TIME General Motors

GM’s Mary Barra Back in the Hot Seat on Capitol Hill

GM CEO Mary Barra Testifies At House Hearing On Ignition Switch Recall
General Motors CEO Mary Barra (L), and Anton Valukas, head of GM's internal recall investigation, field questions while testifying during a House Energy and Commerce Committee hearing on Capitol Hill on June 18, 2014 in Washington, DC. Mark Wilson—Getty Images

"It is enormously painful to have our shortcomings laid out so vividly," General Motors CEO told lawmakers at a hearing over defective engine parts

General Motors CEO Mary Barra was grilled by lawmakers over a lethal defect in vehicle ignition switches once again Wednesday, expressing regret for lax oversight, while promising skeptical lawmakers that quality controls had improved across the company.

Lawmakers on the House Subcommittee on Oversight and Investigations criticized GM managers for fostering a “culture of secrecy” that allowed knowledge of defective engine parts to remain concealed within the company for more than a decade.

Faults in the ignition switches have been linked to 56 accidents in which car engines and air bags suddenly switched off while the car was in motion. GM has admitted faulty switches played a role in 13 deaths, though advocates have claimed more lost their lives.

Barra, who had already appeared before the House Energy and Commerce Committee in April, called the findings of an internal investigation into the ignition switch defects “brutally tough and deeply troubling.”

“For those of us who have dedicated our lives to this company, it is enormously painful to have our shortcomings laid out so vividly,” Barra said in her opening statement to the House Subcommittee on Oversight and Investigations. She said the company has since fired 15 employees and beefed up its staff of safety investigators.

Skeptical lawmakers pressed Barra on the extent of the fixes. “You mentioned 15 were fired,” Rep. Timothy Murphy (R-Penn.) said to Barra, “99.999 percent, if my math is right, of the people [still at GM] are the same … If you haven’t changed the people, how do you change the culture?”

The questioning narrowed in on the role of senior managers, including Barra, who claimed to have no knowledge of the faulty switches until 2014. “That the most senior GM executives may not have known about a defect that caused more than a dozen deaths is frankly alarming and does not absolve them of responsibility for this tragedy,” said Rep. Diana DeGette (D-Colo.). The company’s “culture of secrecy” must be changed, she added.

Lawmakers also raised concerns about GM’s successive waves of recalls. GM has issued 44 recalls for 20 million vehicles worldwide. GM says defects related to more recent recall notices have not been linked to any known deaths or injuries. Nonetheless, Rep. Murphy called the most recent call, on Monday, “hauntingly similar to the Cobalt ignition switch recall.”

Barra said GM was currently preparing a compensation fund for victims families that would begin processing claims by Aug. 1st. “I want this terrible experience permanently etched in our collective memories,” Barra said.

TIME Gadgets

After Recall, Nest Smoke Alarm Is Back and Discounted

Nest

Nest’s followup to its nicely designed smart thermostat was a smart smoke detector called Protect (see our original coverage here).

One of the features of Protect — aside from being Internet-connected and able to send alerts to your smartphone — was a trick that let you wave your hand underneath it to silence it.

The thought was that people have a tendency to accidentally set off their smoke alarms while cooking, and getting the alarms to pipe down is more cumbersome than it should be.

However, the company found that the feature might have been at risk of malfunctioning, which in certain cases could have silenced the alarm when it was supposed to be making noise. So in early April — a few months after Nest was acquired by Google for $3.2 billion — nearly half a million Nest smoke detectors were recalled; the wave-to-dismiss feature was able to be deactivated via a software update as well, making physically sending the smoke detector back to Nest unnecessary.

Now, the Nest Protect is back on the market, with the wave-to-dismiss feature disabled altogether. The company had originally alluded to trying to fix it via a future software update, so we’ll see if and when that comes to fruition. The price of the Nest Protect has also dropped from $130 down to $99 as well.

[New York Times]

MONEY stocks

Recalls Aren’t General Motors’ Only Problem

2014 Chevrolet Cruze
Strong sales for the fuel-efficient Chevy Cruze helped drive General Motors sales in May. courtesy of General Motors

GM's strong May sales show consumers are looking beyond the automaker's recent quality issues. Unfortunately, the company faces other challenges.

So much for the specter of recalls.

In May, car buyers in the U.S. largely ignored the bad news surrounding General Motors and flocked to GM dealerships. In a month in which the nation’s largest automaker announced yet another series of recalls — bringing GM’s total number of recalled vehicles this year to more than 11 million — the automaker reported its best monthly sales since the global financial crisis struck in 2008.

GM said it delivered 284,694 vehicles in the U.S. last month, marking a 13 percent rise from May 2013′s tally. The better-than-expected results were driven in large part by a strong month for GM’s Chevrolet division, where sales jumped 14%, led by strong demand for the Chevy Cruze, which appeals to younger buyers. As for Buick, GM’s more upscale line saw its best May results in nearly a decade.

Analysts had been expecting good results, but not this good. For instance, Edmunds.com, citing favorable credit conditions that were making it easier for consumers to buy and lease new cars, forecast that GM sales would reach nearly 270,000 in May.

This proved to be a good test for CEO Mary Barra. When General Motors named Barra the first female CEO of a major automaker late last year, the C-suite shift was supposed to herald “the new GM,” a reinvented titan with improving finances and better cars. Recently, though, it was another switch — a malfunctioning part in ignitions in some older-model vehicles — that dominated the headlines and kept reminding the public of the old GM.

Tuesday’s announcement indicates Barra & Co. have gotten consumers to look past the bad headlines.

But Barra faces other challenges:

The company is still losing market share.

Last year, GM’s share of total U.S. auto sales slipped to 16.9%, down from the 17.5% share it enjoyed in 2012. Meanwhile, rival Ford — which also had a good May, selling 254,084 vehicles, up 3% from a year ago — saw its share rise from 15.2% to 15.7%.

It’s not because GM isn’t trying.

As a result of its bankruptcy five years ago, GM shed some struggling brands, such as Hummer and Saturn. The move allowed GM to trim the number of platforms on which the company’s vehicles are built, and that in turn made it easier and cheaper to upgrade the firm’s entire line. Starting last year, GM redesigned 80% of its vehicles, resulting in cars and trucks that have “never been better in the history of the company,” says Kelley Blue Book senior analyst Karl Brauer.

Unfortunately, GM’s chief rival is about to go on an upgrade spree. Ford is set to launch the first aluminum-frame truck, which significantly improves fuel efficiency.

And critics say GM priced some newer models, such as the Cadillac ELR, too high to gain market share.

GM still lacks buzz.

There’s one area where GM is selling at a big discount: its stock.

F Chart

F data by YCharts

The company’s shares trade at a modest price/earnings ratio compared to its peers, and GM’s P/E ratio — unlike Ford’s — hasn’t really lifted recently.

GM PE Ratio (Forward) Chart

GM PE Ratio (Forward) data by YCharts

GM’s low valuation may seem appealing at first, but the stock’s P/E ratio has barely budged in the past year despite the company’s refreshed domestic vehicle lineup — a sign that investors may lack faith in the turnaround.

Right now, Europe is still emerging from recession. And while China offers opportunity, GM sales there pale in comparison to the domestic market. Barrack Yard Investors portfolio manager Marty LeClerc says that puts the onus for General Motors’ success squarely on the company’s new U.S. line.

If today’s numbers are any indication, investors can feel hopeful the U.S. line is making waves. Unless Ford’s upcoming new truck has consumers thinking GM is old again.

TIME Technologizer

Nest’s Smoke Detector ‘Recall’ Doesn’t Mean You Need to Send Yours Back

Nest Smoke Detector
Nest Labs

A problem disclosed in early April is now the subject of an official bulletin from the Consumer Product Safety Commission

Nest Labs–a startup recently bought by Google which brings high style and web smarts to mundane household devices–is recalling Nest Protect, a smoke and carbon monoxide detector, over concerns that its alarm might fail to go off in emergency situations. The Consumer Product Safety Commission estimates that 440,000 Nest Protect units are affected by the problem.

Wednesday’s recall news, though important, isn’t quite as big a deal as it sounds like: It’s more of a formality, as the CPSC is officially alerting consumers to measures which Nest took on its own back on April 3. And the “recall” doesn’t involve Nest owners having to send the detectors back for repair; they were designed all along to update their own software over Wi-Fi, a feature which makes this unexpected development less of a disaster.

The risk relates to one of the detector’s most clever features, “wave to dismiss.” If the alarm goes off because of something which isn’t actually dangerous–like a little smoke wafting from your oven as you cook dinner–you don’t need to frantically whip a towel through the air or stand on a chair to turn it off. Instead, you can merely wave your hand and a motion detector inside Nest Protect will shut off the alarm.

Here’s the rub: The company concluded that there was a chance that the feature might malfunction, causing Nest Protect to stay silent in a situation that really is dangerous. There are no known examples of any harm coming to people or property because of the problem, but Nest decided to issue a software update which temporarily disabled the feature while it worked on a permanent fix.

On April 3, Nest disclosed the discovery of the potential hazard, issued the software update which shut off wave-to-dismiss, halted sales of new units and offered a refund to any Nest Protect owner who was unable or unwilling to perform the update.

Why the delay before the CPSC’s recall notice? The agency had its own technicians examine Nest’s solution for the issue and approve it–a process which took a few weeks. It considers the formal notification it published today to be a recall, even though the resolution involves the smoke detector self-installing the update. (And as before, consumers can also return the unit for a refund.)

Nest, meanwhile, says it’s finishing a new version of “wave-to-dismiss” which will bring back the feature while eliminating the malfunction. It’ll be part of another software update which the company plans to push out in the next few weeks, whereupon it will also resume sales of Nest Protect.

MORE: How a Thermostat Can Save the World

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 Companies

GM’s Plan to Prevent Another Recall Debacle

Mary Barra, CEO of General Motors, speaks at the New York International Auto Show, on April 15, 2014 in New York City.
Mary Barra, CEO of General Motors, speaks at the New York International Auto Show, on April 15, 2014 in New York City. Mark Lennihan—AP

CEO Mary Barra has announced a new "global product integrity" unit to prevent future problems, though hasn't yet detailed how the group would operate, as the car giant faces criticism for its bungled handling of a massive recall for a defect linked to 13 deaths

General Motors has created a new “global product integrity” group in the wake of a major, widely criticized recall earlier this year, CEO Mary Barra announced at the New York International Auto Show on Tuesday. She did not provide details on how the unit would operate, but acknowledged that it should not take 1o years to address a known problem like the ignition-switch failures, which led to at least 13 deaths.

“We know the world is watching,” Barra said at the annual car show. “And we know we’ll be judged by our actions.”

MORE: Should Mary Barra be on the 2014 Time 100? Vote now.

GM recalled 2.6 million cars in February for an ignition-switch problem that was detected as early as 2004, CNNMoney reports. Barra, who became the company’s first female CEO in January, testified in front of congressional committees this month about the mishandled recall. She has also met with and apologized to some of the families of the drivers who died as a result of the flaw.

[CNNMoney]

 

TIME Vehicles

Toyota Is Recalling a Massive 6.39 Million Cars Globally

Women walk in front of Toyota Motor's logo at the company's showroom in Tokyo
The Japanese giant Toyota recalls several million cars world-wide © Toru Hanai—Reuters

The world's largest automaker is recalling 6.39 million vehicles through 27 models for defects like a sliding driver's seat or airbags that won't deploy, making for the second-largest recall in the company's history

Toyota, the world’s biggest auto-maker, is recalling 6.39 million vehicles world-wide because of various faults, it announced Wednesday.

The recall, which applies to 27 models in five different regions of the world, is the second-largest in the Japanese automaker’s history, Reuters reports.

“Toyota is not aware of any injuries or fatalities caused by this condition,” the company wrote in a statement about the recall in North America, where more than 1.3 million cars are being called back.

The faults include steering problems that could keep the airbag from deploying, an engine starter risk that could be a fire hazard and a driver’s seat defect that could cause the seat to slide forward in a crash.

The glitches were found in 27 different Toyota models, including RAV4, Corolla, Yaris, Matrix and Highlander, that have all been sold globally. Toyota issued a recall of 7.4 million cars in 2012 and a recall of 2.1 million vehicles earlier this year.

 

TIME Ford

Ford Recalls Nearly 435,000 Cars to Fix Faulty Parts

The car company is making two recalls, covering five models, in order to repair faulty parts. The larger recall was of Ford Escapes, which can rust and lead to steering issues. No injuries were linked to either recall

Ford said Monday it was recalling nearly 435,000 cars and SUVs in total to fix two separate potentially faulty parts, the Associated Press reports.

The larger recall comprises 386,000 Ford Escapes from models years 2001 through 2004, which have frames that can rust and hamper steering control. That recall covers models sold or registered in 20 states and Washington, D.C. as well as six Canadian provinces, where salt used to clear snow and ice from area roads can exacerbate the problem.

The other recall, which applies to 49,000 Ford Fusion, Lincoln MKZ, Ford Escape and C-MAX vehicles from model years 2013 and 2014, will replace seat back frames that weren’t welded properly.

No injuries were linked to either recall, though Ford said it was aware of one crash related to the rusting frames.

Ford’s recall comes as rival automaker General Motors is in the hot seat over allegations it mishandled manufacturing problems that have been linked to at least 13 deaths.

[AP]

TIME General Motors

Watch: The Long, Troubled History of the Chevy Cobalt

Even before the ignition defect, Car owners complained of locks inexplicably opening and closing, power steering failures, and even door windows falling out

+ READ ARTICLE

Long before the Chevrolet Cobalt became known for having a faulty ignition defect, it was already seen as a lemon.

In more than 120 instances, General Motors was forced under state laws to buy back faulty Cobalts, pay settlements to owners or let them trade in the cars, a New York Times report showed.

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

Watch the video above for more.

TIME

GM CEO Mary Barra’s Stark Apology: ‘Terrible Things Happened’

General Motors CEO Mary Barra introduces the 2015 GMC Canyon pick-up truck at the Russell Industrial Center in Detroit, on Jan. 12, 2014.
General Motors CEO Mary Barra introduces the 2015 GMC Canyon pick-up truck at the Russell Industrial Center in Detroit, on Jan. 12, 2014. Tannen Maury—EPA

Mary Barra, who only recently became CEO of automaker General Motors, has apologized for the broadening controversy surrounding the company's safety recalls and promised the auto giant would improve the process in the future

General Motors CEO Mary Barra addressed GM employees in a contrite message Monday afternoon as executives at the American auto giant seek to address a widening scandal over safety issues affecting millions of cars. GM has admitted that it was aware for nearly 10 years of an ignition issue that affected 1.6 millions cars and can interfere with air-bag deployment. The safety issue has resulted in at least 12 deaths, and two congressional investigations and the Department of Justice are now reportedly scrutinizing GM’s operations.

“Something went wrong with our process in this instance, and terrible things happened,” Barra said in her video message to employees. “We will be better because of this tragic situation if we seize the opportunity. And I believe we will do just that.”

Barra said the company has sent out letters to customers, and recalled an additional 1.55 million autos as part of its ongoing internal safety review. GM is increasing production lines to help replace parts in faulty recalled cars and dedicating a slew of new customer-service representatives to deal with the problem, she said. “We are completely focused on the problem at the highest levels of the company, and we are putting the customer first and that is guiding every decision we make,” Barra said. “That is how we want today’s GM to be judged. How we handle the recall will be an important test of that commitment.”

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