From the factory floor to the corporate suite, employees at General Motors saw indications of a deadly ignition defect and failed to disclose the problem to the government.

Yet even now that prosecutors are closing in on a criminal case against the automaker, their effort to charge individual employees at the center of the case has hit an obstacle: legal loopholes that the auto industry helped create. And while some G.M. employees still face investigation, the prospect of sweeping indictments across the company’s ranks has faded, according to people briefed on the investigation.