Coverage: General Motors continues to struggle

It’s no secret that General Motors is struggling. They continue to recall cars and admit problems within the organization. It has some things to fix, and CEO Mary Barra is continuing to answer questions about the company’s handling of the issue.

Neal E. Boudette and Andrea Fuller had this story for the Wall Street Journal:

When General Motors Co. issued a recall in March for 1.3 million cars with power-steering systems that could conk out suddenly, it ended a defect case that got its start a decade ago.

One reason why it took so long is that GM for years said a loss of power steering doesn’t pose a serious safety risk. That meant government regulators had to prove that it did—a process that for 2004-2007 Saturn Ions took 10 years, even though owners complained about steering problems more than four times as often as owners of two competing models, according to a Wall Street Journal analysis of government records.

GM’s power-steering recall is an example of what happens when car makers resist regulators’ recall efforts. In such instances, National Highway Traffic Safety Administration officials and outside safety experts say, the agency faces obstacles to fast action that have roots in another GM recall three decades ago.

NHTSA’s bar is high for proving that a defect presents a danger. The agency opens investigations or pushes for recalls only if it has evidence that will hold up in court.

The New York Times had an anecdote-filled story by Hilary Stout, Bill Vlasic, Danielle Ivory and Rebecca R. Ruiz about who exactly will get compensated in court. It also pointed out the damage done when cars are left on the road.

Kenneth R. Feinberg, the victim-compensation expert hired by the company, is nearing the final stages of an elaborate process to determine who is eligible for payments and for how much. His plan, which is expected to be made public in the next two weeks, is seen as critical to the company’s ability to move beyond an issue that has prompted numerous investigations, congressional hearings, a $35 million federal penalty and withering public criticism.

While it will not come cheap, getting the payment plan right is crucial. Too generous and it could slow the automaker’s comeback from bankruptcy; not generous enough and victims will seek justice through lengthy and costly court battles, further dragging out the company’s turmoil.

Claims records, lawsuits and accident reports suggest that the list of injured survivors is long and tragic.

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Financial settlements for accident survivors are usually calculated by looking at a mix of medical expenses both for immediate treatment and a lifetime of continuing care, the wages that the victims would have made over their lifetime had they not been injured and the harder-to-measure factor of pain and suffering.

G.M. has an interest in seeing as many injury cases as possible handled not by the courts but through the compensation fund, which will begin reviewing claims Aug. 1. To that end, Ms. Barra has indicated the fund would not employ a distinction that the company has used to battle scores of other lawsuits — a provision in the company’s July 10, 2009, restructuring agreement that essentially created a “new G.M.” that was insulated from liability claims stemming from events before that date.

And while the company continues to deal with lawsuits, it’s dealers who are suffering the most, USA Today said in a story by Chris Woodyard:

As General Motors continues to pile on recalls, the scope has become staggering — and the work and customer interaction will all fall to the automaker’s franchised dealers.

They’re the ones who will perform the actual repairs on what is already 17.73 million vehicles in the U.S. — with the likelihood, GM says, of still more recalls by midsummer.

When it comes to replacing the faulty ignition switches that have cost 13 lives, the February and March recalls that started the avalanche, GM dealers have gotten new parts and performed the repairs on 177,000. That’s a fraction of the nearly 2.2 million vehicles in the U.S. under the switch recall. GM has pledged the repairs will be substantially done by October.

Given the burden, no wonder General Motors CEO Mary Barra singled out for praise GM’s hundreds of dealers on the front line of carrying out recall repairs.

So far, the dealers aren’t complaining. The pace of available parts to fix recalled vehicles has been a stream, not a river, so they aren’t overwhelmed. Customers, for the most part, haven’t hounded them for repairs. And the payments from GM for performing the repairs will certainly be a nice supplement to service department revenues.

There are, however, concerns. Some fret about any long-term damage to the GM brand. Others say the recalls, 44 so far this year and counting, also have resulted in delivery holdups for some top-selling models until the recall parts arrive and they can be fixed. That hurts the sales side of the business.

The brand is definitely damaged. I’m sure there are many consumers looking for new cars who are passing on purchasing GM vehicles, especially given the scope of the recalls. It also remains a tarnish on Barra’s resume as she continues to deal with problems created before her tenure.

The slow trickle of bad news isn’t helping either. It would be better for the company to do an information dump and just get everything out in the open. The constant headlines also point out the company still doesn’t have a handle on the extent of its problems.