General Motors Company
) received another blow with the federal authorities now
investigating whether the pre-bankruptcy General Motors committed
bankruptcy fraud by not revealing the ignition switch defect that
recently led to the recall of 1.6 million vehicles, according to
The New York Times. They are investigating whether the company
was aware of the problem during the bankruptcy filing in 2009 but
failed to notify the authorities to prevent liability claims.
Although the new General Motors, formed after bankruptcy, is
not responsible for the liabilities of the old General Motors,
pressure is mounting on the company to compensate the victims.
The company is also facing a lawsuit claiming that the new GM
should be held liable for the old GM's actions as it was also
responsible for hiding the ignition switch flaw. The National
Highway Traffic Safety Administration (NHTSA) is also facing an
internal audit by the U.S. Transportation Department for not
investigating the matter earlier despite being aware of so many
incidents of failure in airbag deployment.
The chronology of events filed by General Motors with the
NHTSA indicates that the faulty ignition switches were identified
way back in 2001 during the pre-production test of the Saturn Ion
vehicles. However, the company assumed that a change in design
had resolved the problem.
Saturn Ions, along with many other GM vehicles, were found to
have faulty ignition switches which may lead to abrupt engine
shutdown, leading to near-fatal crashes. It was found that a
heavy key ring or uneven roads could cause the ignition switch to
shift from the run position, thereby turning off the engine and
preventing deployment of front air bags in the event of a
On Feb 13, the automaker announced the recall of 778,562
Chevrolet Cobalt and Pontiac G5 compact cars of model years
2005-2007 in North America to fix faulty ignition switches.
Later, on Feb 25, General Motors announced a recall of 2003-2007
Saturn Ions, 2006-2007 Chevrolet HHRs and 2006-2007 Pontiac
Solstice and Saturn Sky models adding up to 842,000, for the same
General Motors is facing multiple investigations for the
delay. Two congressional committees and the Justice Department
will examine the reason behind the delayed recall. Additionally,
the NHTSA has started an investigation into the matter. Moreover,
General Motors has hired a team to probe into the ignition switch
General Motors currently holds a Zacks Rank #5 (Strong Sell).
Some better-ranked automobile stocks worth considering are
Tata Motors Limited
Tesla Motors, Inc.
). TTM and DDAIF sport a Zacks Rank #1 (Strong Buy) while TSLA
carries a Zacks Rank #2 (Buy).
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GENERAL MOTORS (GM): Free Stock Analysis
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