GM's Defective Ignition Switches May Prove Costly

Image: GM's Defective Ignition Switches May Prove Costly

Friday, 28 Feb 2014 07:21 AM

By Melissa Clyne

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General Motors Co. may take a financial beating for its faulty ignition switches – and the recall of 1.4 million vehicles – that abruptly shut off cars' engines and electrical systems, disabling the air bags, power steering and anti-lock brakes, Reuters reported.

There's the maximum $35 million fine if the automaker failed to notify the National Highway Traffic Safety Administration within five days of learning of a safety defect, according to The New York Times. Federal law mandates that within those five days, the company must provide a plan for a recall.

But the costliest issue for the Detroit-based automaker that went through a bankruptcy restructuring in 2009 are the countless possible lawsuits that are likely to be filed due to both the malfunction as well as the company's subsequent actions.

Last year, Toyota Motor Corp. paid $1.6 billion to compensate vehicle owners who suffered an economic-loss tied to "widespread reports" in 2009 and 2010 about sudden acceleration, according to The Times. Toyota is still dealing with personal injury lawsuits.

In the recalled GM vehicles – 2005 – 07 Chevrolet Cobalts; 2003-7 Saturn Ions; 2006-07 Chevrolet HHRs and Pontiac Solstices; and 2007 Saturn Sky and Pontiac G5s – the ignition switches jump from the "run" to "accessory" position, shutting down the cars' systems. The defect has led to at least 31 crashes and 13 deaths.

GM issued a statement this week explaining that extra weight on a key ring or a jarring event, such as when a vehicle goes off road, may inadvertently cause the ignition switch to jump from the "run" position.

Drivers are being urged not to have anything else on their key ring when operating the vehicle.

GM has known about the problem since 2004, according to The Times, when it filed a report with NHTSA about the problem with Chevrolet Cobalts.

"The automaker's failure to recall the vehicles until this month prompted the safety agency to announce Wednesday that it was starting an investigation into why it took so long to prompt a recall," the newspaper reported.

By 2007, GM knew about at least 10 crashes possibly related to the same issue yet the automaker didn't issue its recall until this month, according to the Los Angeles Times.

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