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GM Hit With Justice Department Subpoena In Loan Probe

GM Hit With Justice Department Subpoena In Loan Probe


General Motors said in a filing that its financial arm has received a subpoena from the Justice Department for documents related to risky subprime auto loans.

GM Financial said in the Securities and Exchange Commission filing that the July 28 subpoena covers documents related to underwriting criteria that GM used to make subprime auto loans since 2007.

This latest setback comes amid a year of record recalls for GM — some 30 million at last count — that cost the company $3.48 billion for recalls, loaner cars and warranty repairs in the first half, according to an AP report.

One defect, an ignition switch on older models that can cause the vehicle to stall, is tied to at least 16 deaths, GM has said. That defect has resulted in a separate federal probe of a possible cover-up.

Meanwhile, GM was looking for a new supplier after its Zhongrong Metal Products plant in China exploded on Saturday, killing at least 69 people and injuring some 200.

The company has reportedly asked Dicastal, its primary Chinese supplier, to find another factory to produce the components. GM said in a statement that it doesn’t expect the disaster to affect production because it has sufficient inventory.

GM shares were up about 1% in Monday afternoon trading on the stock market as strong global auto sales and new models keep the No. 1 U.S. automaker rolling despite the series of challenges.

The automaker’s shares fell 4.5% on July 24 after it reported second-quarter earnings per share that slid 31% from a year ago and came in a penny short of analyst views. Sales of $39.6 billion also missed.

No. 2 U.S. carmaker Ford on Aug. 1 reported its best July sales result in eight years, led by its flagship Fusion sedan and a couple of SUV models. Shares rose more than 1% in Monday afternoon trading.

Toyota last year regained the title of world’s largest automaker after overcoming a series of disasters including the disastrous earthquake, tsunami and Fukushima nuclear-plant meltdown of March 2011. Toyota edged up fractionally.