GM to pay $900 million fine to settle ignition switch criminal case

Posted at 11:27 AM, Sep 17, 2015
and last updated 2015-09-17 11:27:06-04

NEW YORK (CNNMoney) — General Motors will pay $900 million to settle criminal charges related to its flawed ignition switch that has been tied to at least 124 deaths.

Problems with the ignition switch could shut off the car while it was being driven, disabling the airbag, power steering and power brakes — and putting drivers and passengers at risk.

GM had already admitted that its employees were aware of the problem nearly a decade before it started to recall millions of the cars early last year. That delay is the basis behind the criminal charges.

The settlement was disclosed Thursday by the Justice Department. No individual GM executives were charged in the case — something that was called “grossly inadequate” by the mother of a crash victim.

“While nothing can bring my daughter back, we need a system where auto executives are accountable to the public and not just corporate profits,” said Laura Christian, whose 16-year-old daughter Amber Marie Rose was killed in 2005.

The Justice Department agreed to defer prosecution in the case, essentially placing the company on probation for the next three years. The criminal case will then be dropped if GM continues to cooperate with federal authorities during that time.

Under the settlement GM agreed to hire an independent monitor of its recall process to insure the company continues to comply with federal safety reporting regulations. The monitor will operate a toll free phone service for people to call in complaints anonymously.

GM also said it has struck a deal to settle a civil class action suit involving nearly 1,400 cases of death or serious injuries. The case includes recalls beyond the ignition switch problem.

GM did not disclose the amount it has agreed to pay in that civil case, but it said it said it would take an additional $575 million charge against earnings to account for the payments in both the civil and criminal cases. The company has taken previous charges in anticipation of these costs.

“The parties to these agreements have resolved difficult claims without the burden, expense, and uncertainty of litigation,” said GM General Counsel Craig Glidden.

GM CEO Mary Barra is due to address company employees about the settlements Thursday afternoon.

The automaker has previously set up a compensation fund to pay the families of those killed, as well as those injured, in accidents. GM will pay at least $150 million into the fund.

General Motors has also changed how it handles recalls. The result: a massive surge of more than 30 million recalls and an estimated $4.1 billion cost to repair cars and trucks, not including the cost of this fine.

GM has already agreed to pay the maximum possible fine of $35 million to settle civil charges with federal safety regulators.

The criminal settlement is just the latest announced by the Justice Department against corporations.

Last year Toyota agreed to pay $1.2 billion to settle a case related to its failure to recall cars despite reports of unintended acceleration. In 2013 JPMorgan Chase agreed to a record $13 billion fine to settle criminal charges related to the sale of mortgage backed securities ahead of the 2008 financial crisis.