Thursday, March 20, 2014

Auto industry problems: GM recalls over 3 million cars and admits to quality control failures while Toyota agrees to pay 1.2 billion dollars to avoid criminal prosecution

This has been a bad week for the auto industry.  In a video message to GM employees, CEO Mary Barra admitted that the company’s quality control process have failed, resulting in “terrible things,” a reference to problems with more than 3 million cars that GM has recalled recently.  The first recall related to ignition problems that resulted in a recall of 1.6 million cars.  More recently, the company announced three new recalls, bringing the total number of recalled vehicles to over 3 million. AboutLawsuits has more details here.

Meanwhile, yesterday it was reported that Toyota has agreed to pay $1.2 billion to avoid criminal prosecution for hiding information in a recall case. It was also announced that the federal government has filed a criminal charge alleging the company defrauded consumers by issuing misleading statements about safety issues in Toyota and Lexus vehicles.  The Chicago Daily Law Bulletin has more information here.  Reportedly, shortly after the announcement, Attorney General Eric Holder issued an apparent warning to GM and other automakers, saying the Toyota deal was “not necessarily the only time we will use this approach.”

If that's the case, GM should be worried. It is facing a federal criminal probe over delays in recalling small cars with a deadly ignition switch problem.  Even though the company has admitted knowing about the ignition-switch problem for more than a decade, it failed to recall the affected cars (1.6 million of them) until last month. During the wait, at least a dozen people died in crashes.

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