General Motors Co. GM is under pressure as the U.S. government is considering criminal charges against the automaker or its employees, according to sources. The charges pertain to the delay in recall of vehicles with a faulty ignition switch that has apparently caused 104 deaths.
Manhattan U.S. attorney Preet Bharara is examining evidence related to the safety defect, with assistance from the Federal Bureau of Investigation (FBI) in New York. The attorney is investigating whether there was any violation of law on the part of the company or its executives. If proven guilty, investigators can sue the automaker or General Motors’ workers. The investigative body may even impose a fine on the company and make it ammend its operations going forward.
The fine, if imposed, might be in excess of the compensation that General Motors owes to the victims of the safety glitch. The costs associated with the replacement of the 2.6 million switches in older-model cars will be an additional burden.
General Motors has already launched a program to compensate the victims and families affected by crashes caused by the ignition switch defect. To assess the claims and deploy funds, General Motors has appointed Kenneth Feinberg, who is dealing with the claims registered between Aug 1, 2014 and Jan 31, 2015.
Other automakers which have suffered along similar lines as General Motors include Toyota Motor Corporation TM. The company was fined when found guilty of hiding safety defects related to uncontrolled acceleration. The Japanese automaker had agreed to pay a fine of $1.2 billion in this regard.
On its part, General Motors had hired Attorney Anton Valukas, the chairman of Chicago law firm Jenner & Block, to investigate the reason for the delay. He pointed that lack of urgency among engineers and in-house lawyers had resulted in the delay.
General Motors is facing the heat for delaying the recall of 2.6 million vehicles with defective ignition switches, which can lead to engine shut-down and hinder deployment of front air bags in the event of a crash. The company issued a recall in Feb 2014, although the problem was identified long back in 2001. Lawfully, automakers are supposed to alert The National Highway Traffic Safety Administration (“NHTSA”) about any safety concern in vehicles within five business days of recognizing the problem. However, General Motors had failed to do so. The automaker has faced multiple investigations (including a criminal probe) and lawsuits on account of this delay.
CEO of General Motors, Mary Barra, has faced the Congress several times in the past, apologizing for the delayed recall. She has maintained that the company is determined to resolve the issue in the least possible time.
General Motors currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the auto industry include Fox Factory Holding Corp FOXF and PACCAR Inc. PCAR, both of which hold a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment