GM Settles Ignition Switch Lawsuit; Will Pay $900M Penalty [News]

2010 Chevrolet Cobalt
2010 Chevrolet Cobalt

General Motors reached an agreement with the United States Attorney’s Office over their handling of the ignition switch defect and recall.

In the agreement, the U.S. Attorney’s Office will defer prosecution for three years, and if GM holds to the terms of the agreement, the charges will be dropped after that time.

GM will pay a $900 million penalty and is required to set up an independent monitor to review the company’s safety recall procedures.

The government decided to defer prosecution based on GM’s actions that show they have taken responsibility for their conduct. The company’s internal investigation, cooperation with authorities, termination of employees and creation of a victim compensation program all helped with the decision.

“The mistakes that led to the ignition switch recall should never have happened. We have apologized and we do so again today,” said GM CEO Mary Barra. “We have faced our issues with a clear determination to do the right thing both for the short term and the long term. I believe that our response has been unprecedented in terms of candor, cooperation, transparency and compassion.”

GM also reached civil agreements regarding 2014 recalls, including the ignition switch recall. The settlements, which include a shareholder class action and 1,380 individual death and personal injury claimants, will cost the company $575 million.

Both monetary amounts will come off of the company’s third-quarter ledger.

The recall stems from issues with the ignition switch on certain GM vehicles that could move to the “off” position while the car is in motion, which cuts power abruptly and disables the power steering, power brakes and air bags. The total number of recalled vehicles is approximately 29 million. As of August 21, the GM compensation program has issued compensation for 124 deaths and 275 injuries.

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