GM Fined $28k By NHTSA, Places 2 Engineers On Paid Leave

Cameron Aubernon
by Cameron Aubernon

Associated Press reports General Motors has placed two engineers on paid leave as “an interim step” in the investigation conducted by former U.S. attorney Anton Valukas. Spokesman Greg Martin declined to name the two engineers in question.

The Detroit News reports GM has been fined $28,000 by the National Highway Traffic Safety Administration for failing to answer in full by the April 3, 2014 deadline the 107-question survey sent to the automaker regarding the recall of 2.6 million vehicles with an out-of-spec ignition switch linked to 13 fatalities and 33 accidents. Furthermore, the agency will fine GM $7,000/day so long as the automaker continues to fail to comply with the inquiry in full, and may call in the Justice Department to sue GM for answers and fines.

As for how this came to pass, GM says it couldn’t provide all of the answers as the outside investigation by Valukas had yet to be completed. Meanwhile, spokesman Greg Martin defended the automaker’s response to the survey, citing the millions of related documents already delivered to the NHTSA as proof of compliance.

The agency may not be alone in its dimming view of GM, however, as concerns running through Wall Street have sent price targets of GM stock downward amid gloomy forecasts of rising costs, diminished earnings and other challenges outside of the recall crisis. Analysts for Morgan Stanley and RBC Capital Markets have dropped their target prices of $49 and $47 per share to $33 and $46, respectively, with the former downgrading GM stock to “underweight.”

Without the crisis, however, the automaker still has rough seas ahead after emerging from government ownership, with Wall Street fearing for the long-term future of GM in the face of strengthening Japanese automakers — bolstered by a weakened yen — dependency on its joint ventures in China, problems in Europe and other international markets, and domestic challenges from Ford and Tesla.

In other financial news, Bloomberg reports former GM financial arm Ally Financial’s exit from U.S. Treasury ownership would allow Ally to take on more subprime auto loan borrowers. The finance company currently holds 11 percent of its portfolio in such loans, and at $25/share in its IPO, the $2.83 billion raised would give Ally a boost in attracting more subprime borrowers.

However, both CreditSights Inc. analyst Jesse Rosenthal and independent banking consultant Bert Ely shared concerns regarding the finance company’s reliance on auto loans, especially in the subprime market, citing the lack of diversification other consumer-finance companies or large banks possess in weathering the credit risk subprime auto lending could bring. Bloomberg adds that Ally’s relationship with GM — 39 percent of its lending and leasing portfolio came from the automaker in 2013 — could add an additional risk in light of the latter’s ongoing recall crisis.

Finally, Automotive News presents a history of failure between GM and its suppliers over the functionality of the ignition switch in Chevrolet Cobalts and Saturn Ions, leading to numerous changes, complaints, claims and, a decade later, a recall crisis that may bring more pain than the automaker could bear.

The first problem — Ion owners not being able to start their vehicle in cold weather — prompted the 2004 redesign currently linked to the recall, then quietly changed in April 2006 when the second and third problems — Cobalt owners not being able to shut off their vehicle unless they accidentally bumped their knee into the ignition — led to the conclusion by two engineers that the switch was mounted too low, and that it was “falling apart.”

Furthermore, in the deposition given by engineer David Trush in the case regarding the 2010 death of Brooke Melton behind the wheel of her Cobalt, Trush stated GM had its supplier at the time make replacement parts for the first ignition problem alongside a service bulletin asking dealers to install the new part in affected cars; the automaker changed suppliers in 2008, citing deficiencies in quality and production in the former supplier.

Lastly, nearly two years before the recall in April of 2012, GM began offering to replace the switch on 2007 – 2009 Cobalts and Pontiac G5s and 2008 – 2012 HHRs for free, citing a “binding condition” with the cylinder and its housing which could prevent basic functionality of the ignition system.

Cameron Aubernon
Cameron Aubernon

Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.

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  • HerrKaLeun HerrKaLeun on Apr 10, 2014

    "paid leave" sounds like quite a punishment... staying at home while getting paid....

    • SCE to AUX SCE to AUX on Apr 10, 2014

      Come to think of it, it might just be a way to get a couple of excitable engineers out of the office while the Feds snoop around.

  • Da Coyote Da Coyote on Apr 11, 2014

    Does that not make GM's engineer count now zero? The few GM engineers I had the pleasure of knowing had some rather four letter word decorated remarks when the word "management" was mentioned.

    • Fvfvsix Fvfvsix on Apr 11, 2014

      I kinda agree with that snark. The only real "engineers" I've ever encountered from GM came from the Powertrain group. Those dudes were as smart and resourceful as anyone I've met from the Japanese or German makes. Everyone else I've encountered with an "engineering" title at GM... just barely passable as engineers and more focused on product cost than product quality. Sad.

  • THX1136 Always liked the Mustang though I've never owned one. I remember my 13 yo self grabbing some Ford literature that Oct which included the brochure for the Mustang. Using my youthful imagination I traced the 'centerfold' photo of the car AND extending the roof line back to turn it into a small wagon version. At the time I thought it would be a cool variant to offer. What was I thinking?!
  • GregLocock That's a bodge, not a solution. Your diff now has bits of broken off metal floating around in it.
  • The Oracle Well, we’re 3-4 years in with the Telluride and right around the time the long term durability issues start to really take hold. This is sad.
  • CoastieLenn No idea why, but nothing about a 4Runner excites me post-2004. To me, they're peak "try-hard", even above the Wrangler and Gladiator.
  • AZFelix A well earned anniversary.Can they also attend to the Mach-E?
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