The New York Times reported today that emails released during ongoing congressional hearings about GM’s faulty ignition switches discussed the cost of fixing the switch.
Based on the emails, which were written in 2005, it appears that the cost of the fixing the switch was a factor in why a change was delayed for years. Several people died in accidents caused by ignition switch failures. Because power to the vehicle was cut when the switch failed, air bags sometimes failed to deploy. You can read those GM emails here.
In the released emails, an engineer discussed that changes to the ignition switch would cost an additional 90 cents per car. The cost to GM to provide a manufacturer warranty, in turn, would be reduced by 10 to 15 cents, leading to a net cost to GM of 75-80 cents per car. The engineer also wrote that he had been aware of the problem and the reason for it.
In response to the calculations, another employee wrote that “I’m not sure its ok to wait. I want to discuss.” Yet GM did not immediately fix the problem, and did not recall cars with the faulty ignition switch for years.
Cost analyses like these bring back memories, for Plaintiff lawyers at least, of the failed Ford Pintos from the 1970s. At the time, the estimate to fix the car’s faulty gas tanks was $11 per car (equivalent to about $42 today). Ford apparently determined that it would gain higher profits by handling a limited number of lawsuits rather than fix every gas tank. The cars were eventually recalled. In one lawsuit, a jury awarded over $3 million in compensatory damages, and $125 million punitive damage. These amounts were later reduced on appeal.
Perhaps recognizing that GM could be held liable for injury caused by the faulty ignition switches, the Times is also reporting that GM has hired a prominent attorney to consider providing compensation for victims. Unfortunately, corporate compensation programs are sometimes aimed at improving public image, while limiting the money paid, and failing to fully and adequately compensate victims for their injuries. It remains to be seen whether injured victims will have to file lawsuits to protect their rights.