(Adds comment from Jim Koons Management)
By Diane Bartz
WASHINGTON, Jan 28 (Reuters) - General Motors Co and two dealership companies, Jim Koons Management and Lithia Motors Inc, will settle allegations they advertised that they sold carefully inspected cars that in fact had unrepaired safety recalls, the Federal Trade Commission said on Thursday.
The FTC's allegations were that GM said its "certified pre-owned vehicles" had a 172-point inspection but failed to disclose that no one had repaired such critical issues as an ignition switch defect that can affect engine power, steering, braking and airbag deployment.
GM paid more than $2 billion in total costs connected to its recall of older Chevrolet Cobalt and other cars linked to 124 deaths and 275 injuries. GM issued a record setting 84 recall campaigns with more than 26 million vehicles in the United States in 2014.
Under the terms of the settlement with the FTC, the companies are barred from saying their cars are safe unless all relevant repairs, including recalls, have been done or unless the companies disclose that the vehicle needs repair.
The companies are also required to contact customers by mail to tell them about the recalls.
GM said that it had been told of the FTC probe in June 2015, and made changes to ensure that repairs needed because of recalls were taken care of.
"We made changes to our certified pre-owned marketing program last year to address the FTC's concerns and we are pleased with the proposed resolution of the matter," said James Cain, a GM spokesman.
Koons said that it was unaware of any customer complaints about its advertising or disclosures. "We agreed to a settlement with the FTC to avoid the costs and disruption of litigation," the company said in a statement. "We do not admit any wrongdoing."
Litha did not immediately respond to requests for comment. (Additional reporting by David Shepardson; Editing by Grant McCool and Meredith Mazzilli)