Federal prosecutors have reached agreement with GM to resolve a criminal investigation into how the company concealed a deadly problem with ignition switches. File picture: Molly Riley / AP.

New York - General Motors has agreed to sign a deferred-prosecution agreement to end a US government investigation into its handling of an ignition-switch defect linked to 124 deaths, a source told Reuters.

The company will pay less than the $1.2 billion (R16bn) that Toyota paid to resolve a similar case, the source said. The exact amount was not immediately known.

The deal means GM will be charged criminally with hiding the defect from regulators and in the process defrauding consumers, but the case will be put on hold while GM fulfills terms of the deal, the source said.

GM declined to comment. A spokeswoman for US prosecutors in Manhattan also declined to comment.

The terms of GM's deal with the government were not immediately known, including how many counts the carmaker would be charged with, whether the company agreed to hire an independent monitor, or how long it would need to abide by the agreement before the case may be dropped.

MILESTONE SETTLEMENT

The settlement is a milestone in a case that over the past two years drove a transformation in the once cozy relationship between the motor industry and regulators in the US government.

Outrage over the GM ignition switch case prompted a much tougher approach by Washington toward vehicle safety issues and compelled carmakers to act more quickly and comprehensively to recall vehicles with potentially dangerous defects.

GM Chief Executive Mary Barra in 2014 undertook a series of actions to atone for the ignition switch failure, including appointing a new safety czar, overhauling GM's product engineering organisation, and pushing out 15 executives connected to the mishandling of the switch defects in a scathing report prepared by former federal prosecutor Anton Valukas, now a senior partner at the law firm Jenner and Block.

GM also recalled more than 30 million vehicles in North America in 2014 to fix a wide array of defects.

GM's approach contrasted with Toyota's, which was slower to cooperate with regulators in response to defects related to incidents of sudden acceleration.

Toyota in March 2014 agreed to pay $1.2 billion to settle a charge that it concealed a problem in its vehicles that caused them to accelerate suddenly. That penalty remains the largest ever levied by the United States on a car company.

Federal prosecutors based in New York have been investigating GM since at least March 2014 over the company's disclosures to regulators about vehicles equipped with the faulty ignition switches.

The ignition switches on Chevrolet Cobalts, Saturn Ions and other GM vehicles could cause their engines to stall, which in turn prevented air bags from deploying during crashes. Also, power steering and power brakes did not operate when the ignition switch unexpectedly moved from the “on” position.

Reuters