Bloomberg News

GM’s Barra Faces Off With U.S. Lawmakers Over Recall of Deadly Cars

April 01, 2014

Mary Barra

General Motors CEO Mary Barra testifies before the full House Energy and Commerce hearing room in a hearing entitled "The GM Ignition Switch Recall: Why Did It Take So Long?" on April 1, 2014 on Capitol Hill in Washington, DC. Photographer: Allison Shelley/Getty Images

General Motors Co. Chief Executive Officer Mary Barra told a U.S. House committee that the automaker still doesn’t have all the answers that might explain why it waited a dozen years to fix a flaw linked to 13 deaths.

With victims’ families sitting in the audience, Barra tried today to assure lawmakers that an internal investigation being run by Jenner & Block LLC Chairman Anton Valukas would shed light on how an ignition-switch defect was allowed to persist. She also announced the hiring of claims lawyer Kenneth Feinberg, who supervised mass settlements following the Sept. 11, 2001, terrorist attacks.

“It angers me that we have a situation that took over a decade to correct,” Barra told reporters after the hearing, when asked whether she was angry to learn about the faulty switches weeks after she became CEO in January.

Related:

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  • BMW to Recall 232,098 Vehicles in China for Bolt Defect

Barra, in her highest-profile appearance as GM (GM:US) chief executive, and David Friedman, acting chief of the U.S. National Highway Traffic Safety Administration, faced barrages of questions from members of the House Energy and Commerce Committee. They sought to know who knew what, when, and what actions GM and the regulator should have taken to probe and repair a flaw that has prompted the recall of 2.6 million cars.

The crisis is GM’s biggest since emerging from bankruptcy in 2009. Yesterday, the automaker doubled its recall-related charges to $750 million after saying faulty power steering in 1.5 million other vehicles needs to be fixed. So far this year, GM has recalled almost 7 million vehicles worldwide, denting a reputation for quality that the automaker had only recently repaired after emerging from a government-sponsored bankruptcy.

Defect Probe

GM and NHTSA opted multiple times not to open a formal investigation or declare a recall to address the flaw that could cause the ignition switch to shut off when jarred. That in turn could cause the engine to stall and the air bags to be deactivated.

Friedman was asked why NHTSA officials in 2007 overruled an agency employee who said a formal defect investigation of the switches should be started. Several lawmakers scoffed at his statement that air-bag failures discovered after several fatal accidents involving Chevrolet Cobalts didn’t necessarily indicate a defect, because the devices are designed not to deploy in certain situations.

“We need a better understanding between the vehicle’s power and air bags going off,” he told reporters after testifying. “This connection is clearly something that has raised a lot of questions for us.”

Representative John Dingell, a Michigan Democrat, said there’s a flaw in NHTSA’s decision-making process, and that the agency appears to be short-staffed and underfunded.

Questions Unanswered

Friedman during the hearing reiterated that the agency would have acted decisively if GM had provided then some of the facts that are now just coming out. The agency is looking at whether GM broke the law by delaying the recall.

“If GM did not follow the law in getting information to us quickly, we’re going to hold them accountable,” Friedman said.

Barra said she couldn’t answer a number of questions during the hearing because they’re being explored by Valukas. She said she didn’t know if her predecessor, Dan Akerson, was aware of the switch defect.

In what was probably her most uncomfortable exchange at the hearing, Barra wouldn’t commit to Representative Paul Tonko that GM will provide the complete version of the outside investigator’s report, saying that the committee will receive “the appropriate findings.”

Truth Telling

“So, in other words, there’s no commitment to share the full report?” Tonko, a New York Democrat, asked.

Said Barra, “I’m saying I will share what is appropriate.” Tonko paused for about four seconds, then said, “I hear the answer.”

The committee asked Barra why GM didn’t immediately know about a change its parts supplier made in the switch in 2006 and why the part wasn’t then assigned a new number that would have shown it was different.

“The question these families back here want to know is: What’s changed at GM,” Representative Bruce Braley, an Iowa Democrat, asked Barra. “Isn’t it true that throughout its corporate history GM has represented to the driving public that safety has always been its No. 1 priority?”

“I can’t speak to the statements that were made in the past,” Barra said in response. “All I can tell you is the way we’re working now.”

‘Business Case’

While Barra became CEO this year, she is an engineer by training who’s worked for GM for more than three decades. Barra was in vehicle manufacturing engineering during much of the 2000s, which put her in a role of being responsible for the machines that are used for building cars and trucks. GM said her job during that time didn’t give her any oversight of product design or the recall of defective vehicles.

Asked by reporters if she could’ve shared more information in the hearing, she said she couldn’t. Asked how she couldn’t have known about the switch defect until two months ago, she said, “I’m telling you the truth.”

Barra was asked to respond to revelations that GM decided it would be too expensive to fix the part. After months of studying switch failures in the Chevrolet Cobalt, GM canceled a proposed change in 2005, when a project engineering manager cited high tooling costs and piece prices, according to documents obtained by House investigators.

“None of the solutions presents an acceptable business case,” the engineer said, according to a GM memo cited by the House committee. While the memo didn’t identify the person, Gary Altman testified in a lawsuit last year that he was the program engineering manager for the Cobalt in March 2005 and continued in the job until that May.

Part Number

Representative Diana DeGette, a Colorado Democrat, accused GM of putting cost-cutting ahead of safety, citing the business-case memo that put the cost per part for changing the ignition switch at 57 cents.

Barra said the company’s culture has changed.

“Today, if there is a safety issue, we take action,”Barra said. “We’ve moved from a cost culture to a customer culture.”

GM shares fell less than 1 percent to $34.34 at 4 p.m. New York time. The stock (GM:US) has lost 16 percent of its market value this year.

Work that one part of the company was doing wasn’t being shared with another part of the company, Barra said. It wasn’t clear whether GM ever told NHTSA of the ignition-switch design change, Barra said.

133 Complaints

“This is personal to me, because I come from Michigan, the auto state, and the auto capital of the world.” Representative Fred Upton, the Michigan Republican who leads the committee, said. The investigation will continue until it gets answers and it “can assure the public that they are safe,” Upton said.

House investigators said in a memo today that consumers complained to GM dealers 133 times about cars unexpectedly stalling or turning off when they went over bumps or nudged the ignition key. At a news conference outside the U.S. Capitol, family members of crash victims called for tougher criminal penalties for automakers that fail to report defects.

GM technicians linked many of those customer complaints to faulty ignition switches, at a time the company was denying a defect existed, according to the memo, which was based on an analysis of the automaker’s warranty-claims database. The company still hasn’t reported most of those cases to regulators, the staff members said.

Feinberg Hiring

Feinberg was brought in as a consultant to begin assessing how to compensate victims of the defective switch, Barra said.

Consumer groups and representatives, including Consumers Union, Consumer Federation of America and Ralph Nader, have requested that GM establish a fund for victims of its defective products.

In addition to his work on compensating 9/11 families, Feinberg ran compensation funds for victims of mass shootings in Aurora, Colorado, and at Virginia Polytechnic Institute and State University, the school known as Virginia Tech. He also oversaw compensation limits for executives at GM and six companies bailed out by the U.S. Treasury, including insurer American International Group Inc.

Friedman told reporters that his agency will re-evaluate its performance.

“Our first job in all of this is that the recall gets done and consumers get their vehicles fixed,” he said. “We also have to make sure we look at what NHTSA did, so we improve our ability to address all of these cases in the future.”

To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net; Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net; Tim Higgins in Washington at thiggins21@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net Bernard Kohn, Romaine Bostick


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