General Motors faces questions
In the wake of revelations that General Motors Co. had waited 10 years to recall 1.6 million vehicles with faulty ignition switches, new CEO Mary Barra is feeling he heat
Jeff Bennett had this story in the Wall Street Journal:
General Motors Co. moved Monday to confront mounting questions over why it took nearly a decade to recall 1.6 million vehicles for faulty ignitions linked to 13 deaths, hiring a high-profile lawyer to lead its internal investigation and stepping up warnings to customers.
GM is bringing in Anton Valukas, the Chicago lawyer who led the court-ordered investigation of the Lehman Brothers collapse in 2008, as it tries to persuade consumers, regulators and lawmakers that it is responding rapidly. GM wants to avoid the kind of costly, damaging scandal that engulfed Toyota Motor Corp. in 2010 after the Japanese auto maker recalled millions of vehicles for problems related to unintended acceleration.
GM initiated a recall on Feb. 13, saying a faulty ignition switch could partially turn off certain vehicles while they were being driven, disabling their air bags. Drivers have since claimed the cars could become difficult to steer when the switch malfunctioned, resulting in accidents.
On Monday, GM launched a website to provide customers with information about the recall, warning owners of the affected vehicles to remove extra weight off their car ignition keys. The National Highway Traffic Safety Administration has given the auto maker until April 3 to answer 107 questions about its handling of the problem.
GM employees knew about the defect as early as 2004. The company has released a chronology sketching out in broad terms how the faulty switch was discovered and how the issue bounced around within its engineering division. The company’s disclosures to date don’t reveal who was responsible for the timing of the recall.
Meanwhile, the NHTSA hasn’t said why it didn’t take action after one of its own officials pointed out the potential problem during a March 2007 meeting. NHTSA officials have declined to comment on the meeting or provide any documentation about it.
The issues prompted a House committee to begin an investigation into what General Motors knew and when. Matthew L. Wald and Bill Vlasic had this story in the New York Times:
A House committee has started an investigation into the response by General Motors and federal safety regulators to complaints about faulty ignition switches that have been linked to 13 deaths, officials said on Monday.
An Energy and Commerce Committee subcommittee will hold hearings that will include the automaker and the National Highway Traffic Safety Administration, although the date has not been set, said Charlotte Baker, a committee spokeswoman.
The congressional investigation is not the first time the committee’s chairman, Fred Upton, has looked into the issue of consumer complaints going unheeded over defective cars.
In 2000, Mr. Upton, Republican of Michigan, led a subcommittee that investigated the rollovers of Ford Explorers with Firestone tires, a problem that followed years of complaints and was eventually linked to 271 deaths.
In response, Congress passed the Tread Act, a law that required automakers to report complaints of defects to the National Highway Traffic Safety Administration, to make it easier to spot trends.
Mr. Upton is particularly interested in how an automaker and safety regulators, despite the added oversight, again had trouble recognizing defect trends.
General Motors has said that it was first alerted to the problem in 2004, and despite twice considering fixes, declined to do so. The safety agency has received more than 260 complaints over the last 11 years about cars shutting off while being driven, according to a New York Times analysis, but never started a broader investigation. The agency repeatedly said that there was insufficient evidence to warrant one.
Writing for Reuters, Ben Klayman said the recall marked the first big test for Barra and how she handles it would set the tone for her tenure:
In her first big test as General Motors Co’s chief executive, Mary Barra has taken a hands-on approach behind the scenes in directing the automaker’s response to ignition-switch problems that have been linked to 13 deaths.
On Monday, GM said the team conducting an internal probe ordered up by Barra of the recall of more than 1.6 million vehicles is being led by the lawyer who investigated Lehman Brothers after the financial services firm collapsed in 2008.
Barra has been heavily focused on the recall since she learned of the issue in late January, about two weeks after she took over as the industry’s first female CEO.
The No. 1 U.S. automaker has said the recall to correct a condition that may allow the engine and other components, including front airbags, to be unintentionally turned off will begin next month when it has the replacement parts. Most of the affected vehicles are in North America.
Barra apologized for the recall and sent a letter last week to employees promising an “unvarnished” look at the recall that is occurring 10 years after the issue first came to light. She has not granted any interviews on the matter.
“Mary believes that her time is best spent on making the recall work as smoothly as possible for our customers,” GM chief spokesman Selim Bingol said in an email. “Meanwhile, GM is keeping our customers informed about the recall while working to provide timely responses to questions from regulators.”
While recalls are not unusual, the number of fatalities involved and the way GM handled this one stretching over the past decade has the potential to cost the company hundreds of millions of dollars in fines and possible legal damages, in addition to tarnishing its reputation.
The public relations nightmare of ignoring a problem for 10 years isn’t Barra’s making, but it’s her problem to fix. She’ll have to contend with employees, the government and consumers. It’s a big task and the future of the company is riding on her.