General Motors (GM) announced in late June 2014 that all people who have been killed or seriously injured in accidents due to product recalls will be given monetary compensation. The plan consists of a generous fund that will give compensation to any family affected, even if their case has already been settled, and covers people who have been hurt in a crash in any way, whether they were a driver, passenger, or pedestrian. The safety issues in GM vehicles that are causing the company to recall have resulted in thirteen deaths and many injuries.
Kenneth Feinberg, an attorney who specializes in compensation following disasters, made the detailed plan public on June 30th. Feinberg, not GM, will determine who is paid what amount. The payouts are estimated to be between $20,000 and one million dollars (USD). The compensation claims also have no cap; the company has agreed to pay any amount that is eligibly claimed. People must submit their claims between August 1 and December 31, 2014.
More recalls than any other carmaker in history
GM has been in the spotlight for car recalls this year. So far, GM has recalled over 25 million vehicles in 2014 alone. The recalls are due to problems with ignition switches. People have reported the switches in cars the company has manufactured in the past ten years have cut power to the car during driving. While this is dangerous on its own, it also leads to malfunctioning air bags and loss of steering control, which all pose significant safety risks.
The company is under scrutiny from the federal government as a large number of cars have been recalled in such a short period of time. The U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) “ordered GM to make significant and wide-ranging internal changes to its review of safety-related issues in the United States, and to improve its ability to take into account the possible consequences of potential safety-related defects” in mid-May. By designing the compensation plan, as well as promising to improve their engineering standards and company policies, GM is trying to appease the NHTSA.
An internal company problem
Mary Barra, the CEO of General Motors, gave an interview on the Today Show on June 26. It was her first interview since the February recalls that pushed GM into the spotlight regarding this issue. In the interview, Barra said that she conducted an exhaustive investigation that revealed that GM “failed our customers with these vehicles.” While Barra could not say for certain that there would not be more recalls, she did say the company is taking measures to ensure that GM never does anything like this again.
GM has been accused of not making the recalls public earlier to avoid embarrassment and save money, even though the safety glitches were known to some GM employees months or even years ago. There was also internal miscommunication, as employees were under the impression that they were discouraged by lawyers to take notes during safety meetings, which has resulted in an inconsistent paper trail. Barra has denied that there was a cover-up; however, she says she has fired executives and other employees who knew about the malfunctions and did not respond in an appropriate manner following company safety policies. Barra has said nobody else will need to leave the company. Any “criminal aspect I think is for the courts to decide,” according to Barra.
While GM has recalled more cars in 2014 than it has sold since 2009, the company’s bottom line seems to be unaffected. In early June, GM reported that it has been having its best monthly sales since 2008. GM is a large car company, which has a large market in the US, as well as around the world, so the recalls indicate that their products may be putting many people across the world at a safety risk. However, the positive sales reports, along with the company’s public claims to offer compensation to those affected and to proceed with better, unprecedented policy indicates that consumers might continue buying GM vehicles for years to come.