GM: Ignition Switch Problem Known in 2001| News | HMG LLP

GM Now Says It Detected Ignition Switch Problem Back in 2001

August 31, 2017


General Motors Co. said late Wednesday it knew of faulty ignition switches dating back as early as 2001—three years earlier than previously reported—and has yet to determine the full scope of the problem.

Separately, the maker of the component at the heart of a 1.6 million-vehicle recall said it only costs a few dollars to produce and minutes to install, which may provoke questions from investigators about why the problem wasn't fixed years ago. Auto-parts maker Delphi Automotive PLC told Wall Street analysts this week it expects to spend between $2 and $5 to produce a replacement ignition switch that can then be "swapped out" in a matter of minutes by mechanics at GM dealerships.

GM's failure to act more quickly to remedy a defect that is now linked to accidents in which 12 people have lost their lives over the past decade has landed the company and new Chief Executive Mary Barra at the center of three different investigations—including a criminal probe.

In documents released by federal safety regulators Wednesday, GM released more details about the events that led to an initial Feb. 13 recall which was expanded almost two weeks later. At a Dec. 17, 2013, meeting and a follow-up meeting on Jan. 31, 2014, members of GM committees focused primarily on whether to recall only 2005-2007 Chevrolet Cobalt and Pontiac G5 cars. However, GM's latest disclosure says "backup" data prepared for the meetings outlined ignition problems in other models.

In its new chronology, GM says officials last month gathered more data about other vehicles, and discovered a 2001 report that documented a problem with the ignition switch for a Saturn Ion assembled before the start of regular production of vehicles for sale. GM said another document from 2003 stated that a service technician observed an Ion stall while driving.

In the 2003 incident, the owner "had several keys on the key ring" and the additional weight of the keys had "worn out the ignition switch," GM states in its chronology. The service technician replaced the switch and the report was closed, GM told regulators. GM went on to say there were other reports of complaints from customers not able to start their Ion engines. The auto maker didn't offer additional details.

The latest GM statement also doesn't name individuals involved in key decisions, or those who served on the committees that deliberated whether to recall the vehicles.

GM previously had said its employees learned of an incident in 2004 in which a Cobalt lost engine power after the ignition key was jarred out of the on position, disabling the car's air bags. The car was about to be launched at the time. GM employees replicated the problem in test drives, according to documents submitted to safety regulators by GM.

An engineering inquiry was opened but later closed after determining it would take too long and cost too much to fix, according to GM.

It wouldn't be until sometime during the 2007 model year of the Chevrolet Cobalt that the ignition switch was redesigned. But GM didn't recall the Cobalts or other cars with similar ignition locks until last month.

The problem occurred when drivers would turn the key from the "off" position, through the "accessory" position to the "on" position. However, the switch's detent plunger and spring inside allowed the ignition switch to turn back to the "accessory" position when the key was either bumped or there was too much weight hanging from the key's head.

GM declined to comment.

Meanwhile, the auto maker made moves to reach out to customers saying it has authorized U.S. dealers to give any owner of a car covered in the recall, and unhappy with the vehicle, a $500 cash allowance to buy or lease a new GM product. The allowance is available through April 30 and can be used on a new 2013, 2014 or 2015 model year Chevrolet, Buick, GMC or Cadillac.

"In keeping with our commitment to help customers involved in this recall, a special, $500 cash allowance is available to purchase or lease a new GM vehicle," spokesman Greg Martin said. "We have been very clear in our message to dealers that this allowance is not a sales tool and it is only to be used to help customers in need of assistance. Neither GM, nor its dealers will market or solicit owners using this allowance."

The issue of the cost of the ignition switches and the delays in replacing them will likely be just one facet of the investigations under way. The U.S. attorney for the Southern District of New York has begun looking into the auto maker's handling of complaints about faulty ignition switches. The probe is at a preliminary stage. The House Energy and Commerce Committee also said it would investigate the case and hold hearings.

Sen. Claire McCaskill, (D., Mo.), chairman of the subcommittee on consumer protection, announced Wednesday plans to hold a hearing in April concerning the GM recall.

"We have to get to the bottom of this," she said. "We need to find out who dropped the ball and put millions of Americans at risk."

The auto maker is also facing an April 3 deadline in answering 107 questions posed by NHTSA concerning GM's timeline on the events leading to the recall. NHTSA is trying to decide if GM was noncompliant in the time it took to initiate the recall.

Meanwhile, owners of the vehicles can't get their cars repaired until April, when GM plans to begin repairing switches in 2005-2007 Chevrolet Cobalt and Pontiac G5, the 2003-2007 Saturn Ion, the 2006-2007 Chevrolet HHR, the 2006-2007 Pontiac Solstice and the 2007 Saturn Sky.

GM is taking steps to reassure consumers and regulators that it now is committed to addressing the problem. The auto maker earlier this week said Chicago attorney Anton Valukas, who served as the examiner of the downfall of Lehman Brothers Holdings Inc., will help lead an internal probe of the handling of the ignition-switch recall.

Morningstar Inc. senior equity analyst David Whiston said the company is likely to shake off any short-term market-share loss.

"The company may well lose sales in the short run because of constant negative headlines, but the impact to its reputation depends on how Ms. Barra and her team respond over the next few months," Mr. Whiston said in a research note. "We expect GM will continue to take responsibility and admit fault in how it handled the process."

The not-for-profit Center for Auto Safety on Wednesday called on GM to establish a $1 billion victims fund and asked the auto maker to waive immunity it received under its 2009 bankruptcy restructuring from most lawsuits.

A GM spokesman had no comment.

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