GM Faces Investigation in Ignition Switch Recall

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Two days ago General Motors Co. (NYSE: GM) doubled the number of vehicles included in its recall related to an ignition switch defect that is now linked to 13 deaths. The National Highway Transportation and Safety Administration (NHTSA) has now opened an investigation into the way the company handled the recall.

GM issued a recall notice on February 13th for 780,000 vehicles sold in the U.S. and on February 25th doubled that number to include 1.6 million vehicles. The company also added four additional models to the recall notice, bringing the total to six. The recalled vehicles are the 2005-2007 Chevrolet Cobalt, 2007 Pontiac G5, 2003-2007 Saturn Ion, 2006-2007 Chevrolet HHR, 2006-2007 Pontiac Solstice and 2007 Saturn Sky. The company also recalled 2,300 Opel GTs in Europe and unspecified number of 2005-06 Pontiac Pursuits sold in Canada. GM no longer manufactures any of these models.

The geographic breakdown on the recalled vehicles reveals that 1,367,146 vehicles are in the United States, 235,855 are in Canada, 15,073 are in Mexico and 2,591 were exported outside North America, according to GM.

The problem is that the weight of the key ring, perhaps coupled with road conditions, may cause the ignition switch to be jarred from the “run” position, turning off the engine and shutting down the car’s electrical power which causes the airbags to fail to deploy.

GM faces a maximum fine of $35 million if the NHTSA investigators find that it failed to notify the agency within five days after learning of the defect. The larger liability for the company might be the result of lawsuits related to the deaths and any injuries caused by the defect. The NHTSA investigation is likely to focus on the timeliness of GM’s response to the issue rather than the number of deaths and injuries that occurred as a result of the problem.

GM’s stock was down 0.5% in the early afternoon on Thursday, at $36.65 in a 52-week range of $26.75 to $41.85.