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Securities regulators probing GM recall

DETROIT - U.S. securities regulators are looking into General Motors' (GM) delayed recall of more than 2 million cars with a deadly ignition switch problem.

GM disclosed in a quarterly report that the Securities and Exchange Commission has made inquiries about the recall. It also confirmed that the U.S. Attorney's office in New York and an unidentified state attorney general are conducting investigations. The National Highway Traffic Safety Administration and congressional lawmakers have also launched probes into the recall.

The SEC likely is probing whether GM failed to disclose the switch problem to investors quickly enough, said Peter Henning, a former SEC lawyer who now is a law professor at Wayne State University in Detroit.

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GM is recalling 2.6 million older small cars because the switches can unexpectedly slip out of the "run" position. That can shut down the engine, knock out the power-assisted steering and brakes and disable the air bags. Drivers can lose control of their cars and crash.

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The company, which has linked 13 deaths to the problem, has acknowledged that engineers knew about it more than a decade ago. CEO Mary Barra has said she was told of the problem in December, yet it was not disclosed in the company's annual report filed in February.

"That's what the SEC is looking at," said Henning. "If it should have been picked up, or it should have been included in the company's financials, it could be a violation of securities law."

A spokeswoman for the SEC would neither confirm nor deny that the agency is investigating. A message was left for a GM spokesman.

The recall is taking a toll on GM's financial performance. In disclosing its latest quarterly results, the automaker said it is taking a $1.3 billion charge related to the cost of recalling 7 million vehicles worldwide.

GM's profit for the first three months of the year plunged 86 percent, to $125 million. It earned 6 cents per year, down from 58 cents per share in the year-ago period. The recall charge sliced 48 cents off GM's first-quarter profit. Excluding one-time items, GM made 29 cents per share, far above Wall Street estimates of 3 cents per share.

GM's global sales for the quarter rose 2.3 percent to 2.42 million cars and trucks. China sales grew 13 percent, and sales in Europe rose less than 1 percent. But sales fell 2 percent in North America, GM's most profitable region. Sales fell 10 percent in South America.

The company's North America division earned $600 million. Without the recall charge, it would have earned $1.9 billion, up from $1.4 billion a year ago. Sales in the region fell to 745,000 cars and trucks.

GM also faces a barrage of lawsuits related to the ignition-switch recall. The company says it knows of 55 class actions in the U.S. and five similar actions in Canada filed against the company since the problem was announced.

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