information from government regulators — will be dropped after three years if the automaker cooperates fully.

GM agreed to a statement of facts that describes in scathing terms its deceptive and dismissive approach to the defect.

“They let the public down,” Bharara said. “They didn’t tell the truth in the best way that they should have — to the regulators, to the public — about this serious safety issue that risked life and limb.”

The twin agreements bring to more than $5.3 billion the amount GM has spent on a problem authorities say could have been handled for less than a dollar per car. Those expenses include fines, compensation for victims and vehicle recalls.

On Thursday, GM chief executive Mary Barra appeared before several hundred employees in suburban Detroit and again apologized to the crash victims. When asked whether employees should have been charged, she deferred to Bharara’s office.

But she added: “We understand that lives were impacted. That is something that we understand and we take forward and will have with us every day.”

United Auto Workers Local 1112 President Glenn Johnson, who represents thousands of assembly plant workers at the Lordstown plant where the Chevy Cruze is built, said he has seen a change in the philosophy at GM from the top down.

“They are listening to customers and they are doing their very best,” Johnson said. “They have done all they could to put the customers first.”

Bharara said he understands victims’ families might be disappointed that no individuals were arrested. But he said there is no law with specific criminal penalties for failing to disclose auto safety problems.

Without such a statute, prosecutors had to rely on broader laws covering false statements and wire fraud, he said.

In this case, court papers showed that GM engineers knew of the problem in 2004 and 2005 when other employees, the media and customers complained. But the engineers left it alone, rejecting a cheap and simple fix, court papers said.

Even after the dangers became plain in 2012, GM did not correct its earlier assurance that the switch posed no safety concern.

The wire fraud count pertained to the company’s assurances to customers over the Internet in 2012-13 that its used cars were safe.

GM recalled 2.6 million cars worldwide to replace the faulty switches in 2014.

Last year, GM set up a fund to compensate victims. Lawyers administering it accepted 124 death claims and 275 injury claims. Families of those who died will get at least $1 million. GM has set aside $625 million to compensate people who settled with the fund.

Texas attorney Bob Hilliard represents 1,385 plaintiffs with death or injury claims who decided not to seek compensation from the fund. On Thursday, GM said it has agreed to spend $575 million to settle those cases, as well as a shareholder lawsuit that said GM’s actions reduced the value of its stock.

GM still faces more than 400 death and injury cases that have yet to be settled.

Amid the scandal more than a year ago, GM fired 15 employees for failing to act to resolve the switch problem.

Despite the heavy amount of recalls in its past, GM has posted growing sales figures. Year-to-date sales are up 3.2 percent year over year.

UAW Local 1714 President Robert Morales, who represents the fabrication plant workers in Lordstown, believes GM took a proactive approach after the ignition switch recall was brought to the forefront.

“If we want to be credible we just need to do the right thing,” Morales said. “General Motors and the UAW are committed to building quality cars.”

Contributing reporter: Kalea Hall