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GM Said to Settle Ignition Switch Case with $900M Fine

General Motors CompanyGM has reached a settlement agreement with federal prosecutors in New York related to the criminal charges for not disclosing the ignition switch safety defect to regulators and thus misleading consumers, according to media reports. The automaker will have to pay a fine of $900 million and signed a deferred-prosecution agreement as a part of the settlement.

General Motors is expected to be charged with criminal wire fraud but case will be put on hold and eventually dismissed, if the automaker fulfills terms of the deal. The agreement is expected be formally announced later today. None of the employees of the company will face any criminal charges following the settlement.

General Motors has been in the doldrums for delaying the recall of 2.6 million vehicles with faulty ignition switches, which led to shutting down of the engine and prevented front air bag deployment in the event of a crash. The company announced a recall pertaining to this issue in Feb 2014, although the problem was identified way back in 2001. Lawfully, automakers are supposed to alert The National Highway Traffic Safety Administration ("NHTSA") about any safety concerns in vehicles within five business days of recognizing the problem.

General Motors is facing multiple investigations and lawsuits for the delay. Previously, the company had agreed to pay a fine of $35 million to the U.S. safety regulators in relation to the late recall. This is the maximum amount of fine which the government can impose.

In addition, General Motors launched a program to compensate the victims and families affected by crashes caused by the ignition switch problem. The automaker has set aside $625 million for compensation fund.

In Aug 2015, General Motors said that it will have to provide compensation for less than 10% of the ignition switch claims filed, as the lawyer hired to assess the claims, Kenneth Feinberg, has rejected nearly 91% of them. According to Feinberg, only 399 of the 4,343 claims filed were eligible to receive compensation. Of the approved claims, 124 are related to death cases and 275 to injuries.

In a similar case, around a year back Toyota Motor Corporation TM was slapped a $1.2 billion fine by the U.S. justice department for concealing unintended-acceleration issues in its vehicles from customers.

General Motors is a Zacks Rank #3 (Hold) stock.

Better-ranked stocks in the auto industry include Ford Motor Co. F , and Penske Automotive Group, Inc. PAG , both carrying a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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