Arizona is first U.S. state to sue GM over delayed recalls

Pinal County Sheriff Paul Babeu (R) listens as Arizona Attorney General Tom Horne speaks about weapons and drugs seized from the Mexican Sinaloa cartel during "Operation Pipeline Express" at a news conference in Phoenix, Arizona October 31, 2011. REUTERS/Joshua Lott

(Reuters) - In the first lawsuit brought by a state against General Motors Co over recalls relating to a defective ignition switch, Arizona has accused the company of putting the public at risk by concealing safety issues and delaying the recalls. The suit, filed Wednesday, seeks civil penalties of up to $10,000 per violation and affects hundreds of thousands of vehicles, suggesting a total potential penalty against GM of billions of dollars if courts rule in the state's favor. A GM spokesman said in a statement Thursday the lawsuit "misrepresents the facts, the performance of our vehicles and our work to ensure the safety of our customers." GM has been hit by a slew of civil lawsuits since it widened a global recall to 2.6 million vehicles late in March because a defective ignition switch could slip out of position in some situations, cutting power to air bags and brakes. Documents produced to U.S. Congress and federal safety regulators suggest GM may have been aware of issues with the switch for at least a decade before ordering recalls. The recalls have expanded to encompass 60 serious defects affecting 27 million vehicles, the suit said. GM said in October it was being investigated by 48 states. Representatives from several states involved said Thursday the investigations were ongoing. Though the company produced many of the affected cars before it went bankrupt in 2009, Horne said "New GM" - following a government bailout - should pay penalties because the alleged cover-up stretched back more than a decade. GM has argued it should not face lawsuits based on safety issues on cars made before its 2009 bankruptcy. The company has asked a Manhattan judge to rule on whether it must face claims arising from the conduct of pre-bankruptcy "Old GM." A decision, not expected until next year, could affect a significant portion of the lawsuits over deaths, injuries and economic losses that are pending against it. The company has set up a compensation program for victims of the faulty ignition switch. Arizona argued that consumers lost money because GM vehicles fell in value. It also said GM Chief Executive Mary Barra, while head of product development, was informed in 2011 of a safety defect in the electronic power steering of several models. Shares of GM were down 0.5 percent at $31.99 on the New York Stock Exchange. They have slumped about 24 percent since hitting a high of $41.85 on Dec. 26, 2013. The case is State of Arizona v. General Motors LLC, the Superior Court of the State of Arizona, County of Maricopa, No. CV2014-014090. (Reporting by Rama Venkat Raman in Bangalore, Paul Lienert in Detroit and Jessica Dye and Karen Freifeld in New York; Writing by Rodney Joyce and Robin Paxton; Editing by Saumyadeb Chakrabarty, Alexia Garamfalvi and Bernadette Baum)

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