General Motors Company (NYSE:GM) revealed that it is being investigated by the US Attorney’s office, the SEC, and others in conjunction with the ignition switch recall affecting more than 2 million vehicles. It is also said in today’s filing that it is being sued in dozens of class action lawsuits across the US and Canada.
More than 60 class action lawsuits against General Motors and counting
“Through April 22, 2014 we are aware of 55 putative class actions have been filed against General Motors Company (NYSE:GM) in various U.S. District Courts since the recall announcement alleging that consumers have been economically harmed,” the company wrote in its 1Q14 earnings report. There have also been five similar class action lawsuits filed in Canada, a shareholder class action lawsuit against General Motors alleging material omissions from SEC filings, another shareholder class action lawsuit against current and former GM directors alleging breach of fiduciary duty, and one lawsuit related to an accident that may have been caused by a faulty ignition.
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General Motors Company (NYSE:GM) says that it will ‘vigorously defend’ itself from all allegations, though it could have a tough time since the company has already admitted to not recalling a product that at least some people knew was faulty for many years.
Multiple regulators approaching the recall from different directions
“We are also the subject of various inquiries, investigations, subpoenas and requests for information from the U.S. Attorney’s Office for the Southern District of New York, Congress, NHTSA, the SEC, and a state attorney general in connection with our recent recalls,” General Motors Company (NYSE:GM) wrote in its filing.
General Motors Company (NYSE:GM) has an internal investigation underway, but with so many different regulators looking at different aspects of the recall, it has a lot of work ahead of it to satisfy everyone. The National Highway Traffic Safety Administration is more concerned with why the recall took so long to happen, while the Securities and Exchange Commission will focus on whether company filings were knowingly inaccurate, for example. It’s not clear what the Justice Department is looking at, but if the class action lawsuits are any guide it may be investigating the possibility of a cover-up.
Which means that General Motors Company (NYSE:GM) is facing a lot of litigation and regulatory risk, as the company makes clear in its filing, but it also has to find a way to maintain consumer confidence as its dirty laundry is aired. Coming forward with damaging evidence could result in worse court settlements and immediate bad press, but GM also doesn’t want to look like it is continuing to hide safety and quality control problems.