What's the car? There was an issue with the actual VATS reader on late 80's early 90' cars. The ignitions cylinder has been replaced several times on my STS. The reader itself is a HUGE job and requires removing almost the entire dash.
The ignition cylinder is most likely the problem and is pretty inexpensive to fix. There is a small wire inside there that contacts the key. That gets worn out or bent or whatever.
On the other hand if you wanted to you can bypass the system.
Bypass instructions. This is how I did it on my 89 STS
The VATS wire is orange, black or purple. There will actually be 2 wires together. I think mine was purple. Look under the dash along the steering column, you'll see a purple wire and if you follow it you'll find a small disconnect plug along the way.
Measure the resistance of the pellet in your key. This needs to be accurate. Go to Radio Shack and buy a pack of resistors as close as possible to your key.
Bend the wires on the resistor so that you can put them into the plug going to the car not the steering column. Since i had every intention on fixing mine I did NOT solder I just taped it in place until I did the repair.
There is also good information
here and
GM VATS Pellet Inserted Chip.
