TIME Autos

GM’s Mary Barra Faces Another Capitol Hill Mauling

General Motors CEO Mary Barra Testifies Before Senate Committee About GM's Recalls
CEO of the General Motors Company Mary Barra testifies during a hearing before the Consumer Protection, Product Safety, and Insurance Subcommittee of the Senate Commerce, Science and Transportation Committee on July 17, 2014 on Capitol Hill in Washington. Alex Wong—Getty Images

Barra is headed to the Senate for her fourth congressional hearing since record series of recalls began in February

Senators grilled GM’s general counsel Michael Millikin during a hearing Thursday after an internal investigation released last month found that his legal team knew of safety concerns linked to a faulty ignition switch for several years before recalls were announced in 2014.

“How in the world, in the aftermath of this report, did Michael Milliken keep his job?” asked Sen. Claire McCaskill, chair of the Subcommittee on consumer protection, product safety, and insurance, which held the hearing. “It is very clear that the culture of lawyering up and Whac-A-Mole to minimize liability in individual lawsuits killed innocent customers of general motors.”

“The failure of this legal department is stunning,” she said.

CEO Mary Barra, making her fourth hearing appearance on Capitol Hill since the company began massive recalls this year related to the ignition switch problem that has been linked to at least 13 deaths, was largely praised by Senators for her handling of the scandal, which erupted just weeks after she assumed the post.

Thursday’s hearing came in the wake of a New York Times report that found that GM withheld information from regulators inquiring about fatal accidents. Citing documents obtained through the Freedom of Information Act, the New York Times reported on Tuesday that GM “repeatedly found a way not to answer the simple question from regulators of what led to a crash.” In some cases, GM said it had not conducted an assessment and in others it simply declined to provide an answer. In another case, the company cited attorney-client privilege.

The hearing in Congress aimed to focus on accountability in corporate culture, as lawmakers aim to keep corporations from covering up safety concerns. Three senators introduced a bill on Wednesday that would impose criminal penalties for corporate executives who hide product dangers.

Milliken says he was not informed about the safety concerns until February of this year, and Barra defended her decision not to fire him. “He is a man of high integrity,” she said.

Following the internal investigation last month, GM fired 15 employees and Barra blamed “a pattern of management deficiencies and misjudgments.” But she said the probe found no deliberate cover-up by the company.

The Justice Department is separately investigating why it took the company more than a decade to address the problem.

Barra and Millikin were joined at the hearing by Anton Valukas, who headed up the internal report, and Rodney O’Neal, the head of the ignition switch supplier, Delphi. Kenneth Feinberg, who is administering GM’s compensation payments, also took questions from lawmakers about the compensation program.

TIME Business

Ralph Nader: GM Must Pay Big for What Was Clearly an Institutional Cover-Up

GM CEO Mary Barra Testifies To House Hearing On The Company's Ignition Switch Recall
General Motors Company CEO Mary Barra testifies during a House Energy and Commerce Committee hearing on Capitol Hill, on April 1, 2014 in Washington, DC. Mark Wilson—Getty Images

Top management must be held accountable for a pattern of inaction and the auto company's uncommunicative committee structures.

The ongoing and tragic General Motors debacle involving the mishandling of the fatal ignition switch defect reached its latest milestone with the release last week of a company-commissioned 315-page report by former U.S. Attorney Anton Valukas. Valukas condemned GM’s “troubling disavowal of responsibility” that led “to devastating consequences.” He declared that for more than a decade, the facts about these faulty switches that took the lives of motorists by stalling and depowering the vehicles thrashed around an “astonishing number of committees” inside GM’s sprawling silo-like bureaucracy.

What Valukas delivered for top GM management was concisely described by Sen. Richard Blumenthal (D-CT), who said, “It seems like the best report money can buy. It absolves upper management, denies deliberate wrongdoing and dismisses corporate culpability.”

The Valukas Report concluded that there was no cover-up, even though GM’s new CEO Mary Barra attributed the delay to a “pattern of incompetence and neglect.” She dismissed mid-level employees, some senior level managers, disciplined five others and installed new executives to supposedly shape up the place.

In her speech to 1,000 GM employees, Barra began to get at the core problem when she declared that employees should report failures to their supervisors and, if that doesn’t work, to “contact me directly.” This is not remotely the right sequence. Few employees would expose their careers to such potential retaliation by the “cover their rear” attitude of the GM hierarchy.

The report cites what has become known as the “GM nod”: “The GM nod, Barra described, is when everyone nods in agreement to a proposed plan of action, but then leaves the room with no intention to follow through, and the nod is an empty gesture.” Other witnesses explained the “GM salute, a crossing of the arms and pointing toward others, indicating that the responsibility belongs to someone else.”

Meanwhile, year after year, nearly 3 million Chevrolet Cobalts and Saturn Ions, among others, carried this lethal but easily fixable defect, resulting in highway crashes, deaths and injuries. Not until February of this year did GM announce the recall of millions of these cars. Nor did the Department of Transportation act to compel such a recall, even though it knew about the defect for years. Finally, this year, it fined GM the maximum sum of $35 million.

How can top management not be held accountable for such a pattern of inaction, such a miasma of evasive, uncommunicative committee structures, such a malfunctioning chaos of mortal information not being passed on to the top officials of the company? Taken together, it clearly was a 13-year institutional cover-up.

Clarence Ditlow, longtime GM watchdog and head of the Center for Auto Safety, which I co-founded, called the Valukas report “little more than an elaborate whitewash that buys into GM’s arguments that it was a bunch of incompetent engineers, lawyers and mid-level managers who were fired as a result.” Ditlow argues that “GM has a corporate culture where denying safety problems has been prevalent and taking responsibility for safety defects has been rare.” He also faulted the report’s “buying into the company’s argument that this is just an airbag defect – yet stalling has been the subject of over 300 safety recalls from all companies from 1966-2013. The Valukas report ignores the 2004 death and injury Early Warning Reports (EWR) filed by GM on the models covered by the ignition switch recall through 2013.”

Incredibly, the ignition switch hazard was classified as a “customer convenience issue,” rather than an urgent safety failure. But as former National Highway Traffic Safety Administration physicist Dr. Carl E. Nash told me, GM has a long history of denial, delay, cover-ups and blaming everyone but itself for millions of serious defective motor vehicles.

GM is bracing for the results of the Justice Department’s criminal investigation, the Securities and Exchange Commission’s probe, and the two Congressional Committees’ ongoing inquiries, all of which lie ahead. But on its own, GM must act to compensate the bereaved families and the injured survivors in product-defect crashes both before and after its 2009 bankruptcy and its $50 billion government bailout. The kangaroo court of corporate bankruptcy dissolved existing personal injury claims, stripping the victims of their constitutional rights to have their day in court.

Secondly, shuffling personnel and rearranging committees will not do the job Barra says she wants done. What will be effective is if she establishes an independent ombudsman who confidentially receives complaints from internal whistle-blowers and reports them directly to GM’s CEO and President, as well as to the Department of Transportation. As Nassim Taleb wrote in his recent book Antifragile, nothing is more productive of accountability than top bosses having “skin in the game.”

Providing a monetary incentive to the reporting employee for saving the company a boatload of trouble and averting highway tragedies will also help. Companies often give money to workers who suggest dollar-saving ways to run production or distribution lines. GM can certainly do the same for internal life-saving reports by conscientious GM personnel.

Ralph Nader is a consumer advocate and author of Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State.

TIME Autos

GM CEO Pledges ‘New Industry Standard for Safety’

GM CEO Mary Barra Testifies To House Hearing On The Company's Ignition Switch Recall
General Motors Company CEO Mary Barra testifies during a House Energy and Commerce Committee hearing on Capitol Hill, on April 1, 2014 in Washington, DC. Mark Wilson—Getty Images

Mary Barra is taking personal responsibility for the problem plaguing GM's corporate culture, despite an internal report revealing that top management didn't cover up the defects leading to the auto company's recalls.

It’s hard to overstate how unprecedented GM CEO Mary Barra’s announcement this morning of the findings of U.S. attorney Anton R. Valukas’ investigation of the company’s ignition switch scandal was. Barra called the report, based on 350 interviews with 230 individuals, as well as the examination of 41 million documents, “extremely thorough,” “brutally tough,” and “deeply troubling.” The National Highway Traffic Safety Administration will be posting the whole report later today on their website, but in the meantime, here are the three things you need to know about the case and its ramifications, based on Barra’s preview of the report.

  1. This wasn’t a trade-off between cost and safety – Barra says that the report found no evidence that the bean counters within the firm pushed the engineers to compromise safety in order to save 90 cents on an ignition switch that ended up costing lives. Rather, this was about a company with lots of divisions and moving parts that didn’t talk to one another. The ignition switch scandal was, in the end, a kind of death from a thousand cuts in which multiple divisions had information that could have prevented the safety issues, which they didn’t share, and for which no one person took ultimately responsibility. Those “silos” are what Barra is going to try and break down over the next few weeks and months – one of the key steps she’s taking to do that is putting responsibility for safety issues in the C-suite, as well as appointing a single VP of safety to coordinate everything, with the help of 35 new safety investigators.
  2. Barra isn’t guilty herself, but she’s taking personal responsibility for fixing not only the problem, but also GM’s corporate culture. Barra didn’t know about the problem – indeed, she said that she believed “deeply in my heart” that if information had traveled out of various corporate silos and up the food chain, “we would have dealt with this issue very differently.” In one of the most telling moments of her speech, she told employees that if any of them saw a problem with safety that should be addressed, they should tell their supervisors, and would be commended for doing so. And, if they still didn’t feel it was being addressed, they should come to her – she actually said “contact me directly,” which is the first time I’ve ever heard a CEO say that in a similar press conference.
  3. This is a scandal that could change not only GM, but also the auto industry itself, and the broader business landscape. The “silos” that Barra kept referring to, those divisions within the company that don’t talk to each other, are a problem not just for GM, but for nearly every big company in America. Finding examples of this is like shooting ducks in a barrel – there’s the famous anecdote about two Sony divisions building plugs for a single product without knowing what the other was doing, or the blue chip tech companies that hire PR reps to follow around executives and write down what they are saying so that they can tell the rest of the company, because the leaders don’t do it themselves.

Expect “de-siloing” to become a major management topic. And expect Barra to continue to be in the spotlight – she gave a rock star performance at this conference, and has set the bar for herself even higher, pledging to set a “new industry standard for safety.” If she can get all the many parts of GM to talk to one another, she may set a new standard for corporate management, too.

TIME Autos

General Motors Fires 15 People Linked to Recall Scandal

An internal GM report found no deliberate cover up and said the top management did not know about the defect until the recall

+ READ ARTICLE

General Motors CEO Mary Barra said Thursday the automaker has fired 15 people and disciplined five others following an internal investigation into why it took more than a decade to address a defect that’s led to the death of at least 13 people.

“Some were removed because of what we consider misconduct or incompetence. Others have been relieved because they simply didn’t do enough: They didn’t take responsibility; didn’t act with any sense of urgency,” Barra said.

However, Barra said the report found no deliberate cover-up by the company — GM’s top management was unaware of the problem until the company decided to begin recalling millions of affected vehicles earlier this year, according to the report. Instead, Barra put the blame on “a pattern of management deficiencies and misjudgments.”

GM top brass ordered the report, conducted by former U.S. Attorney Anton Valukas, after the company began massive recalls in February because of defective ignition switches, which caused some cars to lose power steering and airbag functions. The report laid out a series of findings and recommendations that Barra said the company had already begun to undertake.

GM has recalled at least 13.5 million vehicles for various issues this year, 2.6 million of which because of ignition switch problems. The recalls came after the company was put under intense pressure from Congress and federal authorities for its failure to fix the switch issues for more than a decade. On Thursday, Barra suggested that more recalls will follow.

“As I’m sure you know, we are taking an aggressive approach on recalls,” she said. “In the near term, you might expect to see a few more recall announcements.”

Barra also announced a compensation program for victims seriously injured as a result of the defective ignition switch as well as the families of those killed in connection with the problem. The program, which will be administered by Kenneth Feinberg — who ran the September 11th Victim Compensation Fund — will begin accepting claims on Aug. 1.

TIME Automakers

GM Recalls Another 2.7 Million Vehicles

The car giant is recalling about 2.7 million vehicles in the U.S. for issues like a hydraulic brake booster problem, hoping to raise flags early this time, amid a federal investigation into why it waited more than a decade to recall vehicles with a deadly ignition switch defect

General Motors said Thursday it’s recalling about 2.7 million additional vehicles in the U.S., including more than 140,000 cars suffering from brake problems.

Among GM’s newly-recalled vehicles is the 2014 Chevrolet Malibu, which has a hydraulic brake booster problem that can make stopping the vehicle more difficult. The company said it was aware of four crashes, but no injuries, that may have been related to the brake issue.

The fresh recalls come as GM is already grappling with the recent recall of 2.59 million cars over defective ignition switches. GM faces a federal recall over its decade-long delay to address the ignition switch problem, which has been linked to at least 13 deaths.

“These are examples of our focus to surface issues quickly and promptly take necessary actions in the best interest of our customers,” Jeff Boyer, vice president of GM Global Vehicle Safety, said in a statement regarding the new recalls.

The largest of the recalls announced Thursday involves break lamp wiring corrosion affecting 2.4 million previous generation cars. GM said the defect could result in brake lamp failures as well as disable cruise control, traction control, electronic stability control and panic braking assist operations where applicable.

GM said it was aware of two injuries and 13 crashes as a result of the brake lamp defect as well as several hundred complaints. The recall related to the brake lamps involves the 2004-2012 Chevrolet Malibu, 2004-2007 Chevrolet Malibu Maxx, 2005-2010 Pontiac G6 and 2007-2010 Saturn Aura. The automaker also said it issued a technical service bulletin about the problem in 2008.

In a third recall, GM said that 477 recently built full-size trucks may have defective tie-rods — part of the vehicles’ steering system — that could separate and cause a crash. The company said it has already fixed the problem on the assembly line and is now warning dealers and owners of vehicles that have already been sent to market.

GM said last month it took a $1.3 billion hit after it recalled 7 million vehicles worldwide, including cars with the defective ignition switch. GM said Thursday it expects the latest recalls to cost the company another $200 million.

TIME Earnings

General Motors Profits Drop 86 Percent After Recalls

The troubled automaker took a $1.3 billion hit after it had to recall 7 million vehicles worldwide, 2.6 million of them because of problems with ignition switches that have been linked to 13 deaths so far

General Motors said Thursday its first quarter profits dropped approximately 86% from the same period last year after a series of massive recalls cost the automaker $1.3 billion.

The company’s profits in the first three months of the year fell to $125 million, compared to $865 million for the first quarter of 2013. This year’s first quarterly earnings report marks the company’s worst showing since it reported a loss after going through bankruptcy in 2009, the New York Times reports.

But the company’s first quarter profits still trounced analyst estimates. Excluding one-time items, GM’s profit was 29 cents a share, well above the Bloomberg estimate of 4 cents a share.

GM has recently recalled 7 million vehicles worldwide, 2.6 million of which because of faulty ignition switches that have been linked to at least 13 deaths. The company was also hit with $300 million in restructuring costs and $419 million because of a valuation change in Venezuelan currency.

TIME GM recall

GM’s Recall Troubles Haunt Former Executive’s Run for Congress

Wife Of Longtime Congressmen John Dingell, Debbie Dingell Announces Her Run For His Seat
AN ARBOR, MI - FEBRUARY 28: Debbi Dingell, wife of Congressman John Dingell, the longest serving member of Congress in U.S. history who recently announced he will not be seeking reelection, speaks with reporters after she discussed the announcement she made earlier this morning that she will run for his seat and seek the democratic nomination for Michigan's 12th Congressional District at the Downtown Home and Garden store February 28, 2014 in Ann Arbor, Michigan. (Photo by Bill Pugliano/Getty Images) Bill Pugliano—Getty Images

Articles about the Chevy Cobalt's ignition shut-off problems were written in 2005, but top General Motors officials including Debbie Dingell, who oversaw the company's marketing strategies that year and who's now running for Congress, apparently didn't read them

If you think things look bad for General Motors now, they looked even worse back in the summer of 2005. Its finances were shaky, its models were unloved and the big carmaker’s future was very much in doubt. So it had a lot riding on the reviews of its newest line of small cars that was supposed to help it shift away from the slowing SUV sales it had relied on for years.

Which is why the review of the Chevy Cobalt in the New York Times on June 19, 2005 was such good news for the company. The Times called the Cobalt “a good car, if not a great one,” a “creditable competitor” to comparable Toyota and Honda models, and one of several new GM models that were “vastly improved and generally likeable.”

Sadly, no one in top management read the article, according to current GM officials who are currently scrambling to manage the PR fallout of the belated recall of Cobalts earlier this year. Or at least, say the current officials, no top managers read the sidebar story that ran next to the main review and reported on a troubling phenomenon: intermittent stalling of the Chevy Cobalt and loss of electrical power due to a problem with the ignition system.

GM now claims top managers only learned of the Cobalt’s ignition system problems this year, and only mid- and low-level officials have been punished. But the coverage of the ignition issue in the Times and elsewhere in June 2005 raises uncomfortable questions for GM, and for at least one former official from the time who is seeking public office.

The Times review was highlighted in documents released by the House oversight committee earlier this month, and was referenced in documents released by the National Highway Traffic Safety Administration over Easter weekend. It reported that Chevy was telling dealers that drivers could accidentally cut power to the car’s engine and should be told to lighten the load on their keyrings. It cited one example of the cutoff occurring when the reviewer’s wife was driving the car, and it quoted a reviewer in a small Pennsylvania paper who said the problem happened four times in a week of testing the car.

A week after the Times review, the Cleveland Plain Dealer wrote about the problem. And the House oversight committee also published a statement that had been released in June 2005 by a GM spokesman, Alan Adler, acknowledging the ignition problem and saying that dealers and “service advisers” had been told to tell customers to remove items from their keyrings that might be contributing to the shutoff problem.

Apparently only good news made it up the chain to top managers in 2005, however. In comments to the media and GM employees on Oct. 17, 2005, then-CEO Rick Wagoner praised the market success of the Cobalt and other new models, saying “these products have been well-received by the enthusiasts and general press.” Wagoner was forced out as part of GM’s restructuring during the government bailout of the company in 2009 and has largely stayed out of the spotlight since then.

Not all top officials from that time may find it so easy to stay out of the GM recall story as it unfolds, however. Debbie Dingell was GM’s Executive Director of External Affairs and Constituent Relations in 2005, overseeing the company’s marketing strategies, community relations and its relationships with labor, suppliers, dealers, business organizations and constituency groups. She too retired from GM in 2009. But after her husband John Dingell, the long-serving Congressman from Michigan’s 15th district, announced his retirement in February this year, she announced she would run for his seat.

Debbie Dingell declined to answer questions about the 2005 coverage of the ignition shutoff problem. However, she said through a spokeswoman that she knew nothing about the troubles besetting the Cobalts and other small cars when she worked for GM. “Her responsibilities were not related to the engineering and design segment of the business and she was not part of the management group related to or responsible for recall decisions,” says Liz Boyd, Dingell’s spokeswoman. Boyd says Dingell was not aware of the articles in the Times or the Plain Dealer and was not aware of the instructions sent to dealers and service managers regarding the ignition cut-off problem.

GM has named a former federal prosecutor to investigate what the company knew about the problem as it unfolded. Company spokesman Greg Martin said of the 2005 Times story, “It was printed in the paper and we’ll have further information as it becomes available.”

TIME GM recall

More Trouble for GM and Mary Barra

GM CEO Mary Barra Testifies At Senate Hearing On GM Recall
Mary Theresa Ruddy, right, and her husband Leo Ruddy hold a photo of their daughter Kelly Erin Ruddy, who was 21 when she died in a car accident in 2010 involving her 2005 Chevy Cobalt, as General Motors CEO Mary Barra testifies before the Senate Commerce, Science and Transportation Committee on Capitol Hill, April 2, 2014 in Washington, DC. Mark Wilson—Getty Images

Documents released by the House Oversight Committee show the engineer who designed the faulty ignition switch at the heart of the GM recall of 2.6 million cars in February had approved fixes to the system eight years ago without changing the part number

The engineer who designed the faulty ignition switch at the heart of the February GM recall of 2.6 million cars approved fixes to the system in 2006 without changing the GM part number, according to documents released by the House Oversight Committee on Friday.

The faulty design allowed the ignition switch to turn off accidentally, cutting power to electrical systems including air bags and assisted steering. The 2006 fix was intended to make electrical cut-offs less likely, the released documents show. Thirteen deaths have been linked to the failure.

The engineer, Ray DeGiorgio, testified under oath in April 2013 that he was unaware of the changes to the switch.

The head of the House Oversight Committee, Rep. Tim Murphy of Pennsylvania, said, “much work remains to be done in this investigation. Documents show individuals at GM allowed vehicles with safety concerns to remain on the road for almost a decade, resulting in at least 13 fatalities.”

Also in the documents released by the committee Friday is an e-mail to current GM chief Mary Barra dated Oct. 3, 2011, informing her of continuing failures with electric power steering in GM models. Barra apologized for GM’s handling of the ignition switch problem during testimony earlier this month and said she didn’t learn about the ignition switch problem until January. The email released Friday refers only to potential electric power steering issues, not ignition problems.

DeGiorgio was suspended by GM earlier this week.

TIME Autos

GM Puts Two Engineers on Paid Leave During Recall Probe

General Motors CEO Mary Barra, recently grilled by lawmakers about a massive recall linked to at least 13 deaths, says the engineers were placed on paid leave as an independent investigation looks into why it took GM so long to announce the recall

Two engineers at GM have been put on paid leave amid an outside investigation into the automaker’s massive recall linked to at least 13 fatalities, CEO Mary Barra said in a statement Thursday.

Barra said the move was an interim step while former U.S. Attorney Anton Valukas leads an independent investigation into why the company delayed the recall, CNN Money reports.

The company issued a recall for 2.6 million cars because of a faulty ignition switch that can cause the car to shut off while driving, disabling airbags, power steering and anti-lock breaks. It recently emerged GM knew of the fault as early as 2004, but failed to act.

[CNNMoney]

TIME Automotive

Congress Pulls GM Over For Failing to Fix Defect

The General Motors logo outside its headquarters at the Renaissance Center in Detroit on Aug. 25, 2009.
The General Motors logo outside its headquarters at the Renaissance Center in Detroit on Aug. 25, 2009. Jeff Kowalsky—Reuters

A House subcommittee investigating the recall of 2.6 million Chevy Cobalts and other cars says GM ignored or dismissed several warnings about the danger of a defective ignition switch for a decade, and that regulators were also asleep at the switch

General Motors in 2005 twice neglected to fix a defect in ignition switches that has forced the company to recall 2.6 million cars and a federal regulator failed to investigate warnings about the defect, a congressional memo said Sunday.

The memo, released by the House subcommittee investigating the case, said that both engineers and the automobile giant’s brand quality division investigated the defect and proposed possible fixes during the spring of 2005. Some solutions were deemed too costly and time consuming to implement, while at least one other was canceled after initially being approved.

The faulty ignition switch, which has caused the Chevrolet Cobalt and other model cars to stall and has disabled the air bags and power steering, has been linked to 13 deaths.

A House Energy and Commerce subcommittee is currently investigating why General Motors didn’t recall the cars before this year, as the company first became aware of the problem in 2001 and was warned that the defect was linked to four fatal crashes in 2007. The company’s CEO Mary Barra will testify before the subcommittee in charge of the investigation on Tuesday and participate in a Senate hearing Wednesday, while an official from the National Highway Traffic Safety Administration is also testifying before lawmakers this week.

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