From fraud to coverups to hot metal being fired at your face.
The automotive industry is a huge business with tight bottom lines that have only become tighter and tighter since Ralph Nader took to grandstanding on automotive safety in the 1970s. Since then, people's safety versus the bottom line has seen the most notorious of auto industry scandals, but now we have strict emissions testing and standards to be met as well. In an age of complicated technology, that means we're seeing some epically unscrupulous behavior, cover-ups, and spectacular amounts of money being surrendered by car builders when the truth outs.
One serious error in judgment, deliberate or otherwise, and scandal spreading through national and the world's media becomes a huge problem. These are the ones that rocked the automotive industry the hardest.
The story of Ralph Nader’s grandstanding crusade against the car industry is well documented and made his name, but it was his attack on the Chevrolet Corvair in chapter one of his book "Unsafe At Any Speed" that rocked the industry. GM didn’t take kindly to allegations made against the Corvair, and later tests showed the car wasn’t any more dangerous than its contemporaries. However, GM didn’t take the high road at the time and made the alleged error of trying to harass Nader and dig dirt on him with private detectives. Nader sued GM over an invasion of privacy and was paid $425,000 in 1970, which is well over $2 million today.
John Delorean is an industry legend and was a charismatic business rockstar in his day. He was the father of the original Pontiac GTO and made his way up the ladder to become vice president of General Motors. However, he left GM in 1973 and then in 1975 he went on to pursue his dream of building his own sports car and put together a company to build the DeLorean DMC-12. It was a money pit that ended in bankruptcy, and his alleged way of financing the company to get back up and running ended in a sting by the FBI that resulted in a seizure of 220 pounds of cocaine worth $24 million. DeLorean's lawyers argued that he was a victim of entrapment and, ultimately, DeLorean was acquitted.
The story didn’t end there though, and he was soon on trial for fraud and spent the next few decades being forced to pay millions of dollars to creditors as well lawyers. Now, that story is being recounted again in the form of a movie starring Alec Baldwin.
A 2010 investigation by the United States Securities and Exchange Commission found that Daimler had been bribing officials around the world to gain preferential treatment. The complaint accused Daimler of paying out over $56 million over a ten-year period "to further government sales in such countries as Russia, China, Vietnam, Nigeria, Hungary, Latvia, Croatia, and Bosnia.” Adding injury to insult, it was also discovered that Daimler had created kickbacks to Iraqi ministries using the United Nations Oil for Food Program.
In terms of scope, the Takata Airbag Recall is the granddaddy of scandals. According to the National Highway Traffic Safety Administration, the recall covers roughly 37 million vehicles across 50 million defective Takata airbags. That makes it not just the largest automotive recall in United States history, but the largest overall product recall.
The recall was based on initial incidents and then research that showed the chemical propellant that inflated the airbags would have its structure changed over time by moisture. That causes the substance to ignite too fast and the inflator to burst and fire metal shards at the driver or passenger. According to NHTSA’s figures, over 250 people have been severely injured by Takata airbags and over 15 killed. The latest being just a few months ago.
Volkswagen's emissions cheating and cover-up is one of the biggest automotive scandals in recent history and has also been boring the pants off of automotive journalists having to cover it for 11 years now. The reverberations are ongoing through both investigations and its effect on the market for diesel-powered cars.
The news broke in the United States when researchers discovered there were discrepancies between the standard lab tests and Volkswagen’s diesel engines' emissions on the road. When the findings were reported to the California Air Resources Board, an investigation was started and the agency discovered a cheat device programmed to lower Volkswagen cars' emissions during testing and evaluation.
The fallout was immense and forced the Volkswagen Group CEO Martin Winterkorn to step down and has cost the company tens of billions since. The financial repercussions are best shown with pictures of dieselgate graveyards of affected cars. According to reports, Volkswagen had as many as 37 facilities leased in the United States to store cars at one point.
Toyota’s reputation for building safe and reliable cars took a monstrous blow when, after blaming floor mats and recalling 5.5 million vehicles to fix the issue, Toyota then discovered the pedal could also stick. That affected millions more vehicles and cost the company a $1.2 billion fine with the United States Justice Department. Toyota then admitted that it had misled US customers with deceptive statements and concealed two safety issues, both of which caused unintended acceleration.
In 2000, an investigation began over reports of tread separation happening with Firestone tires mounted on Ford’s Explorer. It sparked an epic battle between Ford and Firestone but, much more importantly, also 271 deaths and over 800 injuries. Ford and Firestone were swamped with lawsuits, and there was even a congressional hearing. Ultimately, the scandal also claimed the CEOs of both companies when they stepped down and the partnership with Firestone and Ford ended. The Explorer's problems didn't end there though.
Preston Tucker designed one hell of a car in terms of innovation and safety. He started driving his Tucker 48 in 1948 across the country, showing off its style and features then taking payments on cars, and even selling stock in the company as well as dealer franchises.
The problem was that he started the company with little money and the car wasn’t actually in full production. He was using the money he took on his sales trip just to keep his factory afloat in Chicago. The big problem arose when demand meant waiting lists and preference was given to returning soldiers from World War II. Non-veterans ended up being bumped down the waiting lists, but if they purchased an accessory from Tucker's Accessories Program then that customer could guarantee their place on the dealer list. The US Securities and Exchange Commission and the United States Attorney investigated the practice and was unimpressed enough to issue an indictment. The charges were eventually dropped, but the negative publicity was a death blow to the Tucker 48 and the company itself.
When 60 Minutes aired a segment about allegations of the Audi 5000 suffering from unintended acceleration, it spelled the death of that model in the US and almost cost Audi the American market completely. It turned out 60 Minutes had doctored the car they showed as an example, and when the National Highway Traffic Safety Administration investigated and made a report, they cited human error as the reason for the sudden acceleration. Audi’s sales had already plummeted though, and it took years for the brand to recover in the US, and all because Americans had trouble pressing the correct pedal.
Compact cars were still in their infancy when Ford launched the Pinto in 1971, and it wasn't long before Ford caught wind of reports that Pintos were catching fire when rear-ended. The fuel tank sat between the rear axle and bumper with little room for things to move during a rear impact before the tank was hit, meaning the chances of the tank springing a leak was high.
It was six years after the Pinto hit the road that Mother Jones magazine brought the problem to national attention and then pushed for an investigation. The National Highway Traffic Safety Administration obliged, and found the fuel system to be potentially dangerous and ordered a recall. Things got worse for Ford though when three women died in a Pinto that caught fire and the state of Indiana prosecuted the automaker. It was the first time a US company went to court on murder charges but, despite being found not guilty, it was one of Ford’s darkest hours.
Mother Jones was not done with Ford after the Pinto. It addressed the issue that, from 1966 through 1980, Ford’s automatic transmissions had a design flaw that could have been fixed for $0.03 per unit, but was rejected by the automaker. The problem was that transmission could slip out of park and into reverse and start rolling backward. Ford ignored it but found themselves eventually having to face the possibility of bankruptcy through a 23 million car recall.
The National Highway Traffic Safety Administration cites that 777 accidents occurred due to the defect, and 259 injuries and 77 deaths were part of that number. Ford appealed to the Reagan administration and a compromise was formed. In the end, Ford mailed out 23 million stickers to customers to go in their cars and remind them to "make sure the gear shift is fully in park” and to "engage the parking brake.”
While ignition switches failing doesn’t sound like the end of the world, it is when just knocking against the key in the ignition while driving shuts down things like the power steering, power brakes, and airbag sensors. The death toll from such an avoidable problem was 124 lives lost, and GM’s financial cost was a $900 million dollar settlement with the Department of Justice, a $35 million settlement with the National Highway Traffic Safety Administration, and then $594.5 million paid out through the automaker’s victim compensation fund.