VOL. 129 | NO. 110 | Friday, June 6, 2014
GM: Incompetence, Negligence Led to Delayed Recall
WARREN, Mich. (AP) – General Motors says a pattern of incompetence and neglect, not a larger conspiracy or cover-up, is to blame for a long-delayed recall of defective ignition switches.
GM CEO Mary Barra, who released the results of an internal investigation into the company's missteps on Thursday, said 15 employees – many of them senior legal and engineering executives – have been forced out of the company for failing to disclose the defect, which the company links to 13 deaths and 54 crashes in which the air bags didn't deploy. Five other employees have been disciplined.
GM also said it will establish a compensation program for families of victims and those who suffered serious injuries in accidents related to the switches. The program is expected to begin taking claims Aug. 1.
Barra called the 315-page report by attorney Anton Valukas, whom GM hired in March to do the investigation, "brutally tough and deeply troubling." It lays bare a company that operated in silos, and employees who didn't take responsibility for problems or treat them with any urgency. Mistakes were made repeatedly as far back as 2002, when GM decided to use a switch that didn't meet its own specifications.
"That was a decision made by an engineer that led to tragic consequences," Barra said.
Since February, GM has recalled 2.6 million older model Chevrolet Cobalts, Saturn Ions and other small cars because their ignitions can slip out of the "run" position and shut down the engine. That disables the power-assisted steering and brakes and can cause drivers to lose control. It also disables the air bags. Trial lawyers suing the company put the death toll close to 60.
Deep within the company, engineers and others believed the ignition switch problem was an inconvenience, a "customer satisfaction" issue rather than a safety problem. Engineers believed that cars could still be steered when the engines shut off, even though the loss of power steering could cause drivers to lose control.
In 2005, the company failed to make a repair that would have cost an estimated 57 cents. A year later, engineer Ray DeGiorgio – who was among the 15 workers fired – approved a change in the switch design but didn't follow GM's policy to change the part number. That made the problem much more difficult to track for investigators later on.
Barra didn't directly answer a question about whether she should have figured out that the switches were a deadly problem. Before becoming CEO, she was product development chief for three years, and safety reported to her through GM's chain of command.
"I wish I had known, because the minute we knew we took action," she said. Barra has said she first learned about the issue in December, before she became CEO on Jan. 15.
Barra, a 34-year veteran of the company, told 1,000 employees gathered at GM's suburban Detroit technical center that the report was "enormously painful."
"I hate sharing this with you just as much as you hate hearing it," Barra said, in a speech that was also broadcast to the company's 212,000 employees worldwide. "But I want you to hear it. I want you to remember it. I want you to never forget it."
But some were critical of the report and its conclusions, which spared Barra and other top executives.
"It seems like the best report money can buy," said Sen. Richard Blumenthal, D-Conn. "It absolves upper management, denies deliberate wrongdoing, and dismisses corporate culpability."
Barra said Valukas interviewed 230 employees and reviewed 41 million documents to produce the report, which also makes recommendations to avoid future safety problems. The government released the report around noon Thursday.
Barra said the report found that individuals who could have helped uncover the problem didn't speak up.
"Because of the actions of a few people, and the willingness of others in the company to condone bureaucratic processes that avoided accountability, we let these customers down," Barra said. She again apologized to the families of those who died, well as those who were injured.
Last month, GM paid a $35 million fine – the largest ever assessed by the National Highway Traffic Safety Administration – for failing to report the problem quickly to federal regulators. GM knew about problems with the ignition switches as early as 2001, and in 2005 it told dealers to tell owners to take excess items off their key chains so they wouldn't drag down the ignition switch.
NHTSA also investigated the issues twice, in 2007 and 2010, but was unable to show that Cobalts were stalling or their air bags were failing to deploy at higher rates than peer vehicles.
GM began repairing the cars in April, and had fixed 113,000 as of Thursday, Barra said. But the company doesn't expect to fix them all until October. GM says the cars are safe as long as customers only use the key and have no extra items on their key chains.
Barra named a new safety chief at GM in March and pledged to quickly work through a backlog of potential recalls. As a result, the automaker has recalled a record 15.8 million cars and trucks in North America so far this year.
The company took a $1.3 billion charge in the first quarter to pay for the recalls. It expects to take a $400 million recall-related charge in the second quarter.
The report doesn't complete GM's recall saga. The automaker still faces a criminal investigation by the U.S. Department of Justice – led by the same team that recently reached a $1.2 billion settlement with Toyota over its 2010 sudden acceleration recall. It also faces multiple lawsuits from victims and from owners whose say their cars have lost value.
Barra, who testified before House and Senate committees in April, will also likely be called back to Washington.
Sen. Claire McCaskill, D-Mo., chairman of the Senate Commerce, Science and Technology Committee's consumer protection subcommittee, said she intends to hold a hearing on the delayed recalls later this summer.
"I won't be letting GM leadership, or federal regulators, escape accountability for these tragedies," she said in a statement. "The families of those affected deserve no less."
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