General Motors Co. will pay $ 900 million to settle criminal charges with the U.S. Justice Department for the auto maker's botched handling of an ignition-switch defect that led it to recall millions of vehicles and was linked to more than 100 deaths.
The settlement, announced Thursday, will help put a bookend on one front of a safety crisis that tarnished GM's recovery from bankruptcy, reduced its coffers and damaged its reputation among consumers.
"The mistakes that led to the ignition-switch recall should never have happened. We have apologized and we do so again today," GM Chief Executive Mary Barra said in a statement. "We have faced our issues with a clear determination to do the right thing both for the short term and the long term. I believe that our response has been unprecedented in terms of candor, cooperation, transparency and compassion."
Prosecutors are expected to hold a news conference at noon in New York to discuss the settlement. They are expected to also bring up a separate compensation fund GM established last year that could result in the auto maker paying up to $ 625 million to ignition-switch victims.
Federal prosecutors in New York charged the auto maker with criminal wire fraud and scheming to conceal material information from a government regulator in relation to the faulty switch, according to a criminal information filed by the Manhattan U.S. Attorney's Office.
In addition to the financial penalty, characterized by the government as forfeiture of "illegal profits," GM agreed to be subjected to an independent monitor auditing safety practices for up to four years.
No individuals were charged.
The auto maker entered a deferred-prosecution agreement under which the government in three years will seek to dismiss the case if the company abides by the deal's terms.
The settlement with prosecutors comes after GM failed for over a decade to recall vehicles with the faulty switch, despite signs of a deadly problem. Prosecutors alleged GM took the problem "offline" and "outside the normal recall process" when the defect became plain in the spring of 2012 so it could take time to manage the issue. The result was regulators weren't alerted to the problem as required under federal law.
The settlement is the second of its kind in a crackdown on auto makers for safety problems led by the U.S. attorney's office in Manhattan and the New York field office of the Federal Bureau of Investigation.
Prosecutors are still investigating individual employees, but the prospect of criminal charges against them has dimmed as the probe has advanced, according to people familiar with the matter.
The Detroit auto maker is under increased regulatory scrutiny, and embroiled in depositions and probes over the safety lapse. The crisis consumed Ms. Barra's first year at the company's helm. GM is still dealing with fallout from the botched recall amid souring prospects for the auto industry in China, unwanted merger overtures from Fiat Chrysler Automobiles NV and lingering questions about GM's stock price.
The safety crisis overshadowed years of profits and a resurgence after the company's 2009 bankruptcy restructuring. GM has booked more than $ 25 billion in profits over the 5 1/2 years ended in June, with sales of high-margin trucks and sport-utility vehicles booming amid low interest rates and cheap gas.
The financial penalty is less than the $ 1.2 billion Toyota Motor Corp. agreed to pay last year to settle a similar case in part because of GM's cooperation with the government. Toyota, as part of its settlement, admitted it misled U.S. consumers by concealing and making deceptive statements about unintended-acceleration issues affecting its vehicles.
The success of the Toyota case emboldened U.S. Attorney Preet Bharara to pursue other probes into auto makers. In an interview earlier this year, Mr. Bharara called the Toyota case a "watershed moment."
Still, prosecutors are likely to open themselves to criticism if they don't bring criminal charges against individuals at GM. Just last week senior Justice Department officials issued a memo codifying policies announced in 2014 intended to prioritize investigations of individuals at corporations before seeking financial settlements with the companies.
The memo encouraged prosecutors to pursue charges against executives in corporate settlements and recommended that they only consider a company to have cooperated in an investigation if that company turned over information about the actions of individuals at the firm. Since the financial crisis of 2008, such declarations have rarely resulted in criminal charges for executives.
The issue arose in the Toyota case last year, when U.S. District Judge William H. Pauley approved a settlement between the Justice Department and the auto maker but scolded prosecutors for not charging individual employees. "Corporate fraud can kill," he said during a hearing last March.
In the GM case, prosecutors ran into roadblocks on the prospect of charging individual employees in the ignition-switch matter. The difficulties stemmed from limitations with federal law that calls for civil fines but forecloses criminal penalties when an auto maker fails to alert regulators to a safety defect in a timely manner, the people said.
In addition to wire fraud, the Justice Department probed whether GM knowingly concealed the safety defect from the Manhattan court where it filed for bankruptcy protection as part of a $ 50 billion government rescue in 2009. Prosecutors failed to uncover evidence the auto maker committed bankruptcy fraud, which requires a demonstration of intentionally withholding information.
GM disclosed the defect in early 2014, setting off congressional hearings, litigation and government probes. Ms. Barra and other company officials have already been, or will soon be, deposed by plaintiffs' lawyers for lawsuits consolidated in a New York federal court.
The company cracked down on safety problems and ended up recalling a record 26 million-plus vehicles in 2014. An outside lawyer running a victims' compensation fund for the Detroit auto maker has linked more than 100 deaths and more than 200 injuries to the problem.
A plaintiff's lawyer helped set off GM's recall crisis in April 2013 during the deposition of a former GM engineer. The deposition revealed that the engineer, Raymond DeGiorgio, changed the design of the problematic switch without alerting others at GM. Mr. DeGiorgio was among the employees Ms. Barra dismissed. Mr. DeGiorgio couldn't be reached for comment.
The auto maker commissioned a report last year written by former U.S. Attorney Anton Valukas that found it failed for more than a decade to recall millions of vehicles with the defective ignition switch even though it had internal evidence of the safety problem.
GM in early 2014 recalled roughly 2.6 million older Chevrolet Cobalts and other small cars with the switch and set up a compensation fund that could force the company to pay more than $ 600 million to victims.
Mr. Valukas's report found what Ms. Barra later bemoaned a pattern of incompetence and neglect in failing to spot the safety problem and recall vehicles. Ms. Barra dismissed 15 employees in the wake of the report, including lawyers and engineers.
GM in 2014 paid a record $ 35 million regulatory fine and signed a consent order acknowledging the company failed to alert the National Highway Traffic Safety Administration to the ignition-switch defect in a timely manner as required.
Mr. Valukas's report pointed to instances where the auto maker wasn't forthcoming about the defective switch. The company in 2005 and 2006 avoided using the term "stall" to describe a problem with cars amid concerns the word could suggest safety problems, and for years didn't tell regulators about the defect even when dealing with litigation arising from fatal crashes in which air bags failed to deploy, according to Mr. Valukas's report.
Write to Mike Spector at mike.spector@wsj.com, Christopher M. Matthews at christopher.matthews@wsj.com and Devlin Barrett at devlin.barrett@wsj.com
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