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Is This Bad News?: GM Gets Maximum Fine

Stocks in this article: GM TM

NEW YORK (TheStreet) -- The headline sounds pretty bad, huh? General Motors  (GM) getting fined the maximum daily amount by the National Highway Traffic Safety Administration. That is, until you realize the maximum daily fine can't exceed $7,000. 

For me or you, $7,000 a day for weeks might deal a crippling blow, but not for a huge company like GM. 

In a time when investors continue to see headlines for millions of recalled vehicles and companies taking charges of hundreds of millions of dollars for the recalls, $7,000 a day is practically a relief. Even if this daily fine goes on for a year, GM is looking at paying only roughly $2.5 million. 

According to the NHTSA, GM will be fined for failing to answer enough questions regarding its ignition-switch recall. The agency pressed the automaker with 107 questions. According to USA TodayGM left more than one-third of those questions unanswered.

In its own defense, GM has said it's "worked tirelessly from the start." I tend to agree. The company and its CEO, Mary Barra, have shown a great deal of transparency and cooperation in the investigation. 

The issues with the NHTSA are based more on principal than on dollar amounts. Obviously, $7,000 per day doesn't mean anything. That would be like a normal person being fined a penny per day for some infraction. 

But the NHTSA is bothered by GM's failure to respond to so many questions. From the same USA Today report, Carl Tobias, a law professor at University of Richmond, said, "It is a very stern letter. NHTSA intends to deal very strictly with GM." 

Although the fine is something investors might laugh at, the penalties from the Justice Department won't be so humorous. 

Last month, Toyota Motors  (TM) got whacked with a $1.2 billion fine from the Justice Department for a case quite similar to GM's current predicament, and GM is going to be shelling out a lot of dough for this ignition-switch cover-up.

For now, though, investors can breathe a sigh of relief now that GM has received its first not-so-horrible news from the government regarding the recalls.

At the time of publication, Kenwell held no position in any stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

-- Written by Bret Kenwell in Petoskey, Mich.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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