GM CEO Mary Barra on Tuesday at her first annual stockholders meeting in Detroit. (David Coates / The Detroit News)
— General Motors Co. CEO Mary Barra on Tuesday said employees are taking ownership of findings in GM’s internal investigation on the ignition switch recall issue. She also said the company expects to make an estimate on the cost of a compensation program for victims by the end of the second quarter.
“I’ve gotten hundreds of emails of employees reaching out,” Barra told reporters ahead of her first stockholders meeting in Detroit, as a small protest with a few families of people who lost children due to the faulty ignition switch picketed outside. “They are absolutely owning the report.”
Barra said she has received a “handful” of emails from employees bringing potential safety problems to her attention, to which GM has responded. She said she expects no more problems of the magnitude of the ignition switch defect. GM also expects no more dismissals linked to the ignition switch issue, but there could be a few more tweaks to the company’s organizational structure as it works to change its culture, Barra said.
She told the 29 shareholders present — fewer than who attended last year’s meeting — that in the short-term there could be “a few more recalls” like the four GM announced Friday. None of the shareholders who spoke complained about the recalls during a question-and-answer period. Some, including the Rev. Jesse Jackson, praised Barra’s handling of the situation.
The company has been plagued by a record-setting pace of recalls this year. Barra was in her new role for only a few weeks before GM opted to recall the first group of cars for ignition switch defects. In total, the company has recalled 2.59 million older Chevy Cobalts, Saturn Ions and other cars for defective ignition switches. The switches, when bumped, can move from the “run” to “accessory” or “off” position while driving, cutting engine power and power steering. In crashes, air bags won’t deploy.
The company has linked 13 deaths and 54 crashes to the problem.
Last week, GM said it will compensate families who lost loved ones or people who were injured in crashes linked to faulty switches. The terms are being set up by compensation expert Kenneth Feinberg. The first claims are expected to be accepted Aug. 1 and GM has not given any estimates on what it might cost the company.
Barra told analysts last week that Feinberg will determine the number eligible. Last week, GM Chief Financial Officer Chuck Stevens said the company would likely handle the compensation charge — which it hopes to estimate by the end of the second quarter up through its earnings release July 24 — as a special item and could adjust it later as claims come in.
“We want to make sure that everyone that was harmed with serious physical injury or lost a loved one, that we do the right thing,” Barra said Tuesday. “And that’s been our guiding principle in our conversations with Mr. Feinberg.”
Recalls have already cost GM $1.3 billion this year, with another $400 million expected to be charged in the second quarter. The automaker has issued 34 recalls this year totaling nearly 16 million vehicles in North America.
The company faces investigations by Congress — Barra is expected to return to testify again — as well as the Department of Justice, U.S. Securities and Exchange Commission and a state attorney general. The company faces more recalls costs including lawsuits, the compensation plan and a possible Department of Justice fine.
Bank of America Merrill Lynch analyst John Murphy on Monday told reporters in Detroit he pegs the figures all told at less than $5 billion. Morningstar Inc. analyst David Whiston last week in an investment note said he was estimating $7 billion for the victims fund, future Department of Justice fine, SEC fines and other litigation.
Asked about the compensation plan and its impact on shareholders, Barra said: “I believe if we do the right thing for customers, and we do the right thing for the business, we are doing the right thing for shareholders.”
Last week, GM announced it had dismissed 15 employees and disciplined five employees. Barra said Tuesday that employees who “were determined to have acted inappropriately” are no longer working at company.
A 315-page report released last week blamed incompetence and neglect for why it took GM more than a decade to recall the defective cars,
“Even though the investigators found no evidence that any employee made a trade-off between safety and cost in the investigation of the Cobalt, it is clear that no one did enough to protect these customers,” Barra told shareholders.
GM Chairman Tim Solso said Tuesday that the board has “complete confidence that Mary and her team will lead General Motors to make the necessary changes.”
Shareholders voted to elect Joe Ashton, a retiring UAW vice president who oversaw the GM department to its board starting in August. He becomes the first current or retired UAW representative on GM’s board. Former GM Vice Chairman Steve Girsky, who most recently has been consulting for the company, also was re-elected. Shareholders also approved an advisory vote on executive compensation and short-term and long-term incentive plans for certain employees, but voted down a shareholder proposal on independent board chairmen.