Feds Fine GM Over Ignition Switch Row

Feds Fine GM Over Ignition Switch Row

One of the last remaining government product liability investigations ended when the automaker agreed to pay a $1 million fine to the Securities and Exchange Commission.

According to the SEC, General Motors ignored a critical ignition switch flaw for at least ten years, leading to more than 120 deaths and 270 serious injuries in Saturn Ions, Chevrolet Cobalts, and several other model cars that had ignitions prone to sudden shutdown during operation. Specifically, GM engineers failed to promptly inform company accountants of the significant product liability risk, and that is a violation of SEC rules.

Settlement terms do not include an admission of wrongdoing, and the company further insisted that “no material weakness or significant deficiency was found by the SEC.”

Profits Before People

It was widely reported that GM could have fixed the defective ignition switches for 90 cents per vehicle, although that figure may not have included indirect costs, such as factory retooling and additional labor. Even if the cost were substantially higher, a multinational giant like General Motors probably could have easily absorbed the expense and saved lives in the process. Why do companies faced with product liability issues make decisions like this one?

The GM ignition switch imbroglio is eerily similar to one that occurred about a generation ago at Ford Motor Company, and students of law and industry still scrutinize the infamous Ford Pinto case. Faced with competition from both foreign and domestic manufacturers turning out small and inexpensive cars at the height of the energy crisis, Ford Chairman Lee Iacocca supposedly directed company engineers to design and produce a car that didn’t cost a penny more than $2,000 and didn’t weigh an ounce over 2,000 pounds. To conserve both weight and money, designers placed the Ford Pinto’s gas tank near the rear axle, where it was prone to bursting and exploding even after relatively low-speed collisions.

After crash tests revealed the likelihood of product liability lawsuits, the company determined that the $11 per car cost to make minimal safety improvements to the Pinto would total about $137 million, which to company executives only concerned about the bottom line, far outweighed the estimated $49.5 million savings in product liability lawsuit settlement payments.

In a nutshell, most companies care almost nothing about pursuing product safety if that endeavor means lower profits, and that is one of the main reasons attorneys file product liability lawsuits. Additionally, victims in these cases are entitled to significant compensation for their economic and noneconomic losses. Juries often make substantial punitive damage awards in product liability cases as well.

For prompt assistance from an experienced personal injury lawyer in Cave City, contact Attorney Gary S. Logsdon today, because you have a limited amount of time to act.