GM recall problems won't go away soon
Back-channel word from General Motors Co. is that the ignition-switch scandal responsible for 19 deaths, the firing of 15 company insiders and four rounds of congressional thrashings is in the rear-view mirror now.
Not so fast. Compensation czar Kenneth Feinberg says he's received 131 death claims — 10 times the tally GM confirmed in a decade-long screw up. And Monday he upped the official death tally nearly 50 percent from the 13 the automaker confirmed to federal regulators.
Tuesday, a Senate committee hammered the director of the National Highway Traffic Safety Administration for lax oversight of the GM's defective switch investigation. The odyssey stretches back more than a decade, implicating both regulators and the automaker's siloed engineering, safety and legal management.
Feinberg issued his first report on claims he began receiving Aug. 1. His office told The Detroit News that it would update the numbers weekly, including approved death claims that are certain to make headlines even if they don't adhere to the strict definition GM used in response to specific questions from congressional investigators.
"This is nowhere close to being in the rear-view mirror," said Warren Browne, a former GM executive who is now vice president of new business development for AutoForecast Solutions. "In the context of 'is this over,' no, the journey is still long."
That's the problem: GM's necessary effort to do the right thing over defective ignition switches in Chevrolet Cobalt and Saturn Ion models — embodied in the hiring of Feinberg, his independence from GM and creation of an open-ended fund to compensate victims and their families — risks raising as many new problems for the company as it addresses existing ones.
It reminds customers, and those who could be, of deep-seated incompetence and callousness; reprises speculation about what management knew when and whether criminal investigations will yield charges; questions whether GM's directors asked too little, accepted too much and moved too slowly.
Each new Feinberg tally represents, at a minimum, an optical hit to the automaker and its reputation. For most average folks who don't work in the auto industry, fine distinctions blur between his definition of who's been harmed or killed in GM vehicles and the company definition offered to Congress.
Add the fact that investigations by the Justice Department, the Securities and Exchange Commission, even Feinberg's claims effort, are not even close to complete, and it's not unreasonable to speculate that GM will be dogged by its self-inflicted nightmare well into next year, or longer.
There's more: On Wednesday, in a speech in Washington, Attorney General Eric Holder put corporate America on notice, saying "corporate misconduct must necessarily be committed by flesh-and-blood human beings. So wherever misconduct occurs within a company, it is essential that we seek to identify the decision-makers at the company who ought to be held responsible."
He didn't mention GM by name; he didn't need to. When Toyota Motor Corp.'s unintended acceleration scandal erupted four years ago, the Japanese automaker scrambled to cover it up, guaranteeing the $1.2 billion fine that set a new precedent for the costs of misleading the public and federal officials.
Holder is upping the ante, in part because the spate of corporate and financial scandals (often underwritten in some form by consumers, taxpayers or both) is hardening public sentiment against companies who do wrong and the executives who lead them.
An internal investigation prepared for GM by former U.S. Attorney Anton Valukas exonerated CEO Mary Barra, General Counsel Michael Millikin and other top executives in the defective switch scandal. The company expects those findings to be confirmed in subsequent investigations, but that may not extend to GM or lower level managers complicit in the ignition switch mess.
"Optically, do we have hurdles," a GM source close to the situation asked. "Yes. We're going to have to earn trust back over time."
That and hope that the comparatively open-ended parameters of Feinberg's compensation program don't unintentionally demonstrate that GM's response to a problem of its own making is more reprehensible than it already appears.
The automaker and its reputation are paying a dear price for a cascade of mistakes and willful oversights. The single most important known unknown is what it will cost — not just in dollars and cents, but in the precious commodities of credibility and trust.
Daniel Howes' column runs Tuesdays, Thursdays and Fridays.