Auto Outlook: GM ignition recall prompts investigations, Tesla sales

Recalls are a fact of life in the automobile business.

Companies don't like the inconvenience or cost -- usually free for the car owners -- but most fixes generally go smoothly. That's why it's news when Congress, the Justice Department and a federal prosecutor get involved.

The House Energy and Commerce Committee Wednesday asked General Motors to answer 107 questions by April 3 about its recall of as many as 1.62 million vehicles that may have a faulty ignition switch.

The recall started with 620,000 vehicles, grew by 748,000, and then to more than 1.6 million vehicles that may have an ignition switch that can jump from the normal "run" position to "accessory" or "off" when jostled while driving or bumped during a crash, turning off the engine, electrical system and deactivating the airbags.

The National Highway Traffic Safety Administration said at least 31 crashes and 12 deaths had been linked to bad ignition switches before GM issued a recall last month. Lawmakers on the House Energy and Commerce Committee and Senate Commerce Committee expect GM to provide a timeline of its reporting of the problem to NHTSA, the watchdog government agency for vehicle safety.

Records made public last week indicate GM may have been aware of the ignition switch issue as early as 2003. The Detroit News said GM acknowledged it had a report of an ignition switch problem in a pre-production 2001 Saturn Ion, but said a design change resolved the issue.

GM said in a filing with regulators an engineer proposed a revised design in 2005 that could handle the weight of heavy keys, but it was canceled, the New York Times reported.

GM previously said it became aware of the ignition switch problem in 2004, but in a 2003 internal report, a GM service technician found a Saturn Ion had stalled because the weight of keys on the owner's key ring "had worn out the ignition switch."

In December 2005, GM issued a service bulletin for 2005-06 Chevrolet Cobalt, 2006 Chevy HHR, 2006 Pontiac Solstice and 2003-06 Saturn Ion models advising against putting heavy keys on a key ring that hangs from the ignition switch. The bulletin was updated in October 2006.

The initial GM recall issued Feb. 13 covered 2005-07 Cobalt compacts and 2007 Pontiac G5s in the U.S. and Mexico and was expanded to 2003-07 Saturn Ions, 2006-07 HHR, 2006-07 Pontiac Solstices and 2007 Saturn Sky cars. None of the models is currently in production.

The fix could cost as little as $2 to $5 for a replacement part when one is available, JP Morgan auto analyst Ryan Brinkman said in a research note obtained by the Detroit News. The supplier of the original equipment part -- Delphi Automotive Systems LLC -- could share the costs. Labor costs and time need to swap out the ignition switch may be minimal.

But NHTSA could fine GM $35 million if it is found to have delayed reporting a safety-related defect in a timely fashion.

U.S. Transportation Secretary Anthony Fox said his department has been in contact with the Justice Department and the U.S. Attorney's Office in Manhattan has opened a preliminary investigation.

Fox told a Senate Appropriations Committee federal safety regulators did not have enough data from GM to open a formal investigation earlier, adding NHTSA is "conducting an ongoing aggressive investigation into the timing of the recall."

Acting NHTSA Administrator David Friedman said a recall could have begun earlier had the agency gotten "timely information" from GM. "The data was inconclusive, it just didn't point to a formal investigation," he said.

Rep. Fred Upton, R-Mich., author of the 2000 Tread Act that gives auto manufacturers five days to report defects related to deaths and injuries, wants to know why NHTSA didn't act on the early warning reports, CBS reported.

"The law said five days, not five years, not 10 years, and we're going to find out why the law may not have worked the way that it was intended," he said.

The recall is black eye for revitalized GM, the largest U.S. automaker, which expects to send out letters to U.S. vehicle owners the first week of April telling them when to schedule repairs.

The public may remember the exploding gas tanks of Ford Pintos in the 1970s, rollover accidents linked to faulty Firestone tires on Ford Explorers in the 2000s and unintended acceleration of runway Toyotas and could cost the new GM consumer confidence.

When General Motors Co. emerged from Chapter 11 bankruptcy the company split into an "old" entity saddled with the General Motors Corp.'s bad assets and a "new" entity holding good assets like modern plants and office buildings, the Times said. The new GM also got protection from previous claims, including product liability claims.

GM Co. had net income of $3.77 billion in 2013, after posting 16 straight profitable quarters.

Former NHTSA administrator Joan Claybrook and Clarence Ditlow, executive director of the Center for Auto Safety, say GM should waive immunity from lawsuits for most actions before its 2009 bankruptcy restructuring.

"GM has conducted 25 safety recalls since the bankruptcy that cover vehicles made before the bankruptcy. Just as it is unfair for victims and families of the Cobalt ignition key defect to be barred from recovering for their losses, it is also unfair for victims of other GM defects to be barred by the bankruptcy from recovering for their losses," the safety advocates said in a letter to new GM Chief Executive Officer Mary Barra.

Ditlow and Claybrook called on GM to create a $1 billion trust fund to compensate victims of safety defects.

"By concealing the ignition key defect for at least 10 years, GM created more victims and then robbed them of their legal rights through the passage of time," they wrote.

The problem is the first crisis for Barra who in January inherited a federal debt-free GM liberated from the $49.5 billion taxpayer-funded bailout. Barra apologized for the handling of the recall and promised to hold the company responsible for its mistakes.

Automotive News said GM, in a March 4 notice to dealers, offered 1.37 million U.S. owners of cars that may have a faulty ignition switch a $500 cash allowance toward the purchase of a new GM vehicle.

Owners who request a loaner vehicle would be able to use it until their recalled car is repaired.

"GM is focused on ensuring the safety and peace of mind of our customers involved in the recall. It is true that new GM did not assume liability for claims arising from incidents or accidents occurring prior to July 2009. Our principle throughout this process has been to put the customer first, and that will continue to guide us," GM said in a statement.

New Jersey bans direct to shopper Tesla sales

Tesla Motors Inc., the media darling electric car startup in California, hit a pothole in New Jersey.

The New Jersey Motor Vehicle Commission last week agreed to ban Tesla from selling cars directly to consumers -- and to require all automakers selling cars in the state to do it through a franchised dealership.

The decision in favor of auto dealers came as a blow to Tesla, which sells its luxury all-electric Model S sedan directly to consumers for $60,000 to $90,000. The current system gives franchised dealers a monopoly on new-car sales in their regions, a practice some feel is archaic in the Internet era.

Tesla began selling directly to New Jersey buyers at factory-owned stores in two Garden State malls last year and will now have to shutter its existing sales operations and layoff about 27 employees.

The company has Tesla stores in Minnesota, Massachusetts and Washington but ran into similar turf problems in New York and Texas.

"Since 2013, Tesla Motors has been working constructively with the New Jersey Motor Vehicle Commission and members of Governor [Chris] Christie's administration to defend against the New Jersey Coalition of Automobile Retailers' [NJ Car] on Tesla's business model and the rights of New Jersey consumers," Tesla said on the company's blog. "Until yesterday [Monday], we were under the impression that all parties were working in good faith."

The automaker accused the Christie administration of going "back on its word to delay a proposed anti-Tesla regulation so that the matter could be handled through a fair process in the Legislature" and said the change "would curtail Tesla's sales operations and jeopardize our existing retail licenses in the state."

Tesla said its sales model has a goal to educate consumers about the benefits of electric vehicles and technology as well as to sell cars.

"We strongly believe it is vital to introduce our own vehicles to the market because electric cars are still a relatively new technology," the company said.

Tesla shares took a dip after the New Jersey decision and closed at $230.97 a share Friday, giving the company a market capitalization of less than $29 billion -- nearly half the value of Ford.

Apple CarPlay delay?

Fans of Apple's iPhone and iOS operating system may have to wait a while longer before the technology gets in popularly priced vehicles.

Toyota teased that CarPlay -- a mobile version of iOS complete with the voice-enabled Suri personal assistant -- would arrive next year, but the Japanese automaker quickly rolled back the promise, PC World said.

"Come 2015, you'll be able to get the iPhone experience you love in your Toyota with Apple CarPlay," a post on Toyota's U.K. blog said. Later, the company posted a message saying: "A previous version of this article said Apple CarPlay would be in Toyota cars from 2015. This is incorrect and we are happy to put the matter straight. No announcements have been made about if and when Apple CarPlay will arrive in Toyota cars."

CarPlay is supposed to be available in some Volvo, Mercedes-Benz and Ferrari models later this year.