Policy Watchdog Says US Government May Have Delayed GM Recall

Dec 08, 2014 06:30 PM EST | Jordan Ecarma

A policy-monitoring nonprofit has called for an investigation into whether or not the federal government purposely timed its sale of the last General Motors shares to close before the automaker's ignition switch debacle hit headlines.

The National Legal and Policy Center has asked the House Committee on Oversight & Government Reform to take on an "independent" investigation of the GM recall delay, citing emails from lawyers who are suing GM.

The recall timeline as documented by time-stamped emails suggests that the U.S. Treasury washed its hands of GM right before the fatal ignition switches became public knowledge and that GM CEO Mary Barra may have been aware of the issue earlier than the date reflected in her own account.

"It defies common sense to believe that the preceding sequence of events took place without Mary Barra's knowledge," NLPC President Peter Flaherty wrote in a letter to Rep. Jason Chaffetz, R-Utah, who is incoming chair of the House committee. "It further strains credulity to believe that after a decade of investigation into issues surrounding the defective ignition switch, an 'urgent' order was placed for 500,000 ignition switches only one week after the government exited its GM investment and Dan Akerson resigned as CEO."

In the letter, Flaherty reminded the congressman of a February 2010 Oversight Committee where then-Secretary of Transportation Ray LaHood "was unable to explain" why federal regulators were not investigating the Chevrolet Cobalt despite 1,100 customer complaints.

For comparison, the National Highway Traffic Safety Administration was investigating the 2009 Toyota Corolla at the time after the compact earned just 84 complaints from owners.

Flaherty notes that the ignition switch defect came to light "almost immediately after" the U.S. Treasury had sold the last of its GM shares and Treasury-appointed board member and CEO Dan Akerson had resigned from GM.

"GM's stock hit an all-time high on Dec. 17, 2013, the same day GM held an 'Executive Field Action Decision Committee' meeting about the ignition switch problem, exactly one day before GM placed an 'urgent' order for 500,000 replacement ignition switches, and only seven days after the government exited its investment in GM," he wrote.

As reported by the Wall Street Journal, emails have revealed that GM ordered half a million replacement ignition switches nearly two months before the issue was brought to the attention of federal regulators.

Faulty ignition switches in the Chevrolet Cobalt, Saturn Ion and other small cars have been related to at least 36 deaths as well as serious injuries for GM customers. Since the 2.59 million-vehicle debacle came to light, GM has recalled more than 30 million cars in 79 campaigns this year. The beleaguered automaker has done some much-needed damage control, with Barra promising a "new GM" that focuses on consumer safety above all else.

"Now, as in 2010, NHTSA's failure to catch GM's defects even in light of overwhelming evidence is deeply troubling," Flaherty wrote of the recall delay, adding that, "The Department of Justice opened a preliminary inquiry into GM's handling of the ignition switch defect more than eight months ago, but it has yet to report to Congress on its progress."

GM, which has already paid the maximum federal fine of $35 million for delaying the ignition switch recall, will face its first safety-defect trial in January 2016.

The bellwether trial will involve a wrongful death or personal injury case that is yet to be selected.

Lawyers representing affected owners who are bringing the litigation wanted GM to come to trial in October 2015, while the carmaker requested June 2016; Furman's decision put the date somewhere in the middle, the New York Times reported last month.

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