By Margaret Cronin Fisk, Bloomberg News
DETROIT (Jan. 16, 2015) — General Motors Co. managers misled investors and regulators for years about issues connected to vehicle ignition switch defects, according to a shareholders lawsuit accusing the company of inflating the stock's value.
GM CEO Mary Barra assured the U.S. Securities and Exchange Commission in February that the company had adequate internal controls over its finances the day before the first recall was announced, lawyers for investors said in a complaint filed late Jan. 15.
Just weeks after Ms. Barra took over, GM recalled almost 800,000 cars because the ignition switch could slip out of the “run” position, shutting off the engine and safety features including airbags while the car was moving. The recall eventually expanded to 2.59 million vehicles and has been linked to at least 45 deaths.
The consolidated complaint filed Jan. 15 in U.S. district court in Flint, Mich., combines claims by investors that the auto maker's handling of the recalls cheated them.
“GM's internal controls continued to suffer from severe and systemic problems which resulted in GM's failure to accurately account for and disclose the ignition switch defects and associated liabilities, costs, and contingencies in its financial statements,” according to the complaint.
GM spokesman Jim Cain said in March when one of the shareholder lawsuits was filed that the first any GM executive was told of the ignition switch issue was Jan. 31. He declined then to comment further on the lawsuit allegations.
“GM's long belated recall of these dangerously unsafe cars has now led to the loss of billions of dollars of market value for GM investors,” the lawyers said in the consolidated complaint.
The shareholder lawsuit was filed as a proposed class action on behalf of all GM investors. U.S. District Judge Linda Parker appointed the New York State Teachers' Retirement system as lead plaintiff in October.
The lawsuit seeks to represent all investors who bought or otherwise acquired GM stock from Nov. 17, 2010, to July 24, 2014.
This Bloomberg News report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.