I previously wrote about the growing controversy over the delay of General Motors in dealing with its defective ignition switches — a defect that appears to have caused multiple deaths. Now the company has agreed to pay a $35 million civil penalty for delays in responding to defect. If this seems ridiculously small, it is. The fine is the largest that can be imposed by the National Highway Traffic Safety Administration (NHTSA) under a federal law protecting companies from higher penalties. The Administration is trying to get Congress to approve the Grow America Act, which contains an increase of fines for the most serious violations from $35 million to $300 million.
GM admits to knowing about the potentially lethal defect for over a decade. It will face some additional fines, but this “maximum” fine is trivial in comparison to the horrific costs imposed on individuals and families by the decision of GM to do nothing in the face of mounting evidence of a lethal defect.
The question is why federal law would cap the fines at such a low level in a field where companies make billions in profits. The obvious answer seems to be the power, again, of lobbyists in Washington is leaving “penalties” in laws while reducing their actual bite for the industry.
In light of the federal law, the torts system again seems the only effective deterrent in terms of real damages for companies. While many members love to rail against the tort system, they simultaneously work (or remain silent) for different corporate shields and caps like this one. The result is uncertainty by a company like GM as to whether (and to what extent) it will be forced to internalize or assume the true costs of a defect. This problem is more severe where the company believes that bankruptcy will protect it from civil lawsuit, as we previously discussed. Thus, GM can use one law to cap fines and use another law to negate judgments. That is one heck of a one-two punch for families who lost loved ones in these defective cars.
Even if the company succeeded in blocking civil damages, a government fine would presumably not be able to be blocked through bankruptcy — further supporting the need to increase the potential fine under federal law. The proposed act however includes other items that may lead to a stall in Congress. It would seem warranted to have a stand alone bill that only addresses this one fix if Congress is serious about addressing this controversy.
Source: Washington Post