Mary Barra, chief executive of General Motors (GM), just wrapped up her ritual flogging by a House panel. She apologized. She promised a full investigation. She remained calm and contrite while still resisting demands from grandstanding members of Congress for answers as to how GM so royally screwed up in its ignition-switch debacle.
All of that was to be expected. Barra admitted she’s at a loss as to exactly why GM took more than a decade to come to grips with the defect and recall 2.6 million cars (so far). The company has acknowledged that its employees first identified ignition-switch problems as early as 2001. When jarred, the faulty switch cuts power to the car—not a good thing when you’re in traffic. There have been dozens of crashes and more than a handful of deaths. The final numbers won’t be known until the plaintiffs’ lawyers are done doing their grim work of tallying claimants.
Amid the humiliation, Barra said one heartening and potentially important thing: GM has retained Washington attorney Kenneth Feinberg as a consultant to explore how to compensate families of accident victims whose defective GM cars are being recalled.
Feinberg, whose work sorting out mass-injury messes I’ve observed for more than two decades, knows what he’s doing. He supervised claim funds after the 2010 BP oil spill in the Gulf of Mexico and many other calamities, including mass shootings in Aurora, Colo., and at Virginia Tech. He’s fair, honest, and industrious.
If GM gives Feinberg a real opportunity to distribute compensation to deserving victims—without invoking a lot of technicalities related to the company’s 2009 taxpayer bailout and bankruptcy-court restructuring—there’s a chance that consumers will believe that the automaker is truly sorry and determined to make things right. It’ll also be critical that plaintiffs’ attorneys not overreach and try to undermine Feinberg’s work. That’s a lot of contingencies, I’ll admit, but bringing in Feinberg is an excellent first step.
Barra sounded appropriate, if vague themes along these lines: “I consider this to be an extraordinary event, and we are responding to it in an extraordinary way,” she said. “As I see it, GM has civil responsibilities and legal responsibilities. We are thinking through exactly what those responsibilities are and how to balance them.”
Feinberg’s track record in the BP (BP) case merits a quick review. Under pressure from the White House, the London-based oil company hired Feinberg in mid-2010 to help disburse funds in the wake of the horrific gulf spill. Over about 18 months, he cut checks totaling $6.7 billion for 220,000 claimants, among them many deserving working people and business owners. Under the system he set up, some recipients surrendered their opportunity to seek additional compensation; others did not. Numerous claimants took the company to court, as was their right.
The continuing claims litigation culminated in a multibillion-dollar deal in March 2012 between the oil company and a steering committee of plaintiffs’ lawyers. At the behest of those plaintiffs’ lawyers, who viewed Feinberg as too stingy, BP agreed to replace the Washington settlement expert with a local appointee. Since then, all heck has broken loose with the gulf claims process, making Feinberg’s tenure look like a Solomonic golden era by comparison. He’s not a miracle worker. He can’t guarantee success. While he was working on the BP fallout, though, some measure of justice got done.
Back on GM, my colleagues at Bloomberg News provide helpful additional background:
The [ignition-switch] crisis is GM’s biggest since emerging from bankruptcy in 2009. Yesterday, the Detroit-based 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.
GM faces a long and challenging road on the way to restoring credibility.