U.S. May Charge GM with Wire Fraud

The U.S. Dept. of Justice could charge General Motors Co. with criminal wire fraud related to its belated recall of 2.6 million defective ignition switches linked to 111 fatalities, sources tell The Wall Street Journal.

Federal prosecutors in New York may charge GM with making false or misleading statements about the safety of their vehicles during the 10 years in which the company was aware of the flawed switches but failed to recall them. The switches can be easily jogged out of the "on" position, thus turning off the engine and cutting power to the power brakes, steering and airbag systems.

The prosecution's tack is similar to one that led to a $1.2 billion settlement last year with Toyota Motor Corp. regarding that company's handling of customer complaints about unintended acceleration. In both cases, the strategy is to prosecute a company for misleading customers about the safety of its cars rather than for making defective parts.

GM confirms the nature of the probe. The Journal says the Justice Dept. hopes to reach a settlement with the company in 4-5 months. The newspaper also says prosecutors may levy additional charges of wrongdoing against GM.