Mary Barra, CEO of the General Motors Co., speaks during a Senate committee hearing on Capitol Hill about delayed safety recalls by GM. (Brendan Smialowski / AFP/Getty Images)
General Motors Co. CEO Mary Barra stood by the company’s top lawyer, saying she had no plans to fire him after he was harshly criticized Thursday by a Senate panel investigating GM’s delayed ignition switch recall.
In what was the fourth — and possibly final — congressional hearing into GM’s recall of 2.6 million cars linked to at least 13 deaths, Barra offered a strong defense of Michael Millikin, who has worked for the company for 37 years and been general counsel since 2009.
“How in the world in the aftermath of (the GM internal) report did Michael Millikin keep his job? This is either gross negligence or gross incompetence on the part of a lawyer,” said Sen. Claire McCaskill, D-Mo. She headed the Senate Commerce panel hearing testimony from Barra, Millikin, Delphi Automotive CEO Rodney O’Neal, compensation adviser Ken Feinberg and Anton Valukas, the outside attorney who led GM’s internal investigation.
GM’s culture of “lawyering up ... killed innocent customers of General Motors,” McCaskill added. “I think the failure of this legal department is stunning.”
Barra said she “respectfully” disagreed, and defended Millikin as a man of “incredibly high integrity.” “I need the right team,” Barra said. “He’s the person I need on this team.”
Barra — who fired 15 people after the internal investigation found significant problems in GM’s legal department — said she took a hard line. “When in doubt, we reached further to take action. There are many lawyers that are no longer with the company,” she said.
The recall of the cars was delayed more than a decade after some in the company became aware of the problem. Ignition switches in Chevrolet Cobalts, Saturn Ions and other older cars turn too easily and can allow the key to shut off the engine inadvertently in a crash or when bumped. That can disable power steering and power brakes, creating control problems. And in a front-end crash, air bags won’t inflate.
After nearly six months of news coverage, GM hopes that by completing congressional testimony and launching its victim compensation fund in two weeks, it finally will start to put the issue behind it. GM has set aside $2.5 billion to pay for its record-setting 29 million vehicles recalled this year, including 25.7 million in the United States.
But the automaker still faces a criminal investigation by the U.S. Attorney in New York, and probes by more than a dozen state attorneys general and the Securities and Exchange Commission. It could take months — or likely at least a year or more — before those investigations are completed.
'Poor information flow'
McCaskill questioned how the lawyer who presided over a department that repeatedly failed to tell him of problems could remain in his job. She noted that Veterans Administration Secretary Eric Shinseki was forced out even though he didn’t know of problems.
Sen. Roy Blunt, R-Mo., asked why it took so long for Millikin to learn of the problem. Millikin said he didn’t learn until early February of the ignition switch problem, even though in April 2013, the company was warned of a potential problem when engineer Ray DeGiorgio was deposed as part of a lawsuit.
“How is that possible?” Blunt asked.
Millikin acknowledged under questioning that despite the fact that GM lawyers as early as 2010 warned the automaker could face punitive damages, GM didn’t notify the board of directors, Securities and Exchange Commission or set aside reserves to cover potential costs. He acknowledged “poor information flow” in the legal department. “This is a tragedy that cannot happen again.”
Sen. Richard Blumenthal, D-Conn., said GM needs to make more changes in its legal team. He said lawyers at GM “actually enabled coverup” and “fraud.” He said he thinks the criminal investigation by the U.S. Attorney’s Office in New York will find wrongdoing at GM’s legal department.
In response to questioning, Millikin said some fired employees were given undisclosed financial incentives as part of their departure and said none have challenged their dismissals. Blumenthal asked if those employees are barred from speaking publicly or to the press; Millikin said he didn’t know, but said they can talk to regulators. He said GM will not make public the documents turned over as part of its internal investigation or waive its bankruptcy liability shield.
GM is likely to continue to face pressure over Millikin’s employment. At times, he was unable to answer questions about who handled certain legal issues at GM.
The company disclosed it hired law firm Quinn Emanuel Urquhart & Sullivan LLP to conduct a complete review of its litigation practices, and that it hired two outside law firms to aid it in responding to suits. Millikin said he now reviews all serious injury or death claims, a change from prior practices in which GM lawyers could settle cases for as much as $5 million without notifying Millikin.
Barra: Delphi not to blame
Delphi’s O’Neal — whose company built the faulty switch — defended Delphi and said it was not responsible, because it built the part that GM asked for. “Our product met the requirements of the customer,” O’Neal said. He said Delphi had no knowledge of the deaths linked to the switch until February when GM launched its recall.
Delphi upgraded the switch in 2006 at GM’s request, but GM didn’t change the part number. O’Neal said last year Delphi made 120,000 engineering changes to parts for various automakers, and 60 percent resulted in part-number changes.
Barra agreed GM was responsible because it bought the parts.
O’Neal said Delphi has sped up production of replacement switches. With four lines running, it has produced 1 million switches and will hit the 2 million mark by the end of August. GM has repaired nearly 500,000 cars.
Compensation limits set
GM compensation adviser Feinberg defended the compensation fund’s limits — including ruling out claims for crashes in which air bags deployed — saying if he didn’t, it would lead to thousands of claims being filed. He acknowledged it was possible a claim could be approved when air bags deployed.
Blumenthal repeatedly pressed Barra to expand the compensation fund to include more recently recalled vehicles for ignition issues. Barra said she has no plans to change protocol and said the ignition issues in the newer recalled vehicles and older Cobalts and Ions are very different.
McCaskill praised Barra, saying she has “stepped up and with courage and conviction has confronted head-on the problem and the corporate culture that caused it.”
The senator said the high number of recalls at GM was a good thing, and said GM workers “also are the victims of outrageously incompetent management.”