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Federal government hits General Motors with $35 million fine

May 17, 2014 at 5:49 PM EDT
The federal government issued a record $35 million fine against General Motors on Friday for to the automakers slow response reporting faulty ignition switches -- a defect that has been linked to 13 deaths. What’s the latest on the massive recall? Hari Sreenivasan speaks with Micheline Maynard, who has covered the auto industry for many years, about the fine and this developing story.
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HARI SREENIVASAN: We want to go more deeply tonight into a significant story that broke yesterday – the record government fine against General Motors. This, for its slow response reporting a safety problem linked to 13 deaths. For more, we are joined tonight from Phoenix, Arizona by Micheline Maynard. She has covered the auto industry for many years.

So just remind people what this case is all about.

MICHELINE MAYNARD: These involved General Motors vehicles Saturns, Pontiacs and Chevrolets that started to be built in 2002. These are older model General Motors cars. The problem is that there’s a little pin in the ignition that can come loose and if that happens the car can basically switch itself off essentially. When that happens people can lose control of the car, and if the ignition is off your airbags don’t work. So, that’s the biggest issue here is that sudden loss of control, this sudden loss of power and then if you get in a crash which could happen if you lose the ignition, your airbags won’t come on so it’s a very scary situation for the people involved in these accidents and sadly thirteen people have died.

HARI SREENIVASAN: So, on the one hand $35 million bucks that’s a huge amount of money and on the other hand Senator Markey calls it a parking ticket.

MICHELINE MAYNARD: That’s right. This fine is actually the limit that the government can charge a company for failing to disclose information about recalls. And, there are proposals in fact, backed by the Transportation Department, to raise that to about something around $100 million. So if the new bill went through GM would have paid a much higher fine, but in this case this is all the government can charge.

HARI SREENIVASAN: Besides the fine, what about these monthly meetings that they have to have with regulators about every safety issue under the sun that they’re dealing with.

MICHELINE MAYNARD: My friend Nick Bunkley at Automotive News says ‘GM was put on a short leash.’ So, this is unprecedented in terms of one of the Detroit carmakers. General Motors has to basically report in it is almost like it’s on parole or something with the Transportation Department. This is the kind of information that car companies, you know they don’t like giving out information to the government. They would rather be able to run their operations without having to justify what they do. So, it’s an unprecedented level of supervision for a Detroit company. And it will be very interesting to see how this relationship works out.

HARI SREENIVASAN: It doesn’t see that GM is finished with all of this. There are still investigations going on with all of this. Are they still possibly liable for criminal malfeasance?

MICHELINE MAYNARD: So, there’s a couple of milestones that will probably still happen here. First of all, General Motors is conducting its own internal investigation and it also hired Kenneth Feinberg, who adjudicated the 9/11 victims’ cases, he was the person who looked into compensation in the BP oil spill. And Feinberg is expected to make his recommendations to GM about whether it should be paying the families of the victims. And then finally, there will be more Congressional oversight and possibly a Justice Department settlement like we saw with Toyota which was $1.2 billion and Toyota also admitted fault.

HARI SREENIVASAN: The investigation seems to have uncovered a culture more than just a specific problem. So how do they tackle this? How do regulators change the minds of people who are on the front lines of figuring out whether this complaint should be taken more seriously?

MICHELINE MAYNARD: What’s fascinating about this is that this is the second time that the government has had to wade into General Motors to fix problems that people saw over years but were never addressed. So if you remember back to the bailout of 2009, one of the things that the White House task force did was basically tell General Motors you haven’t been running your operations correctly – these are the suggestions, I guess suggestions with a baseball bat, that they had for GM. And now here we have the Transportation Department saying you camouflaged safety information from 2009 forward. So I think it’s kind of a sad situation for GM that it takes outside regulators, or politicians essentially, to tell the company how to run its operations the way it was supposed to.

HARI SREENIVASAN: All right, Micheline Maynard joining us from Phoenix, Arizona today, thanks so much.

MICHELINE MAYNARD: My pleasure.