The National Highway Traffic Safety Administration (NHTSA),
the auto safety supervisory body of the U.S. government,
announced an investigation into
General Motors Co.
) delayed recall of 1.6 million older-model small cars. This came
in the wake of reports of 31 crashes with 13 front-seat
fatalities caused by collisions of the vehicles.
After the report of the accidents, General Motors announced a
recall of 842,000 2003-2007 Saturn Ions, 2006-2007 Chevrolet
HHRs, and 2006-2007 Pontiac Solstice and Saturn Sky models in
addition to the recall of 778,562 Chevrolet Cobalt and 2005-2007
Pontiac G5 compact cars in North America in Feb 13, 204. With
this, the company is recalling 1,367,146 vehicles in total.
The company will fix the faulty ignition switches, which has been
identified as the cause of the accidents. According to General
Motors, a heavy key ring or uneven roads can cause the ignition
switch to shift away from the run position, thus turning off the
engine and electrical power. In such a situation, the front air
bags will not be inflated in case of a crash.
General Motors is focused on resolving the issue and also
apologized for the delay. The company will be informing customers
though customer care centers and social media teams. It will also
rectify the fault at no extra charge.
General Motors notified that dealers will replace the ignition
switch to prevent the involuntary key movement. Till the
replacement is done, customers have been advised to use only the
ignition key without anything else on the key ring. Moreover,
customers should use their safety belts.
The chronology of events filed with the NHTSA, clearly points out
General Motors' awareness of the problem since 2004, when its
engineer detected the hitch while test driving the
2005 Chevrolet Cobalt. The company initially attempted to
avoid a recall by issuing Technical Service Bulletins for the
problem. The bulletin advised inserting a key into the ignition
switch of the Chevrolet HHR and Cobalt, Pontiac Solstice and G5
and Saturn Sky and Ion vehicles. Moreover, the automaker also
advised its customers not to use overloading key chains.
General Motors was aware of 10 accidents of 2005 Chevrolet
Cobalt, where the air bags did not inflate. Under this
investigation, NHTSA will inspect whether General Motors withheld
information or the automaker was late to report.
Lawfully, the automakers are supposed to alert the NHTSA about
any safety concern in vehicles within five business days of
recognizing the problem. The maximum fine for late reporting
currently stands at $35 million.
Earlier, automakers like
Ford Motor Co.
Toyota Motor Corp.
) have been fined for late recalls. In 2013, Ford had to pay a
$17.35 million fine for a late recall of Ford Escape SUVs with
defective gas pedals. Toyota also paid a heavy fine for delayed
reporting of safety issues in vehicles.
General Motors currently holds a Zacks Rank #5 (Strong Sell). A
better-ranked automobile stock worth considering is
Tesla Motors, Inc.
), with a Zacks Rank #2 (Buy).
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