GM was charged by the SEC with withholding information about its internal ignition switch investigation. The agency contended that knowledge of the investigation was relevant to investors because the ignition switch scandal could negatively impact the company’s finances. Companies are required to note such potentially damaging problems in financial disclosures.
Under the settlement, GM will pay a $1 million civil penalty, but will not admit or deny any wrongdoing. The faulty switches created the potential for the ignition to turn off while a car was in motion, cutting power to the vehicle, including the airbags. GM was thought to know about the problem well before the affected vehicles went on sale, and was investigated by Congress over its response to the issue.
The SEC did not trace GM’s knowledge of the ignition switch issue back quite that far, although it did say that, “General Motors personnel understood in the spring of 2012 that there was a safety issue at hand,” but didn’t notify accountants until November 2013. During that 18-month period, accountants could not evaluate the potential for a recall and its likely cost, the SEC said.
The ignition switches were linked to 124 deaths and 275 injuries. GM paid out $594.5 million in 399 cases deemed eligible for compensation. That works out to an average of about $1.5 million per claim, although the amount paid out varied depending on the circumstances of each case. While GM paid compensation in nearly 400 cases, it received over 4,000 claims related to the ignition switch scandal.
GM also had to recall nearly 2.6 million cars found to have the faulty ignition switches. That included the entire production runs of the Chevrolet Cobalt and HHR, Pontiac G5 and Solstice, and the Saturn Sky and Ion. At the time, GM advised owners to remove key chains and other items from their key rings, saying the extra weight could make it more likely for the ignition switch to turn off.
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