Sunday, September 20, 2015

GM Reaches Settlement


General Motors announced that they have reached a criminal settlement to end the current government investigation of their faulty ignition switches. GM will pay $900 million for the Department of Justice fine incurred.

Additionally, GM has reached a resolution with over half of the death and personal injury lawsuits that are a part of the current multidistrict litigation through the U.S. District Court for the Southern District of New York. General Motors also settled in a shareholder class action lawsuit filed in the U.S. District court in Michigan for two civil lawsuits. The total for these settlements will set GM back another $575 million.

GM’s ignition switch defect caused cars to suddenly turn off when driving, most notably when the car was jostled from uneven road conditions. As well as an engine shutdown, power steering and power brakes were disabled and the airbags became deactivated. This led to numerous car accidents with severe injuries and deaths.

The MDL and shareholder class action settlements resolve about 1,380 death and personal injury lawsuits in total. GM did not release the individual settlement values paid in the various settlements.

The remaining lawsuits in the multidistrict litigation include economic loss claims, 370 injury lawsuits and 84 death lawsuits. Prior to Thursday’s announcement, GM had already agreed to offer ignition switch settlements to 124 families in death lawsuits and another 275 who were injured.

The nearly $1.5 billion GM is faced with in fines and settlements so far for the defect does not include the cost of fixing the 2.6 million vehicles that have been recalled due to the GM ignition switch defect.

Some consumers oppose how the situation was handled under the law. The Justice Department was criticized for not bringing charges against individual GM employees who were believed to have direct responsibility. In general, this criticism has extended to the DOJ in general for going after companies in general rather than prosecuting individuals for their wrongdoing.

When the GM scandal first came to light over a year ago, the company fired 15 employees for failing to resolve the ignition switch problem.

As it stands, there is no law that deals with criminal penalties for auto makers failing to disclose safety problems, so broader laws such as wire fraud and false statements are used.

According to court documents, GM knew of the ignition switch problem a decade ago in 2004 and 2005. Rather than making a simple and inexpensive change in the part at the time, which was estimated to cost approximately a dollar per vehicle, the situation was overlooked.

U.S. Attorney Preet Bharara summarized the situation, “”They let the public down. 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.”

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