Bloomberg News

House Panel to Probe GM Recall of Models for Faulty Switches (2)

March 11, 2014

A House panel will investigate the response of General Motors Co. (GM:US) and U.S. regulators to consumer complaints about ignition-switch failures that led to the recall of 1.6 million vehicles and are linked to at least 13 deaths.

Members of the House Energy and Commerce Committee today asked GM Chief Executive Officer Mary Barra for documents and field reports related to the recall. Committee Chairman Fred Upton, a Michigan Republican, said yesterday that a hearing will be held in the coming weeks to explore whether GM or the National Highway Traffic Safety Administration missed “something that could have flagged these problems sooner.”

“If the answer is yes, we must learn how and why this happened, and then determine whether this system of reporting and analyzing complaints that Congress created to save lives is being implemented and working as the law intended,” Upton said.

A Senate panel may also have a hearing, according to a person familiar with the plans.

The issue is emerging as the first major test for Barra, who was promoted to replace retiring CEO Dan Akerson two weeks before an internal company decision on Jan. 31 to do a recall. She is personally leading senior executives who are monitoring progress on the recall, which includes Chevrolet Cobalt and Pontiac G5 small cars.

In the Senate, Jay Rockefeller, a West Virginia Democrat, has asked for a subcommittee hearing on the matter from Claire McCaskill, a Missouri Democrat, said a person familiar with the matter who didn’t want to be identified because the request isn’t public. The Detroit News reported the request earlier.

Committee Letter

The House hearing focused on GM puts the Cobalt recall in a select group of defects going back to the 1970s. It would be only the fourth automotive recall to get congressional oversight since then, according to Joan Claybrook, a former NHTSA administrator and longtime consumer advocate who has been critical of GM’s response.

A bipartisan group of 10 members of the House Commerce Committee said GM representatives have already been in contact with the panel. The lawmakers are asking for a private briefing with the company by March 18 and various incident reports, consumer complaints and other documents by March 25.

“The committee will examine whether GM knowingly allowed faulty and dangerous cars to remain on the road,” Representative Henry Waxman of California, the top Democrat on the committee, said in a statement. “We will be assessing whether NHTSA has all the tools the agency needs to keep drivers safe.”

‘Fully Cooperating’

GM said yesterday it had hired Jenner & Block LLP Chairman Anton Valukas, who served as a U.S. Justice Department-appointed examiner of the downfall of Lehman Brothers, to lead an internal company inquiry into the handling of the ignition-switch flaw.

The company probe is being conducted jointly by a team led by Chicago-based Valukas and GM General Counsel Michael Millikin, the automaker said in a statement. Attorneys from the law firm King & Spalding are also part of the team, GM said.

The internal company investigation is running parallel to a query from NHTSA on what steps the company took to investigate engineering concerns and consumer complaints dating from 2004. Detroit-based GM has until April 3 to answer specific questions in a 27-page order the agency issued March 4.

“We are fully cooperating with NHTSA and will do so with the Committee, too,” GM spokesman Greg Martin said in an e-mail last night. “We welcome the opportunity to help both parties have a full understanding of the facts.”

Biggest Fine

GM slid 4.2 percent to $35.53 at 3:08 p.m. New York time. The shares fell 9.2 percent this year through yesterday.

GM last month said heavy key rings or jarring can cause ignition switches on some Chevrolet, Pontiac and Saturn vehicles to slip out of position, cutting off power and deactivating air bags. GM has linked the defect to at least 23 crashes, including the 13 deaths.

The auto-safety regulator could fine GM as much as $35 million, which would be the most ever by the U.S., if it finds the automaker didn’t pursue a recall when it knew the cars were defective. The agency can also seek criminal charges.

The initial recall on Feb. 13, covering 778,562 Cobalts and G5s, was widened less than two weeks later to more than 800,000 additional vehicles. Those include 2003-2007 Saturn Ions, 2006-2007 Chevrolet HHRs, 2006-2007 Pontiac Solstices and 2006-2007 Saturn Skys. Other models affected are the 2005-06 Pontiac Pursuit sold in Canada and the 2007 Opel GT sold in Europe.

10-Year Timeline

GM North America President Alan Batey said in a Feb. 25 statement expanding the recall to the Saturn Ion and other models that the company’s “process employed to examine this phenomenon was not as robust as it should have been.” GM is preparing a second timeline related to that recall expansion.

Valukas, 70, was the U.S. attorney in Chicago from 1985 to 1989. He also served as special counsel to the City of Chicago investigating the city’s health-care system and in 1993 was chairman of the Illinois Governor’s Task Force on Crime and Corrections, which led to prison reform legislation, the law firm said in his biography on its Web page.

The company’s reputation may be driven by how it responds, Barra said in a March 4 note to employees.

GM “has acted without hesitation” to address the recall in the past few weeks, Barra said in a note on a website last week for employees. “We have much more work ahead of us.”

NHTSA is seeking information on 107 separate questions about the company’s steps leading to the recall, including the 10-year timeline the company provided regulators Feb. 24.

2007 Meeting

The agency said it wants names and correspondence from any employee involved in the company’s attempts, going back to 2004 to investigate and isolate ignition-switch failures. It asks for details on why engineering fixes proposed in 2004 and 2005 weren’t implemented.

NHTSA also said it wants to know what happened after a 2007 meeting in which regulators and GM discussed an air bag failure after a Cobalt lost engine power. U.S. auto-safety regulators were told by a research team in 2007 of a possible link between defective ignition switches and air bags not deploying.

GM described the issue in a technical service bulletin to dealers the previous year that the automaker said resulted in repairs for 474 customers. NHTSA didn’t start a defect investigation at the time and GM didn’t issue a recall until this year.

‘Significant Questions’

NHTSA is also facing questions about why more wasn’t done to address the Cobalt safety questions in 2007 and earlier. Claybrook on March 7 asked the Transportation Department’s inspector general to investigate.

The most recent safety issue to get a congressional hearing was in early 2010, when Toyota Motor Corp. (7203) President Akio Toyoda was called to testify about the company’s response to reports of sudden, unintended acceleration. Reports of Firestone Wilderness AT tires suffering tread separations, and hundreds of rollover accidents involving Ford Explorer sport-utility vehicles in 2000 and 2001 drew several hearings. A recall of Firestone 500 tires in the 1970s drew House scrutiny.

Upton cited the Ford-Firestone tire malfunctions in the committee statement last night, saying the inquiry led to legislation designed to strengthen communication between carmakers and regulators, while enhancing NHTSA’s ability to assess risks.

“Congress passed this bipartisan solution with the intention of exposing flaws and preventing accidents and fatalities,” the lawmaker said. “Yet, here we are over a decade later, faced with accidents and tragedies, and significant questions need to be answered.”

To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net; Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net

To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net Romaine Bostick, Elizabeth Wasserman


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