TIME

General Motors Is Getting Sued For $10 Billion—Yes, $10 Billion

A new lawsuit claims GM is liable to compensate millions of customers for their devalued automobiles, and owes around three times its annual earnings in compensation

General Motors is liable for up to over $10 billion in damages after its ignition switch debacle lowered the resale value of millions of vehicles, according to a new lawsuit, the latest blow to the beleaguered automaker.

The lawsuit, filed by attorneys Hagens Berman Sobol Shapiro, says that GM hurt its customers by concealing defects, leading to recalls of more than 20 million vehicles so far in 2014, and devaluing a variety of late-model vehicles by about $500 to $2,600 in resale value, Reuters reports.

The plaintiff is Anna Andrews, a California resident and GM customer. Andrews is seeking class-action status for people who owned or leased GM vehicles sold between the company’s bankruptcy and April 1, 2014

It’s the first legal claim that GM owes customers some compensation for damaging its brand and reputation — a total exceeding $10 billion, to be paid to an estimated 15 million vehicle owners. The automaker brought in $3.8 billion in net earnings last year.

“GM’s egregious and widely publicized conduct and the never-ending and piecemeal nature of GM’s recalls has so tarnished the affected vehicles that no reasonable consumer would have paid the price they did when the GM brand meant safety and success,” the complaint said.

It’s uncertain how successful the lawsuit will be.

GM said customers recognize the strength of the GM brand and that the company has seen increased sales and transaction prices.

[Reuters]

TIME

5 Times That GM Could Have Saved Lives But Didn’t, According to GM

GM CEO Mary Barra Holds Press Conference On Ignition Switch Recall
General Motors Chief Executive Officer Mary Barra sits for a press conference at the General Motors Technical Center on June 5, 2014 in Warren, Mich. Bill Pugliano—Getty Images

General Motors employees shirked responsibility at key moments and didn't fix a faulty ignition switch, causing the deaths of more than a dozen drivers, according to a new report

General Motors CEO Mary Barra hasn’t spared a “mea culpa” in her handling of the automaker’s faulty ignition switch crisis. In a strategy as moral as it is shrewd, Barra has taken personal responsibility for fixing deep problems at GM, and that includes accepting the results of a damning report published Thursday by GM-hired attorney Anton Valukas.

The investigation places blame for more than a dozen deaths squarely on the automaker’s employees, accusing engineers of a “history of failures,” and shirking responsibility in fixing the engineering issues. GM’s Valukas traced the history of the company’s faulty ignition switch, which was in the Chevrolet Cobalt, Saturn Ion, and other models. When slightly grazed, the switch powered the car off and disabled the airbags. Ultimately, the report concludes, it was GM’s negligence in fixing the switch that led to the deaths of more than a dozen people.

There’s nothing groundbreaking in that conclusion. And the report doesn’t implicate Barra or the company’s top brass. But the GM investigation does highlight in unprecedented detail the failures of specific employees to address the switch issue.

Here are five instances in which GM could have saved lives, but didn’t.

1. Ray DeGiorgio, the GM engineer in charge of the prototype ignition switch knew by early 2002 that the part didn’t meet specifications. Delphi, the company testing the switch, told DeGiorgio repeated tests had failed, marking each test result in a January report with “Not OK.”

DeGiorgio had a choice: fix the switch, or ignore the problem. Knowing that fixing the switch would delay production, DeGiorgio told Delphi in email to “maintain present course;” in other words, ignore the problem. He signed his email “Ray (tired of the switch from hell) DeGiorgio.” DeGiorgio, who was fired this year, couldn’t be reached for comment.

2. Reviews in the middle of 2005 of GM’s Cobalt, which contained the below-spec ignition switch, were not good. For months, GM employees had exchanged emails noting that a slight graze of the key fob would move the key out of run, shutting off the vehicle. Media reports were vitriolic. “I never encountered anything like this in 37 years of driving and I hope I never do again,” said a reviewer for the Sunbury Daily Item said of his Cobalt’s repeated engine shutdowns, and the New York Times noted Chevrolet dealers were telling Cobalt owners to remove items from heavy key rings. “This is a safety/recall issue if ever there was one,” a customer wrote GM.

Yet despite the obvious dangers of ones car shutting off mid-drive, GM continued to classify the faulty ignition switch as a convenience issue—not a safety one. A team of GM engineers met in September 2005 to consider whether to replace the switch. The answer was a fatal “no.”

3. GM lawyers reviewed a case in 2006 in which a woman died after her Cobalt struck several trees and her airbag did not deploy. Field reports noted that the ignition was oddly in the accessory power mode, but a GM engineer, Kathy Anderson argued that the airbag was not expected to deploy anyway. The case was settled, effectively quelling a deeper investigation into the death, and the possibility of discovering the real source of the problem.

4. A 2007 report by Wisconsin State Trooper Keith Young said that the ignition switch jostling may have caused a fatal crash. “The two front seat airbags did not deploy,” said Young. “It appears the ignition switch had somehow been turned from the run position to accessory prior to the collision with the trees.” GM received the report, but according to the Valukas investigation, no GM engineer read it for seven years.

5. DeGiorgio quietly fixed the ignition switch problem in 2006, but didn’t tell anyone at GM. Nor did he switch the part number in GM records. That meant that all future cars would be safe, but it would be nearly impossible to trace the cause of crashes on old models to the ignition switch—preventing a recall that would have saved lives.

More than specific instances, however, it was a lack of initiative among GM employees to take responsibility that caused more than a dozen deaths, the Valukas investigation makes clear. But the story is far from over: the Justice Department, the Securities and Exchange Commission and a group of state attorneys general, and GM is figuring out to compensate its victims of the crash.

TIME Autos

GM Apologizes After Sending Recall Notices to Victims’ Families

The embattled carmaker says it regrets sending recall notices to families of victims

General Motors apologized Tuesday for sending recall notices to families of car owners killed as a result of their vehicles’ defects.

“We are deeply sorry to those families who received a recall notice,” GM spokesman Greg Martin told Reuters.

GM recalled 2.6 million cars in recent months after they were linked to an ignition switch defect that GM blames for 13 deaths, though other reports say the number is many times that.

Terri DiBattista, the mother of a 16-year-old who died in a 2005 Chevrolet Cobalt, said she received two recall notices from GM to fix the vehicle. The Cobalt was destroyed in the accident.

Federal regulators believe that GM’s death toll of 13 is a low estimate. A recent Reuters analysis says at least 74 people have died in accidents similar to the ones GM has linked to the defective switches, though GM refutes that number.

[Reuters]

 

TIME

GM Fined for Stalling on Ignition-Switch Recall Info

GM CEO Mary Barra Testifies At Senate Consumer Protection Panel Over Recall
General Motors CEO, Mary Barra Andrew Harrer—Bloomberg/Getty Images

The automaker is getting hit by safety authorities for not responding to questions about ignition-switch defects that led to a massive recall

Federal auto regulators said on Tuesday that General Motors is being fined $7,000 each day for not providing enough information on the ignition-switch recall.

The National Highway Traffic Safety Administration (NHTSA) sent General Motors 107 questions in order to determine if the company answered questions about defects promptly, USA Today reports. But according to the NHTSA, GM “did not respond to over a third of the (107) requests.”

The NHTSA is fining GM for the lack of information beginning April 3, bringing the sum to $28,000 so far with an additional $7,000 each day. The NHTSA says it could turn the matter over to the Justice Department as soon as tomorrow.

GM has recalled over 2.5 million cars that may be outfitted with faulty ignition switches that can impede air-bag deployment in accidents. The company first became aware of the problem in 2001 but did not promptly address the flaw. GM says it knows of 13 deaths linked to the faulty ignition switch and is currently subject to a criminal investigation.

[USA Today]

TIME Automotives

Chrysler Recalls 870,000 SUVs Over Brake Defect

Jeep Grand Cherokee and Dodge Durango SUVs may be at risk for brake corrosion, Chrysler said Wednesday, making it harder to stop

Chrysler said Wednesday it will recall 870,000 SUVs in order to fix a defect in the brake systems caused by corrosion.

The company said in a statement customer complaints had spurred it to launch an investigation into excessive brake pedal firmness, discovering that certain vehicles’ brake boosters can become corroded through water exposure and become compromised.

The affected vehicles include the Jeep Grand Cherokee and Dodge Durango SUVs, model years 2011-2014. Chrysler said it would bear the cost of replacing boosters and equipping them with a shield for water insulation.

The defect has resulted in one accident but no injuries, Chrysler said.

(Interactive: Has your car been recalled from the road?)

The recall comes in the midst of a scandal over General Motors’ recall of 2.6 million vehicles with ignition switch defects, a potentially fatal malfunction that the company was aware of for a decade before announcing a recall.

TIME Automotives

Watch a Small Child Ruthlessly Bully Ricky Gervais in New Audi Ad

+ READ ARTICLE

Luxury carmaker Audi has hired Ricky Gervais to plug its latest vehicle. The biting British comedian appears in a series of ads for the new 2015 Audi A3 sedan. In the main 60-second spot (below), Gervais, along with other celebrities such as comedian Kristen Schaal and boxer Claressa Shields speak the opening lyrics to Queen’s “We Are the Champions.”

Another spot (above) features Gervais sitting in an Audi A3 with his niece as she uses the car’s new 4G LTE wireless capability to look up people badmouthing Gervais on Twitter. “Ricky is a pig-nosed troll,” she recites, among other insults. The new Audi, which launches in April, will be the first U.S. car with 4G LTE.

The ads are part of Audi’s ongoing “Uncompromised” campaign, which also included the “Doberhuahua” spot during the Super Bowl. The series also features small video vignettes that profile the individual characters in the main 60-second commercial.

With the A3, which costs less than $30,000, Audi is attempting to bring luxury cars to a broader market. Mercedes is also pushing its prices down, having launched the $29,900 CLA last year. Automotive analysts told Ad Age that at such a price point, car companies can convince middle class families to upgrade from a Honda Accord or Toyota Avalon to a luxury brand.

TIME Automotives

GM Recalls Another 1.5 Million Vehicles

Chevrolet cars are seen at a GM dealership in Miami.
Carlos Barria—Reuters

The total costs of the recall of over 3 million vehicles will add up to $300 million in first quarter, the car maker announces

General Motors said Monday that it is recalling an additional 1.55 million vehicles, bringing the auto company’s total costs related to the recall to $300 million for the first quarter.

GM initially announced a recall of 1.6 million vehicles last month due to ignition safety issues, and this latest batch of recalls is the result of a comprehensive internal safety review ordered by GM’s CEO Mary Barra after the outcry. GM admitted that some of its employees knew for nearly a decade about the faulty ignition switches, which have been linked to at least 12 deaths.

The U.S. Attorney in New York has launched a criminal investigation into the company, and Congress and other investigators are probing the company as well. On Friday, a class action lawsuit was filed in Texas by GM owners who believe their vehicles have lost value after the recalls.

“I asked our team to redouble our efforts on our pending product reviews, bring them forward and resolve them quickly,” Barra said in statement Monday. “Today’s announcement underscores the focus we’re putting on the safety and peace of mind of our customers. We are conducting an intense review of our internal processes and will have more developments to announce as we move forward.”

The company estimated its total costs relating to recalls would reach $300 million in the first quarter of 2014. In the fourth quarter of 2013 GM reported net income of about $900 million.

GM newest recalls includes 1.18 million SUV models including Buick Enclave and GMC Acadia models from the 2008-2013 model years, Chevrolet Traverse from the 2009-2013 model years, and Saturn Outlook from the 2008-2010 model years due to service airbag issues. GM is also recalling 303,000 Chevrolet Express and GMC Savana from the 2009-2014 model years with gross vehicle weight under 10,000 pounds, and 63,900 Cadillac XTS full-size sedan from the 2013 and 2014 model years.

TIME Automotives

Honda Recalls 900,000 Minivans for Fire Risk

Honda
2013 Honda Odyssey minivans sit outside Bob Lindsay Honda in Peoria, Illinois, June 25, 2013. Daniel Acker—Bloomberg/Getty Images

The recall will include 886,815 Honda Odyssey minivans in the United States from the 2005-2010 models years, and the car company said it plans to replace a fuel strainer linked to a fire risk free of charge

Honda is recalling almost 900,000 vehicles to replace a fuel-related part that could increase fire risk, the carmaker said Sunday.

The recall will include 886,815 Honda Odyssey minivans in the United States, from the 2005-2010 models years. Honda said in a statement that it plans to replace the fuel strainer free of charge.

The vehicles’ fuel strainers may be in danger of deteriorating prematurely with exposure to high temperatures and acidic chemicals, Honda said, resulting in cracks in the material. Those cracks could lead in rare cases to leaking fuel, increasing fire risks. Honda said it was unaware of any or injuries related to the issue.

Because the cars being recalled are no longer in production, replacement parts will not be available until the summer.

The recalls come as General Motors is embroiled in controversy over a recall of 1.6 million cars related to ignition issues. More than 10 deaths have been linked to the design flaw.

TIME Automotives

Nissan Sees Electric-Car Sales Boom

Japan Nissan
Itsuo Inouye—AP

The Japanese car manufacturer, which has sold more than 100,000 units of its electric Leaf since its 2010 launch, says it may be able to sell more gas-free vehicles than it initially projected as more and countries embrace fossil-fuel alternatives

The market for electric cars is shifting into high gear. Or at least that’s what the automaker Nissan says.

The Japanese electric-car maker said Saturday it may be able to sell more gas-free vehicles than it initially projected, as more and more countries embrace fossil-fuel alternatives, the Wall Street Journal reports. Nissan has sold more than 100,000 units of its electric Leaf worldwide since its launch in 2010. Nissan will begin selling the Leaf in South Korea in the second half of this year and expects to sell 1.5 million units of electric vehicles by 2020 as the company looks to emerging markets.

Despite having to overcome challenges like shorter range than gas-engine cars, relatively high prices and a minimal refueling infrastructure, tougher emissions standards worldwide will help spur the growth of the electric-car market, Nissan says.

[WSJ]

TIME Automotives

Tesla Slams N.J. Ban on Direct Car Sales

Elon Musk at the Tesla store at Westfield Stratford City retail complex in London, Oct. 24, 2013.
Elon Musk at the Tesla store at Westfield Stratford City retail complex in London, Oct. 24, 2013. Simon Dawson—Bloomberg/Getty Images

Elon Musk's electric car company is criticizing Gov. Chris Christie's administration and the state's motor vehicle commission for blocking automakers from selling cars directly to customers as Tesla does to cut down on costs to consumers

Electric car manufacturer Tesla Motors criticized New Jersey Governor Chris Christie’s administration and the state’s Motor Vehicle Commission for blocking auto companies from selling cars directly to consumers Thursday. As a result of the new rule passed earlier in the day, New Jersey residents will likely have to go out of state if they want to purchase a Tesla vehicle, unless the electric car maker changes to a dealership sales model.

“The Administration and the NJMVC are thwarting the Legislature and going beyond their authority to implement the state’s laws at the behest of a special interest group looking to protect its monopoly at the expense of New Jersey consumers,” the company said in a press release. “This is an affront to the very concept of a free market.”

Tesla sells cars directly to customers through retail locations it owns, whereas most car manufacturers rely on third party dealerships for sales. New Jersey is the third state to ban the direct car sales, according to TechCrunch. Texas and Arizona also ban the practice.

The New Jersey Coalition of Automotive Retailers, a car dealership advocacy group, supported the rule change.

Shares in the company slipped 1.85 percent during regular trading.

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