As if the world needed more proof that General Motors badly botched the handling of its defective ignition-switch debacle, with internal dysfunction delaying or ignoring key safety problems for 13 years before a massive recall brought them all to light, today it has been announced that the automaker has reached a settlement with the U.S. Attorney handling the Federal criminal prosecution of the case. As part of the company’s punishment, a financial penalty of $900 million is being assessed—and it must be reported as a payment on GM’s third-quarter earnings report—on top of the recently finished compensation fund for victims of faulty ignition switches that could pay out over $600 million.
Of course, there’s more to the settlement of the criminal case against GM than just money. According to General Motors, its agreement with the U.S. Attorney’s Office includes the stipulation that the government “defer prosecution of charges against GM related to the ignition switch defect and recall for three years. If GM satisfies the terms of the Agreement, federal prosecutors will then seek dismissal of the charges with prejudice.”
This is sort of a probationary move, one in which the government will assess whether GM “demonstrate[s] acceptance and acknowledgement of responsibility for its conduct.” GM will need to set up an “independent monitor” to review the company’s safety and recall policies and be graded on its ability to investigate quickly; to provide investigators with cooperation, information, and “unvarnished facts;” to fire “wrongdoers;” and to set up the aforementioned victim-compensation fund.
While not as stiff as the $1.2 billion fine levied against Toyota this year—the biggest ever assigned to an automaker—as part of its settlement with the U.S. over the bungling of safety recalls, GM’s financial penalty is pretty big. Plus, GM might not be done paying up for its mistakes anytime soon. Besides the $600 million compensation fund ordered as part of this settlement, GM is also on the hook for $575 million in settlements over shareholder equity lost during the recall debacle, as well as for 1380 cases of death and injury, and more civil cases are pending. For those keeping score, that’s an open-ended $2.075 billion so far.
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