General Motors CEO Mary Barra didn't mince words on Thursday. (Daniel Mears / The Detroit News)
Mary Barra didn’t mince words.
In one of the more extraordinary airings of dirty laundry this town has seen in a long time, the General Motors Co. CEO let ’er rip Thursday with her take on a stinging internal assessment of what went wrong in the ignition switch recall scandal blamed for at least 13 deaths and nearly 50 accidents.
GM CEOs don’t talk publicly like this. She called the report by Anton Valukas, a former U.S. attorney, “extremely thorough, brutally tough and deeply troubling.” It details “a history of failures” in which “nobody took responsibility” and there was “no demonstrated sense of urgency” in a saga “riddled with failures.”
But the 315-page opus is more than a corporate catharsis-cum-indictment of 11 years of operational dysfunction and negligence, which may or not be deemed criminal by investigators. With documented corroboration of insiders, Barra included, it confirms in stark terms the dark underside of GM’s culture, proving some of the worst, most caricatured aspects of old GM exist still in the new one.
“Determining the identity of any actual decision-maker was impenetrable,” the report says, conveying an atmosphere of casual disregard for customers that is stunning in its cowardliness. “No single person owned any decision.”
It details the “GM Salute” affected by managers and executives, who would cross their arms, point outward and suggest that responsibility for a problem resides elsewhere. The “GM Nod,” described by Barra as an “empty gesture,” is where “everyone nods in agreement to a proposed plan of action, but leaves the room with no intention to follow through.”
“Culture doesn’t change overnight,” she said in a news conference following her global town hall with 1,200 employees at the automaker’s Vehicle Engineering Center in Warren. “It’s a continuum. It’s a journey.”
Yes, and the Valukas report confirms that some parts of GM have yet to begin that journey, despite Barra’s claims to Congress that the new GM is all about customers and quality, not cost and mediocrity. If the new boss is looking for the metaphoric club to accelerate that change, to restructure and clean house, to bolster her rhetoric with results, she’s got a big one.
Fifteen employees, the majority of them from the executive ranks, are no longer working for GM in engineering, safety, legal affairs and public policy. Another five were disciplined but are still employed. Federal regulators are reviewing the report, and the Department of Justice is continuing an investigation that could culminate in criminal charges.
The Valukas probe exonerates Barra, her top deputies and General Counsel Michael Millikin, but the ordeal is just beginning. Investigations continue; more lawsuits are likely; protests by the families of victims injured or killed in crashes are expected at next week’s annual meeting in Detroit; and media scrutiny won’t end with a big report and stern words from the CEO.
Details of a compensation fund for victims, which GM confirmed Thursday, still must be finalized. So far costs associated with the recall total $1.7 billion, but GM has yet to say how large the fund will be, who will be eligible and how it will be administered. That is expected be decided soon by Kenneth Feinberg, an independent victim compensation expert.
GM’s professed determination to “do the right thing” by its customers and victims of the dodgy ignition switch partly will determine how the company weathers the crisis. With 70 percent of recalled vehicles no longer in production — including the models implicated in the switch problem — and monthly sales outperforming last year, the market hit is likely to be contained.
Barra’s credibility is another story. Her direct, tough-minded acknowledgment of GM’s problems is likely to win respect internally and among investors who view such crises (as questions from Wall Street analysts Thursday indicated) through the lenses of financial impact and management credibility.
Publicly acknowledging the problems and firing the most egregious offenders — two characteristics seldom associated with the GM that birthed and nursed the switch fiasco more than a decade ago — should buy Barra credibility and trust. With the notable exception of her predecessor, Dan Akerson, GM CEOs are known more for making excuses, standing by underperformers or moving them around, not making them go.
Not Barra. She displayed a level of transparency and, yes, leadership rarely seen in a GM CEO, pre- or post-bankruptcy. This, after all, is the Detroit automaker still struggling with the reality of its failure — the collapse into bankruptcy and its self-generated hype about a “New GM” now colliding with human pushback and the company’s checkered history.
The candor and decisiveness beginning to emerge in this crisis suggest the new CEO’s style, as well as a concerted effort to break with broken tradition. Even though the Valukas report drills into the past, the fact is that much of what it reveals and who it highlights are still very much in the present — a cautionary reality for Barra and her team.
As much as investors may accept the comparatively limited financial impact of the recalls, federal regulators and members of Congress are not likely to be so measured.
The report’s characterizations and Barra’s public embrace of them portends another round, or more, of congressional thrashings, regulatory pushback and probably indictments by the U.S. attorney in the southern district of New York.
None of that will be easy, pleasant or cheap. But having leadership that’s honest about the company’s failings and demonstrating through actions a commitment to fix them is a necessary place to start.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays.