GM's ignition-switch crisis deepens; death toll rises to 16

General Motors Co's (GM.N) ongoing safety crisis over deadly ignition switches deepened on Monday with the recall of 8.23 million mostly older cars linked by the U.S. automaker to three deaths.

The latest recalls boosted the number of deaths acknowledged by GM to at least 16 in cars with switch-related problems. The automaker said it now knows of 61 crashes tied to faulty ignition switches, although U.S. lawmakers and safety regulators have said they expect the death toll to climb.

The latest fatalities occurred in two separate high-speed crashes, one involving a 2003 Chevrolet Impala, the other a 2004 Impala, according to GM spokesman Jim Cain. The air bags failed to deploy in both crashes, Cain said, but GM cannot conclusively link the nondeployment to the ignition switches.

"Among these recalled vehicles,

GM is aware of seven crashes, eight injuries and three fatalities," GM said in a statement. "The fatal crashes occurred in older model full-size sedans being recalled for inadvertent ignition key rotation. There is no conclusive evidence that the defect condition caused those crashes."

A Reuters investigation in early June found that at least 74 people had died in GM cars in accidents with similarities to those that GM earlier had linked to 13 deaths involving defective ignition switches.

The report on Monday of additional fatalities and recalls "confirms our fears that GM's safety failures were much more widespread than initially reported," said U.S. House Energy and Commerce Chairman Fred Upton, a Michigan Republican, whose committee twice has interviewed GM Chief Executive Officer Mary Barra.

GM said the latest fatalities will not be included in a compensation fund set up to provide at least $1 million to victims of crashes tied to defective switches in older compact cars, including the Chevrolet Cobalt and Saturn Ion. Details of that fund, which is being administered by attorney Kenneth Feinberg, were announced earlier on Monday.

The compensation fund could ultimately cost GM billions of dollars, but is seen as critical to help repair the company's tarnished reputation and to move beyond the outstanding liability claims.

Feinberg declined to estimate how big the ultimate payout could be, and financial analysts said it is too early to gauge what GM will have to pay overall for its handling of the faulty switch.

The number of victims seeking damages as well as the number of fatalities caused by the faulty part will not be known until claims are processed, said Feinberg, who previously handled compensation funds for victims of the BP oil spill and the September 11 attacks, among others.

The latest recalls, covering compact and midsize cars, sedans and crossovers from model years 1997-2014, swell the total number of vehicles recalled by GM this year to 29 million. GM last year sold 2.8 million vehicles in the United States and 9.7 million globally. So far this year, GM has recalled more cars than the entire U.S. industry did in 2013.

The automaker also said on Monday it would increase by $500 million a second-quarter charge to cover the cost of the recalls. So far this year, the writedowns are expected to total $2.5 billion.

GM earlier this year recalled nearly 2.6 million Cobalts, Ions and other small cars with defective switches that it linked to 54 crashes and at least 13 deaths.

Earlier this month, it recalled more than 500,000 Chevrolet Camaro sports cars and another 3.4 million midsize and fullsize sedans, including Chevrolet Impalas and Cadillac DeVilles.

LEGAL PROBLEMS

On Monday, GM issued two separate recalls, both related to ignition switches which it said could be turned off because of "inadvertent key rotation." In turn, that could shut off the engine and cut power to steering, brakes and air bags - issues similar to those that triggered the earlier recalls.

Affected are 7.61 million older sedans and coupes dating back to model year 1997, including 2000-2005 Chevrolet Impalas and 1997-2005 Chevrolet Malibus. Also recalled were 616,179 Cadillacs from model years 2003-2014, including the CTS coupe and sedan and the SRX crossover.

The 2004-2006 Cadillac SRX used a switch part similar to that on the 2003 Saturn Ion, Reuters reported in April. GM engineers told the switch supplier, Delphi Automotive (DLPH.N), about accidentally turning off ignition switches in a Cadillac SRX with their knees more than eight years ago, according to documents provided to U.S. safety regulators.

The original SRX ignition-switch part also was used in the 2003-2007 Cadillac CTS, according to online GM parts catalogs reviewed by Reuters. Delphi supplied the switches for the 2003-2007 CTS and the 2004-2009 SRX, it told the National Highway Traffic Safety Administration.

GM did not recall the SRX and the CTS for switch-related issues, however, until Monday.

As it has done previously, GM urged owners to remove all items from key rings, including the fob, leaving only the ignition key. It said it would provide dealers with an insert to change the key-head design from a slot to a hole to reduce the chance of the key ring and fob turning off the switch.

In early June, GM released a 325-page report on the 11-year process of identifying defects in the Cobalt and Ion that eventually led to the recall of those cars earlier this year. The report was prepared by Anton Valukas, chairman of GM's outside law firm Jenner & Block, and largely exonerated top executives.

But GM faces legal problems on a number of fronts. A county district attorney in California on Monday announced a lawsuit accusing GM of being a threat to public safety by concealing at least 35 safety defects that have prompted the recall of millions of vehicles.

GM previously has acknowledged that the U.S. Department of Justice is investigating how it handled the recall of the Cobalt and Ion.

GM shares closed down 0.9 percent at $36.30 on Monday.

Reuters