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article imageGM puts two engineers on leave amid recall probe

By Veronica Smith (AFP)     Apr 10, 2014 in Business

General Motors said Thursday it had put two engineers on paid leave over the automaker's deadly ignition switch recall as the company revealed costs from the scandal could soar to $1.3 billion.

GM chief executive Mary Barra announced the first disciplinary personnel action stemming from the company's internal probe of the circumstances leading to the delayed recall of 2.6 million older model cars.

"This is an interim step as we seek the truth about what happened," Barra said in a statement.

"It was a difficult decision, but I believe it is best for GM," she said, adding that action was taken following a briefing from Anton Valukas, the former US attorney hired by the company to oversee a probe of why it took so long for the company to recall the vehicles.

GM, the largest US automaker, did not identify the two engineers.

The ignition problem was detected at the pre-production stage as early as 2001, but the company waited until February this year to begin recalling the affected vehicles.

The faulty ignitions can abruptly switch into "accessory" or "off" position while in drive, especially when the car is jolted. That can turn off its electrical systems, including safety airbags, preventing them from inflating in a collision.

GM later Thursday announced it had informed the National Highway Traffic Safety Administration (NHTSA) that it was adding ignition lock cylinders to the recall.

The faulty cylinders can allow removal of the ignition key while the engine is running, leading to a possible rollaway, crash and occupant or pedestrian injuries, the company said.

Cars drive by a Chevrolet dealership on January 3  2013 in Colma  California
Cars drive by a Chevrolet dealership on January 3, 2013 in Colma, California
Justin Sullivan, Getty/AFP

It also raised its estimate for a first-quarter charge, mainly due to the recall, to $1.3 billion, from a previously announced $750 million on March 31.

Despite the higher recall charge, GM said it currently expects to report "solid core operating performance" in the first-quarter financial results.

GM shares closed almost 1.0 percent lower at $33.30 in a broad-market sell-off.

The recall is the first big crisis for Barra, who took the company's helm on January 15 as the first woman to lead a major automaker.

- In-house vehicle safety drive -

On Thursday, Barra announced a new GM program -- "Speak Up for Safety" -- to recognize employees for ideas that make vehicles safer, and for speaking up when they see something that could impact customer safety.

"GM must embrace a culture where safety and quality come first," Barra said.

Last week, she faced two days of grilling in Congress over the delayed recall, with lawmakers expressing amazement that no heads had rolled when engineers knew about the defect long ago.

Mary Ruddy (2nd L)  whose daughter Kelly died in the crash of a 2005 Chevy Cobalt  hugs Rosie Cortin...
Mary Ruddy (2nd L), whose daughter Kelly died in the crash of a 2005 Chevy Cobalt, hugs Rosie Cortinas, whose son Amador died in the crash of a 2005 Chevy Cobalt as well, during a press conference on Capitol Hill in Washington, April 1, 2014
Jim Watson, AFP/File

Lawmakers in particular focused on Ray DeGiorgio, the chief engineer for the ignition switch on the Chevrolet Cobalt, one of the cars affected.

In February and March, GM recalled a combined 2.6 million Chevrolet Cobalts, Saturn Ions and other models fitted with the defective switches.

The Detroit, Michigan-based company faces a Justice Department probe, lawsuits tied to the faulty ignitions, and potentially billions of dollars in penalties and damages.

On Tuesday, the NHTSA, which is investigating whether GM followed requirements for timely recall of defective vehicles, fined GM for failing to respond to a request for information by an April 3 deadline.

The federal agency said GM may be fined up to $7,000 per day for each day it fails to provide the information, up to a maximum civil penalty of $35 million.

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