General Motors Feeling Heat Over Recall Timing

By: CBS News
By: CBS News

Feb. 27, 2014

CBS MoneyWatch - Questions about General Motors' (GM) handling of an ignition-switch defect are focusing on the automaker's timing, with critics and federal investigators asking why it took the automaker so long to recall affected vehicles.

The National Highway Traffic Safety Administration is investigating the "timeliness" of GM's recall, the federal agency told CBS MoneyWatch. GM on Tuesday doubled a recall it had issued the week before, with recall now affecting 1.6 million cars. Those include Saturn Ion compacts, Saturn Sky sports cars, Chevrolet HHR SUVs, Chevrolet Cobalts, Pontiac Solstice and Pontiac G5s.

GM knew of the defect as early as 2004, according to a chronology the automaker supplied to the NHTSA. The earliest point at which GM became aware of the problem was with the debut of the 2005 Chevy Cobalt, when one of the cars lost engine power when the key shifted from the "run" position if the driver contacted the key or steering column during test drives. But because of the "lead time required, cost and effectiveness" required to solve the problem, the inquiry was closed without action, GM said in the document.

The defect has been linked to 31 crashes and 13 front-death seats. The problem occurs when the ignition switch is shifted out of the run position due to heavy key chains or bumpy roads.

GM said it will "fully cooperate" with the NHTSA. "We deeply regret the events that led to the recall and this investigation," the company said in a statement.

Regardless of what the investigation uncovers, auto recalls are both complicated and expensive, with Toyota noting in 2010 that its massive recall of cars due to gas pedal problems cost $2 billion.

GM said it's too early to estimate the cost of its recall.

It is clear that the recall will probably take place more slowly than many GM car owners would like. GM said it will send owners letters during the week of March 10th to let them know about the recall. The letter will also remind them to only use the ignition key in the car -- without a fob or other keys attached -- and that parts won't be available until early April.

Beyond the cost of repairs, GM could also face a fine of as much as $35 million, Bloomberg reports. That would be largest penalty ever for the agency if the NHTSA finds that GM failed to issue a recall when it knew of the defects.

Still, if history holds true, GM is likely to rebound from negative consumer sentiment related to the recall. Toyota, for instance, offered incentives to lure buyers back to its wares following its 2010 recall, and its sales rebounded not long after.

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