Last year, General Motors knowingly put over one million vehicles with defective ignition switches in the hands of American consumers. The defective auto parts were to blame for over 100 unnecessary car accident deaths. In the most recent settlement hearing, even though GM agreed to pay a substantial $900-million fine for failing to recall the defective cars, the settlement did not come close to justifying the automakers’ negligence which resulted in the significant loss of life.
No criminal charges have been filed against GM executives or employees even though high-level employees failed to disclose the deadly auto defect to the public. However, the threat of prosecution proved to be an effective tool when it came to applying the pressure needed to pay a sizeable settlement to injured victims and their families. Last year, both Toyota and GM agreed to record-setting settlements so they could avoid investigations and prosecution for their negligence. Both companies also agreed to independent safety monitors.
During the recent settlement hearing, GM Chief Executive, Mary Barra, reiterated that the company regrets its decision to mislead consumers about the fatal safety defect and to take what they have learned from this debacle to make sure they are never again responsible for car accident fatalities. The corporation benefited from this unintended added perk because the settlement is a tax deductible expense for the automaker which actually minimizes the company’s losses.
Difficulty of Prosecuting Automakers
Clarence Ditlow, executive director at the Center for Auto Safety along with U.S. Sens. Richard Blumenthal (D-Conn.) and Edward J. Markey (D-Mass.) expressed that settlements which impose financial penalties as opposed to criminal penalties allow negligent automakers to walk away unscathed. Nevertheless, cases such as this one demonstrate the need to strengthen the laws surrounding accountability for these types of fatalities.
The difficulty is proving criminal intent and pinpointing which company employee should be criminally charged. Multi-million dollar fines have little effect on massive corporations which is why many feel that until the law changes to allow criminal prosecution to be imposed on car companies, automakers will continue to use shortcuts that result in fatal car accidents.
Lawsuits Moving Forward
The latest settlement also covered a shareholder class-action suit which included over 1,300 civil lawsuits related to the defective ignition switches. To cover the shareholder lawsuit charge and settlement charges for the civil litigation, the company will post a $575-million charge in the third quarter. In addition to the class action suit, additional injury and death lawsuits are pending. In January, a New York courtroom will house the first jury trial.