June 5, 2014 at 9:48 pm

Scathing report slams GM for years of recall delays

Mary Barra speaks of failures at GM town hall meet...
Mary Barra speaks of failures at GM town hall meet...: The CEO takes responsibility for the ignition problem scandal.

Warren — General Motors Co. missed a staggering number of opportunities to uncover and fix a deadly ignition switch defect over more than a decade, according to a scathing internal report that blamed “incompetence and neglect” for failing to discover the problem linked to at least 13 deaths and 54 crashes.

CEO Mary Barra on Thursday said the Detroit automaker fired 15 employees and disciplined five — most for failing to take action over a decade on a growing safety issue. GM also agreed to create a compensation program for families of people who died and those injured due to the defective ignition switches in 2.59 million recalled vehicles — mostly Saturns and Chevrolets. Barra said the company was committed to changing its deeply flawed culture and ensuring that a similar failure never occurs.

“We failed these customers,” Barra told more than 1,000 employees at a town hall meeting that was broadcast to employees around the world from its Warren Tech Center.“We didn’t do our job. ... We are going to fix the failures in our system — that I promise.”

The dismissed executives include Michael J. Robinson, who was GM’s vice president of sustainability and global regulatory affairs and previously general counsel for GM North America, several people briefed on the matter said. Others include two former heads of product investigations, Gay Kent and M. Carmen Benavides; several GM lawyers including Bill Kemp; and two engineers heavily involved in the ignition switch issue, according to people briefed on the matter. But the report found no evidence of a conspiracy or cover-up, or that the highest-level executives knew of the problem.

The report, written by Anton Valukas of law firm Jenner & Block after reviewing 41 million pages of records and interviewing 230 witnesses, paints a devastating picture of a company where no one took responsibility and executives repeatedly failed to share bad news with bosses.

It places much of the blame on a now-fired engineer, Ray DeGiorgio, who the investigation found made a “catastrophic” decision in 2002 to approve using ignition switches so far below the company’s specifications that they could result in cars stalling and air bags failing to deploy in crashes.

The report said DeGiorgio didn’t tell anyone that the part had been upgraded in April 2006, and that the part number hadn’t been changed.

Senior engineer Gary Altman, program engineering manager for the 2005 Chevy Cobalt, also was among the 15 dismissed.

GM Chairman Tim Solso said the board has been working closely with GM managers to implement reforms from the report. “The board, like management, is committed to changing the company’s culture and processes to ensure that the problems described in the Valukas report never happens again,” Solso said in a statement.

The report found GM didn’t take the ignition switch problem seriously enough. When presented with evidence of a serious safety problem, GM hired more experts or turned to committees to study issues for months or years without taking action. Few — if anyone — were held accountable for safety problems. Engineers failed to take basic investigative steps, the report found.

GM officials assigned to decide on recalls didn’t bother showing up for meetings. Over and over, there was little urgency to address the problem. GM engineers failed to revisit faulty conclusions. A critical factor was the failure of engineers “to understand, quite simply, how the car was built.” GM had made a deliberate decision to not deploy air bags when the ignition key was in the “off” or “accessory” mode to prevent passengers from being injured by air bags in parked cars.

The part — referred to as “the switch from hell” in early 2002 by DeGiorgio — was so bad it almost immediately needed to be redesigned because of complaints the car wouldn’t start in cold weather.

Top officials not alerted

No one at GM raised the issue at the highest level.

GM officials failed to search for critical documents in the company’s files or in public databases to make the connection. Because they didn’t make the connection, they classified the stalling as a “customer satisfaction” problem and not a safety issue. Two outside investigators, including a Wisconsin state trooper and an Indiana University research team, figured out the problem in 2007, but it took GM several more years to do so.

Over a 10-month period in 2012 and 2013, GM assigned three separate “champions” to lead the Cobalt review. Red flags and outside warnings repeatedly were downplayed. When an outside lawyer warned GM in July 2013 that lawyers for Cobalt owners could make a “compelling” case that GM “has essentially done nothing to correct the problem for the last nine years,” no one bothered to alert GM’s top lawyer.

Barra said the ignition switch problem could have been prevented at many points but GM employees failed to “disclose critical pieces of evidence that could have fundamentally changed the lives of those impacted.”

The National Highway Traffic Safety Administration said its preliminary review of the report “showed at all levels of the organization, GM’s decision-making, structure, process and corporate culture stood in the way of safety at a time when air bags were failing to work.”

'Not another business crisis'

Barra, who said GM will quickly work to implement eight major recommendations made in the report, said she doesn’t think other similar problems are bubbling under the surface. She also said more recalls are expected this summer as the automaker continues to look at all issues.

“These seemingly benign actions led to devastating consequences. In short, we misdiagnosed the problem from the beginning,” Barra said. “This is not another business crisis for GM. We aren’t going to simply fix this and move on. ... I never want us to put this behind us.”

Valukas turned over his report to the company on Monday. Valukas has agreed to brief two congressional committees and may testify. Barra briefed members of Congress and Transportation Secretary Anthony Foxx early Thursday.

Several GM safety officials have retired, left the company or moved to other positions as the recall crisis has unfolded since February. GM has named a new vice president overseeing safety issues and more than doubled the number of engineers looking at safety issues. GM has recalled a record 15.8 million vehicles worldwide in 30 campaigns this year and Barra said more recalls are likely this summer.

The U.S. Attorney’s Office in New York, aided by a federal grand jury, has launched a criminal investigation into GM’s conduct. The Securities and Exchange Commission, a group of state attorneys general and two congressional committees also investigate the company.

Last month, GM paid a record $35 million civil penalty to NHTSA and admitted it violated the law by failing to recall older Cobalts, Ions and other cars in a timely fashion. The automaker agreed to make significant safety changes and hold regular meetings with NHTSA for up to three years of enhanced oversight.

'Self-serving explanation'

Several lawyers, families of victims and some members of Congress, including Sen. Richard Blumenthal, D-Conn., criticized the report.

“In truth, it seems like the best report money can buy. It absolves upper management, denies deliberate wrongdoing, and dismisses corporate culpability,” Blumenthal said, adding the automaker can’t explain why the ignition switch part was changed but not the number. He said the Justice Department must investigate before Congress can accept “GM’s self-serving explanation that the cause was a failure of corporate silos or culture, rather than deliberate wrongdoing.”

Dan Hill, president of Ervin Hill Strategy Inc., a communications and government affairs firm in Washington, D.C., said Barra needs to personally share findings of the report with Congress and answer lawmakers’ questions — not wait until she is called back to testify.

Hill, who is not connected to the issue, said likely more recalls, more litigation and more investigations lie ahead for the company. “They’re still in the bad-news space” for a year or two, he said in an interview Thursday.

Georgia lawyer Lance Cooper, whose lawsuit against GM on behalf of the parents of Brooke Melton who died in a 2010 crash brought much of the ignition switch issues to light, said the Valukas report fails to show there was intentional conduct to choose cost over safety at GM.

“They’re not owning up to the fact that they did do cost over safety deliberately,” Cooper said in an interview. “When the safety defects started to rise… they covered it up and didn’t disclose it. Not only do they have a moral obligation, they also had a legal obligation to disclose it to NHTSA.”

Ken and Beth Melton settled with GM last year but they have filed a new lawsuit, claiming the automaker fraudulently concealed evidence and that a corporate representative committed perjury in the original case.

GM’s stock fell 25 cents a share to close at $36.27 on Thursday.

“The announcement hopefully will limit the negative news flow and improve GM’s image,” Sterne Agee analyst Michael Ward said Thursday in an investors note. “The downside: by setting up a victims fund, GM may have opened itself up to years of additional litigation.”

GM President Daniel Ammann, left, CEO Mary Barra and Mark Reuss, executive vice president of global product development, purchasing and supply chain, give an update on the ignition switch recall probe Thursday. Barra said GM was committed to changing its flawed culture and ensuring that a similar failure never occurred. / Daniel Mears / The Detroit News