Higher fines and jail time reportedly are being considered by US lawmakers who questioned General Motors CEO Mary Barra over why it took years to recall 2.6m cars for faulty ignition switches.
According to Bloomberg News, the questions of what GM and regulators knew and when are bringing together members of Congress who, while agreeing on little else, are rallying around images of constituents who died in the defective cars. Congress passed laws in 2000 and 2010 after the Ford/Firestone tyre and Toyota unintended-acceleration recalls that toughened sanctions while stopping short of broad criminal penalties.
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“Is US$35m enough?” asked senator Claire McCaskill, referring during a hearing on Wednesday to the largest civil fine allowed for not reporting defects. “I mean, is that really a deterrent to companies like General Motors or Toyota or Chrysler, or any of the companies?”
Henry Waxman, the top Democrat on the US House Energy and Commerce Committee, introduced legislation that would increase penalties for failing to disclose defects. It would impose new fees on automakers starting at $3 per vehicle to boost funding for the US National Highway Traffic Safety Administration.
Senate legislation introduced by Democrats Edward Markey of Massachusetts and Richard Blumenthal of Connecticut, who said yesterday that GM could face “criminal liability”, would also mandate greater disclosures of industry data, Bloomberg reported.
The news agency said prospects for criminal penalties increased after the Justice Department last month won an agreement from Toyota to pay $1.2bn to settle a four year criminal investigation into whether it hid safety defects related to uncontrolled acceleration.
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By GlobalData“There needs to be a change in the NHTSA statute so the failure to do a recall on a knowing and willful basis is a criminal violation,” Joan Claybrook, a former agency administrator who is now a consumer safety advocate, told Bloomberg News. “If you’re responsible for that, you go to jail.”
While some criminal penalties were included in the Transportation Recall Enhancement, Accountability and Documentation Act that emerged in 2000, so many loopholes and conditions were added in the final law that NHTSA has never used its authority to refer a car company to the Justice Department, Claybrook told Bloomberg.
The dominant questions among lawmakers are why GM allowed a sub-standard ignition switch into production and then passed up multiple opportunities to fix or recall the part after consumers and dealers complained about cars stalling when they bumped keys or went over rough roads.
“From where I sit, it looks like GM is not forthcoming with the American people, who bailed them out,” Senator Dean Heller said at a hearing yesterday referring to the $50bn government bailout and bankruptcy reorganisation of GM in 2009.
Congress is also targeting NHTSA, which chose not to open a formal defect investigation in 2007 after reviewing airbag data, and again in 2010 after a special crash investigation report was filed.
Acting administrator David Friedman told House and Senate committees this week that the agency would have acted decisively if GM had provided then some facts that are now just coming out, Bloomberg said.
NHTSA’s primary weapon under current law is the ability to issue a civil fine of as much as $35 million. That would be less than 1% of GM’s $5.4bn in net income last year.
“Whether it’s a question of is $35m regarded by some automakers as simply a cost of doing business – that can certainly be a conclusion that some may draw,” Transportation Department Inspector General Calvin Scovel told a Senate panel on Wednesday.
Regulators supported previous legislation that would have increased the maximum fine to $300 million, Friedman told the same panel.
“When we find evidence that automakers have not acted in a timely manner we will fine them to the maximum extent allowed by law,” Friedman said.
While congressional aides agree $35m isn’t enough, lawmakers are more likely to raise civil fines to the $50m range than something dramatically larger, Henrietta Treyz, an analyst at Washington-based Height Analytics who tracks legislation, told Bloomberg News.
“Nobody in DC really wants to hurt the auto manufacturers,” Treyz said. “You want them to take their responsibilities seriously, but you want them to be successful.”
With the Toyota sanction available to US prosecutors under current law, “it might be unclear as to why the government would need new authority to seek increased penalties”, Wade Newton, spokesman for the Alliance of Automobile Manufacturers, told Bloomberg.
However, House Speaker John Boehner has urged caution with GM, saying the congressional committees need time to complete their investigations. So far, the House Energy and Commerce Committee has collected more than 200,000 pages of documents from GM and 6,000 pages from NHTSA, Bloomberg noted.
