Toyota $1.2 billion penalty could offer glimpse into GM's future

The announcement Toyota will pay $1.2 billion to avoid criminal prosecution for hiding information in a recall case could be a glimpse into General Motor’s future. It’s also a warning to anyone selling cars in the U.S.
By TOM KRISHER, Associated Press Published: March 20, 2014
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General Motors, beware.

Wednesday’s announcement that Toyota will pay $1.2 billion to avoid criminal prosecution for hiding information in a recall case could be a glimpse into your future. It’s also a warning to anyone selling cars in the U.S.: Although the federal government’s road-safety watchdog doesn’t have big fangs, the Justice Department does.

The National Highway Traffic Safety Administration’s maximum fine for hiding information is $35 million, a pittance to automakers. But the Justice Department can reach deeper into your wallet and hurt your reputation with damning public statements.

Shortly after the announcement, Attorney General Eric Holder issued an apparent warning to GM and other automakers, saying the Toyota deal was “not necessarily the only time we will use this approach.”

General Motors Co., which is facing a federal criminal probe over delays in recalling small cars with a deadly ignition switch problem, has many parallels to the Toyota case.

Toyota got into trouble for withholding information from NHTSA about floor mats that can trap gas pedals and make cars accelerate wildly, and for concealing a problem with sticky gas pedals that can cause unwanted acceleration. According to court records, the company recalled some models for the floor mats while knowing that others had the same problem.

At GM, the company has admitted knowing about the ignition-switch problem for more than a decade, yet it failed to recall 1.6 million small cars until last month. During the wait, at least a dozen people died in crashes because the faulty switches moved out of the run position, disabling power steering and brakes. Air bags also didn’t inflate.

“We now see what GM may be facing,” said Peter Henning, a law professor at Wayne State University in Detroit and a former Justice Department prosecutor. “If you have comparable conduct inside the company, the government is going to come down hard.”

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