Government Investigation Into Defective Ignition Switches In ‘Early Stages’, General Motors Says
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General Motors said it cannot yet estimate how much its ignition switch recall will cost in legal fees and potential liabilities connected to the issue as the investigations are ongoing and in their “early stages.” The company set aside $400 million from its earnings last year to cover costs related to its victim compensation program and legal proceedings, but at the time recognized the total amount could rise to $600 million.
The U.S. Attorney’s Office in Manhattan has been investigating GM’s recall of 2.6 million small cars for faulty ignition switches for 10 months, along with the FBI and a federal grand jury. GM said the investigations currently “involve significant uncertainties,” such as ” the legal theory or the nature of the claims as well as the complexity of the facts,” preventing them from being able to estimate potential losses. Company CFO Chuck Stevens told The Detroit News he expects legal fees tied to the recall to total another $300 million in 2015, however some Wall Street analysts say GM may have to pay billions in order to settle government investigations.
GM already paid a record-setting $35 million fine to the NHTSA for delaying its recall of cars it knew had a faulty ignition switch. It also faces 108 class-action lawsuits claiming economic loss as a result of the recalls, and 104 lawsuits claiming injury or death as a result of the defective cars, which could add to its mounting legal fees.
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