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General Motors faced more pressure over its handling of a deadly defect in certain compact cars Tuesday as word leaked of a criminal investigation and two congressional committees opened probes into the matter.
The Justice Department is investigating whether GM broke any laws with its slow response to a problem with ignition switches in compact cars from model years 2003 to 2007, according to a person briefed on the matter. The probe is being handled by the U.S. Attorney's Office in New York, said the person, who asked not to be identified because the investigation has not been made public.
Spokesmen for the Justice Department and GM would not comment. The investigation was first reported by Bloomberg News.
At issue is why GM waited until February to recall 1.6 million older-model compact cars worldwide (including in Canada), even though it admitted knowing about the problem for a decade. The faulty ignition switches have been linked to 31 crashes and 13 deaths. Committees in the House and Senate also want to know why the government's road safety watchdog, the National Highway Traffic Safety Administration, didn't take action sooner.
GM announced last month it will replace ignition switches that can shut off car motors unexpectedly. When that happens, drivers lose power-assisted steering and brakes and can lose control of the cars. The ignition can slip from the run position to accessory or off, due partly to heavy key chains dangling from the steering column.
Also, if the ignition switch isn't in the run position, air bags may not inflate if a crash occurs.
An Associated Press review of a NHTSA database found that drivers started submitting complaints about the problem in early 2005, shortly after the first Chevrolet Cobalt went on sale. The review of complaints about the Cobalt, GM's top-selling small car in the mid-2000s, found 173 instances of engine stalling or air bags failing to deploy, both symptoms of the ignition problem. Many drivers reported problems with keys sticking in the ignition in addition to the stalling.
Fred Upton of Western Michigan, the chairman of the House committee, said in a statement Monday that a hearing will be held in the coming weeks.
Marketing expert Ken Wong of Queen's University says the damage to GM's reputation is enormous. "[It's] catastrophic, not only because the incident occurred, but because there is substantial evidence that GM was aware of the incident long before it took any corrective action."
Congress passed legislation in 2000 requiring automakers to report safety problems quickly to NHTSA. The laws came after an investigation into a series of Ford-Firestone tire problems.
Upton said the committee wants to know if GM or the agency missed something that could have flagged the problems sooner.
"If the answer is yes, we must learn how and why this happened, and then determine whether this system of reporting and analyzing complaints that Congress created to save lives is being implemented and working as the law intended," Upton said.
NHTSA has said the rate of problems in the GM cars was not significantly different from similar vehicles.
The prospect of congressional hearings means more bad publicity for GM, which is trying to distance itself from a reputation for building lousy cars. The company has said it's more focused on quality since emerging from bankruptcy protection in 2009.
"It's the old GM haunting the new GM," said Jake Fisher, director of auto testing at Consumer Reports magazine. "They have a lot of the old products still hanging around."
Fisher said GM's new cars and trucks will have to be better than the competition to lure back buyers who swore years ago to never again to buy a GM car.
NHTSA already has demanded information from GM about when it knew of the ignition problem. The agency could fine GM up to $35 million for a delayed response. Automakers must report safety problems to NHTSA within five days of learning about them.
GM said in a statement that it's co-operating with NHTSA and the House committee.
On Feb. 13, GM announced the recall of more than 780,000 Cobalts and Pontiac G5s (model years 2005-2007). Two weeks later it added 842,000 Saturn Ion compacts (2003-2007), and Chevrolet HHR SUVs and Pontiac Solstice and Saturn Sky sports cars (2006-2007).
GM said Monday that it has hired attorney Anton Valukas to investigate the company's actions before the recall. Valukas, who investigated the 2008 collapse of Lehman Brothers for a bankruptcy court. GM has promised an "unvarnished" investigation into the recall.
More Canadian small businesses are taking to social media to interact with their consumers, according to a BMO study. (CBC)