Secret Report On General Motors Recalls Out, CEO Barra sees “Pattern of Incompetence”
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. 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 investigation, which she ordered in March, “brutally tough and deeply troubling.” It took GM more than a decade to report the deadly switch failures to regulators and the public, and to recall the cars.
Ignition Switch-Problem Caused Recall of 2.6 Million Cars
“I hate sharing this with you just as much as you hate hearing it,” Barra told employees in a town hall meeting at GM’s suburban Detroit technical center. “But I want you to hear it. I want you to remember it. I want you to never forget it.” Barra then promised to “fix the failures in our system.”
The crisis began in February, when GM recalled 780,000 older-model Chevrolet Cobalt and Pontiac G5 small cars because of defective ignition switches. GM soon added the Saturn Ion and other small cars to the recall, which ballooned to 2.6 million cars worldwide.
The switches in the cars 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. GM reiterated Thursday that it only links 13 deaths to the problem, but trial lawyers suing the company put the death toll closer to 60.
Barra said attorney Anton Valukas interviewed 230 employees and reviewed 41 million documents to produce the report, which also makes recommendations to avoid future safety problems. The government was expected to release the report later Thursday.
Barra said the report found that the company was operating in “silos,” and 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.
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.
In 2006, GM engineer Ray DeGiorgio — who designed the switch — approved a change in the switch design, but didn’t inform the government or change the corresponding part number. In subsequent years, that made it harder for other GM engineers to figure out why older Cobalts performed worse than newer ones.
Barra confirmed Thursday that two employees placed on leave in April have been fired; DeGiorgio was one of those employees.
GM began repairing the cars in April, and had fixed 86,000 as of Thursday. But it has said it 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.”