There's good reason why Money Morning Capital Wave Strategist Shah Gilani said the GM recall cover-up "would be a legacy issue for years to come"...
On Feb. 7, 2014, General Motors Co. (NYSE: GM) recalled 800,000 cars worldwide to correct an ignition switch defect. Further complaints pushed the company to expand the recall to more models. By roughly halfway through the year on June 30, GM had already issued 45 recalls in 2014 that included nearly 28 million cars worldwide and 24.6 million in the United States.
The core issue was that the ignition switches could slip out of the "on" position and cut power to the engine. This would also turn off airbags.
Today, 51 deaths have been linked to the bad ignition switches. The total number of injury claims stand at 4,180.
What's worse - and why Gilani said GM is facing a legacy issue - is GM knew there was a problem with the ignition switches, but attempted to hide it from the public.
General Motors documents came to light on March 12, 2014 that showed the company had known about the problem as early as 2001. Engineers had found ignition switches on Saturn Ions could turn themselves off. And later in 2005, GM engineers proposed to fix the issue, saying it was affecting the Chevy Cobalt model as well. Management ignored this offer.
Meanwhile, the National Highway Traffic Safety Administration (NHTSA) - a government watchdog that oversees auto safety and studies vehicle defect trends - was alerted to GM's faulty ignitions in 2007.
But it did nothing.
The GM cover-up is just one of five of the worst auto industry cover-ups of all time... Here are the other four.
Worst Auto Industry Cover-Up No. 2
In August, 1977, Mother Jones writer Mark Dowie exposed Ford Motor Co.'s (NYSE: F) neglect of a defect in the Pinto's fuel tank that caused the car to explode on impact. The magazine ran the article "Pinto Madness." The piece claimed "for seven years, the Ford Motor Co. sold cars in which it knew people would needlessly burn to death."
When told of the problem, Ford executive Lee Ioccoca acted fast... to cover it up. Though the company owned the patent to a much safer gas tank, it would cost $200,000 to put in the new factory machinery.
So Ioccoca and other top Ford officials went forward with selling the faulty Pintos. They then lobbied against new auto safety standards being set in Washington. In fact, they were able to stall a government safety standard that would have required the company to change the Pinto's gas tank.
About 500 deaths resulted from the Pinto's faulty fuel system.
Money Morning readers, continue to find out what popular auto accessory caused 89 deaths and hundreds of injuries...
Worst Auto Industry Cover-Up No. 3
On Nov. 2, 2009, Toyota Motors Corp. (NYSE ADR: TM) recalled 12 million vehicles worldwide for a defect involving floor mats that entrapped accelerator pedals. Among the faulty models were Avalons, Camrys, Highlanders, Matrixes, Tundras, Priuses, Lexuses, and Pontiac Vibes.
The first known case of the defect dated back to 2007, when a man called 911 and said his Lexus would not slow down. The man had his entire family in the car and they were approaching an intersection. The call ended when the car crashed, killing everyone inside.
On Jan. 21, 2010, Toyota began another recall in response to several complaints that accelerator pedals were also sticking. After the second issue came to light, Toyota misled consumers to believe that certain models were not in need of repair when they actually were.
A total of 89 people were killed and hundreds injured because of the faulty pedals.
Worst Auto Industry Cover-Up No. 4
Honda Motor Co. Ltd. (NYSE ADR: HMC) trimmed its fiscal year 2015 earnings by 6.5% on Jan. 30, 2015, setting aside $425 million to cover costs related to quality. Included in this sum was the replacement of faulty air bags made by auto safety producer and supplier Takata Corp. (TYO: 7312). Other car companies affected include Nissan Motor Co. Ltd. (OTCMKTS ADR: NSANY), BMW AG (ETR: BMW), Ford, and Toyota.
Takata was able to cover up its airbag debacle for a short while by settling claims out of court one by one. But deaths and injuries continued to mount - so fast that safety advocates have stepped in to issue a warning that older Honda models are more likely to have Takata's faulty airbags.
When deployed, the airbags shot metal into drivers. In 2010, the front seat air bags burst in a woman's 2001 Honda Civic and shot shrapnel into her carotid artery. The woman was able to stop the bleeding but suffered serious health problems after the event.
As of Jan. 18, 2015, six deaths and 30 injuries have been linked to Takata airbags. Approximately 17 million vehicles total were recalled in the United States (mostly Honda) and 24 million worldwide. On Jan. 31, 2015, a second recall was issued in the U.S. for "follow up" work on 2.1 million Hondas, Chryslers, and Toyotas. This recall involved airbags that deployed for no reason.
Worst Auto Industry Cover-Up No. 5
In May 2000, the NHTSA investigated the high number of Ford Explorer rollovers related to Firestone tire tread separation. Every incident involving tread separation caused the vehicle to lose control and roll over.
Then on August 9, 2000, Firestone recalled all of its ATX and ATXII tires of the P235/75R15 size built since 1991. It also recalled Wilderness AT tires of that same size, for a total of 14.4 million tires. Of those 14.4 million tires, the company estimated 6.5 million were still in use. On May 22, 2001, Ford announced a tire replacement program that included all other Firestone Wilderness tires on Ford Explorers, Ford Broncos, Ford Rangers, Mercury Mountaineers, and Mazda Navajos built between the years 1991 to 2000. This replacement totaled 13 million tires.
But all of this could have been avoided.
You see, in 1990, a year before the Ford Explorer's release, engineers working on the SUV suggested changes be made to the vehicle's design. The model rolled over during company tests.
But instead of making these changes, Ford opted to lighten the tires' air pressure.
A total of 250 deaths and 3,000 serious injury claims resulted from the Firestone/Ford defect, 119 of those on a Ford model specifically.
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