In a resounding affirmation of the principle that the cover-up is worse than the crime, federal prosecutors emphasized Toyota’s deceptive practices in announcing that the carmaker will pay $1.2 billion to settle a criminal charge relating to the sudden acceleration controversy. The Justice Department press release uses just about every synonym for dishonesty in describing Toyota’s misdeeds.
“The company admits that it misled U.S. consumers by concealing and making deceptive statements,” the release states, adding that the company “gave inaccurate facts to Members of Congress.” Later it says that Toyota “was hiding” critical information from federal regulators and that it made public a “false timeline.” U.S. Attorney Preet Bharara alleges that the company “cared more about savings than safety and more about its own brand and bottom line than the truth.”
Such strong talk is gratifying, but Toyota, like so many other corporate miscreants, was offered a deferred prosecution agreement in place of an outright conviction. This was made somewhat more palatable by the provision in the agreement that bars the company from deducting the penalty amount from its taxes.
Prosecutors used the announcement to convey a thinly veiled warning to General Motors that it too will have to pay a substantial amount to resolve its own legal entanglements on safety issues. Bharara declared: “Companies that make inherently dangerous products must be maximally transparent, not two-faced. That is why we have undertaken this landmark enforcement action. And the entire auto industry should take notice.”
GM’s announcement several weeks ago that it was recalling hundreds of thousands of its small cars because of an ignition switch problem mushroomed into a major scandal as information came to light suggesting that the company had dragged its feet in dealing with the issue, even though it was linked to 13 deaths. Federal regulators, which had received several hundred complaints relating to the problem, were also criticized for being slow to act. Both Congress and the Justice Department have launched investigations of the matter.
In recent days, GM has tried to spin the situation to its advantage, with CEO Mary Barra putting herself out front and making extravagant promises that such a safety lapse would never happen again. Living up to such a commitment will be even more difficult for GM than it was for Toyota, which used similar p.r. stratagems during earlier phases of its controversy and ultimately failed.
After all, the history of GM is filled with examples of irresponsibility on safety issues. It is now 50 years since Ralph Nader exposed the defects of GM’s Corvair, prompting the company to spy on him and thus inadvertently give a boost to the nascent corporate accountability movement.
Later, GM failed to act when presented with reports that poorly sealed panels on some of its cars could cause dangerous levels of carbon monoxide to leak into the passenger compartment. After some deaths were attributed to the problem in the late 1960s, the company finally recalled 2.5 million cars to repair the defect.
During the 1970s and 1980s the company was frequently criticized by environmentalists and consumer advocates for its efforts to weaken federal rules on emissions and for its resistance to regulations requiring passive restraints such as airbags in all automobiles. In 1990 GM finally agreed to put air bags in all of its U.S. cars starting in 1995.
In 1992 the New York Times published an investigation concluding that GM had recognized as early as 1983 that its pickup trucks with side-mounted gas tanks were highly dangerous but took no action until 1988, even then saying the change was for design rather than safety reasons. During that period, more than 300 people were killed in collisions in which the tanks exploded.
GM resisted recalling trucks with the side-mounted tanks even after the federal government asked it to do so. Instead, it launched a campaign against safety advocates and plaintiffs’ lawyers. In 1994 the company reached a settlement with the U.S. Transportation Department under which the federal government gave up on its effort to get GM to recall the trucks in exchange for which the company agreed to contribute $51 million to auto safety programs. GM still faced a series of personal injury lawsuits in connection with the exploding gas tanks, including one in which a Los Angeles jury awarded victims $4.9 billion in damages. GM appealed, and the case was later settled out of court for an undisclosed amount.
It remains to be seen how much GM has to pay in fines and settlements for its current ignition switch scandal, but it will take a lot of punishment to get a company with such a long history of safety lapses to change its ways for good.
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New in CORPORATE RAP SHEETS: a profile of Yum Brands and its controversies relating to wage & hour violations, sanitation lapses and animal cruelty.