GM recalling another 8.4 million vehicles, details of compensation program released

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Mary Barra, General Motors CEO

Associated Press


General Motors Co. is recalling an additional 8.4 million North American vehicles — mostly for another ignition-switch defect — in yet another development that broadens the automaker’s safety crisis.

GM said the latest round of recalls brings the total for the year to 28.9 million vehicles, more than the company has sold in the past three years combined. Some of the defects involved in Monday’s recalls could be connected to three deaths and eight injuries in seven crashes.

The news came on the same day GM crash fund compensation director Ken Feinberg announced plans to offer settlements to victims of another ignition-switch defect, mostly in 2003 through 2007 cars, that has been linked to at least 13 deaths and has spawned government investigations.

The company said recall expenses would total $1.2 billion for the second quarter, up from $700 million — and enough to raise questions whether GM will report a loss for the period despite the strongest sales in the U.S. since 2007.

The New York Stock Exchange halted trading on the company’s shares after a news release was issued, stopping trading at 2:26 p.m. When trading resumed about a half-hour later, GM stock dipped slightly but remained stable.

The new recalls affect a range of vehicles from the 1997 to 2014 model years.

They include the 1997-2005 Chevrolet Malibu, the 1998-2002 Oldsmobile Intrique, the 1999-2004 Oldsmobile Alero, the 1999-2005 Pontiac Grand Am, the 2000-05 Chevrolet Impala and Monte Carlo, the 2004-08 Pontiac Grand Prix, the 2004-06 Cadillac SRX and 2003-14 Cadillac CTS — about 8.2 million vehicles in total for “unintended ignition key rotation,” GM said in a statement.

The company has said that it expects its recall deluge to be mostly complete by the end of the second quarter on Monday, but investors and consumers will wonder.

“We undertook what I believe is the most comprehensive safety review in the history of our company because nothing is more important than the safety of our customers,” GM CEO Mary Barra said. “Our customers deserve more than we delivered in these vehicles. That has hardened my resolve to set a new industry standard for vehicle safety, quality and excellence.”

Former GM ignition switch engineer Ray DeGiorgio, who was among 15 people fired for their role in the previous defect, was also involved in the design of some, but not all of the newly recalled cars.

Monday’s recalls also affect 188,705 units of the 2005-07 Buick Rainier, Chevrolet TrailBlazer, GMC Envoy, Isuzu Ascender and Saab 9-7x, as well as the 2006 Chevrolet TrailBlazer EXT and GMC Envoy XL — all for an electrical short in the driver’s door module.

Feinberg, the special victims-compensation consultant hired by GM, said that he will begin evaluating victims’ claims starting Aug. 1 and will start to pay damages from a GM fund within 90 to 180 days from when a claim is submitted.

The program provides a sliding scale of payments depending on the severity of injuries or whether a person was killed in a crash that is linked to the defective switch. It will range from $20,000 for someone who is slightly hurt to more than $5 million for a 25-year-old who was married with two children and earned $75,000 annually.

The fund won’t pay for property claims and other types of damages, such as the loss of resale value because a car is one of the models linked to the switch problem. It also won’t cover emotional and psychological injury claims.

“We will work closely with all individual claimants and their lawyers in evaluating individual claims and reaching a determination as to eligibility and value as soon as possible,” Feinberg said.

The program is designed to compensate the heirs of people killed and the damages of those injured when the ignition switch suddenly shut down the vehicles, turning off critical functions such as the power steering and air bags. GM recalled about 2.6 million vehicles earlier this year because of the problem.

GM has acknowledged at least 13 deaths and more than 50 crashes resulting from the defect, but federal safety investigators say the numbers could be higher. The automaker knew about the problem for at least a decade but waited until earlier this year to start to recall the cars.

GM has accepted blame for the problem. It commissioned an internal investigation by U.S. Attorney Anton Valukas that blamed poor communication and incompetence for the automaker’s failure to recall the cars promptly.

“The fund offers GM a break from its tragically troubled past,” said Sen. Richard Blumenthal, D-Conn.

“The strong presumption should be in favor of drivers or others who claim injury, death or damage, because records may be missing and evidence irretrievable,” Blumenthal said. “GM must also ensure that victims have a real choice between using the fund and pursuing their claims in court.”

Feinberg said the program was voluntary. People could submit claims and would only waive their rights to litigate against GM if they accepted the compensation.

He will be the sole decision-maker on the size of the payments. Under his agreement with the automaker, GM does not have the right to veto an award. Moreover, the program does not have a cap. GM will pay whatever Feinberg deems is appropriate for each claim.

Those making claims must prove that the switch was the “proximate” cause of the death or injury in the crash. People will have until Dec. 31 to file their claims.

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