Regulators put GM on short leash

Feds blast carmaker's 'broken' safety culture

Transportation Secretary Anthony Foxx's characterization of the broken "safety culture" at GM is an ominous sign of the penalties the company could face from the U.S. Justice Department as it also sorts out possible compensation for crash victims. Photo credit: BLOOMBERG

Auto-safety regulators concluded a two-month investigation of General Motors last week with a broad condemnation of its ability and willingness to fix dangerous defects, saying that they found "deeply disturbing" evidence of failures and that GM's autonomy in evaluating safety matters would be restricted for at least the next year.

GM admitted in a 16-page consent order that it broke federal law by waiting too long to recall 2.6 million cars for faulty ignition switches and agreed to pay a $35 million fine.

The fine itself -- the most allowed by law -- is seen as little deterrent against future violations. But U.S. Transportation Secretary Anthony Foxx made clear that he felt GM's transgressions merited far greater consequences, urging Congress to increase the maximum to $300 million.

His characterization of a broken "safety culture" at the automaker is an ominous sign of the penalties that GM could face from the U.S. Justice Department as it also sorts out possible compensation for crash victims. The agency is in the early stages of its own investigation of GM and recently hit Toyota Motor Corp. with a $1.2 billion criminal penalty related to delayed recalls.

And the unprecedented government oversight placed on GM for up to three years -- coming just months after GM freed itself from government ownership -- shows that regulators still aren't convinced the company, even after acknowledging 13 deaths linked to its faulty switch, has fully learned its lesson.

"What we will never accept is a person or a company who knows danger exists and says nothing. Literally, silence can kill," Foxx said at a news conference in Washington. "These penalties should put all automakers on notice that there is no excuse and zero tolerance for failing to notify the federal government when a defect puts safety at risk."

Foxx and David Friedman, acting administrator of the National Highway Traffic Safety Administration, wouldn't identify a specific time that they felt GM should have issued a recall, instead saying it passed up several opportunities to do more. But they said documents turned over by GM show that it knew of a definitive link between airbags not deploying in crashes and the ignition switch slipping out of "run" position in 2009 -- an indication that at least some employees realized the cars were defective before GM's bankruptcy filing.

That could give ammunition to the argument being made in federal bankruptcy court this month by lawyers for some customers and crash victims that GM acted fraudulently by not disclosing the ignition-switch defect as a legal liability at that time.

Friedman said Continental Automotive, which supplied the so-called black-box modules that record data in the event of a crash for the recalled cars, informed GM in a 2009 memo that the airbags would be disabled if the ignition switch slipped out of "run." He said the memo contained the "clear connection" that NHTSA was missing when it considered but decided against opening investigations into the airbag issues in 2007 and 2010.

Friedman didn't discuss the memo further, but a person briefed on the matter confirmed to Automotive News that he was alluding to a May 11, 2009, report about data from a Chevrolet Cobalt crash that killed two teens from Michigan in September 2008. The report, released last month by a U.S. House committee investigating GM, includes a flow chart showing that the algorithm determining airbag deployment is enabled only if the black box identifies the ignition switch as being in "run."

GM disclosed in a February filing to NHTSA that it met with Continental on May 15, 2009, to discuss several crashes related to the recall, but it didn't reveal the contents of the report. A GM spokesman declined to comment beyond a statement issued Friday about the consent order.

"We have learned a great deal from this recall. We will now focus on the goal of becoming an industry leader in safety," GM CEO Mary Barra said in the statement. "We will emerge from this situation a stronger company."

Friedman said evidence reviewed by NHTSA shows that employees at multiple levels of the company, from engineers to lawyers "all the way up through executives at varying points in time were aware of information and were briefed" about the faulty switches. But he said he had "no records" showing that Barra, who held various roles in engineering and product development before taking over as CEO on Jan. 15, knew of it before GM approved the recall Jan. 31.

GM has suspended two engineers, one of whom approved a change to the faulty switch in 2006 but denied doing so in a deposition last year, pending the results of an internal investigation being conducted by former U.S. Attorney Anton Valukas. GM expects Valukas to finish his report within the next several weeks and agreed to share it with NHTSA by June 30. GM agreed to then meet with NHTSA monthly for at least the next year to discuss implementation of the report's recommendations while also involving NHTSA officials in the decision-making process for all new possible safety issues that arise in the same time period.

"These were systemic problems. These were problems in structure," Friedman said. "Their process was broken. They need to fix it, and that's exactly the goal of this consent order."

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