GM ousts 15 employees
Jun 5, 2014 at 8:00 PM
General Motors said Thursday it has forced out 15 employees for their role in the deadly ignition-switch scandal and will set up a compensation fund for crash victims, as an internal investigation blamed the debacle on engineering ignorance and bureaucratic dithering, not a deliberate cover-up.
GM took more than a decade to recall 2.6 million cars with bad switches that are now linked to at least 13 deaths by the automaker's count.
"Group after group and committee after committee within GM that reviewed the issue failed to take action or acted too slowly," Anton Valukas, the former federal prosecutor hired by the automaker to investigate the reason for the delay, said in a 315-page report. "Although everyone had responsibility to fix the problem, nobody took responsibility."
GM CEO Mary Barra, who released the results of the investigation, said more than half the 15 employees forced out were senior legal and engineering executives who failed to disclose the defect. Five other employees have been disciplined, she said. She didn't identify them.
The automaker said it will establish a compensation program covering those killed or seriously injured in the more than 50 accidents blamed on the switches. The amount available to be paid out was not disclosed.
The report lays bare a company that operated in "silos," with employees who didn't share information and didn't take responsibility for problems or treat them with any urgency.
Valukas also portrays a corporate culture in which there was heavy pressure to keep costs down, a reluctance to report problems up the chain of command, a skittishness about putting safety concerns down on paper, and general bureaucratic resistance to change.
He describes what was known as the "GM nod," in which "everyone nods in agreement to a proposed plan of action but then leaves the room and does nothing."
Valukas exonerated Barra and two other top executives, Mark Reuss, chief of global product development, and general counsel Michael Millikin, saying there is no evidence they knew about the problems any earlier than last December.
Barra called the report "brutally tough and deeply troubling."
Since February, GM has recalled 2.6 million older-model Chevrolet Cobalts, Saturn Ions and other small cars because their ignitions can slip out of the "run" position and shut off the engine. That disables the power-assisted steering and brakes, making it difficult to control the car, and deactivates the air bags.
Trial lawyers suing the company put the death toll close to 60.
"It's somewhat comforting to realize that they do know that some things were done incorrectly and they're aware of that. They made the appropriate measures to make sure it doesn't happen again," said Ken Reimer, whose 18-year-old stepdaughter, Natasha Weigel, was killed in a 2006 Cobalt crash in Wisconsin.
Deep within the company, engineers and others believed the ignition switch flaw was an inconvenience, a "customer satisfaction" issue rather than a safety problem. Engineers believed that cars could still be adequately steered when the engines shut off, and didn't realize the air bags became disabled — even after police, academic experts and others outside GM had recognized the problem, according to the report.
In 2005, the company failed to make a repair that would have cost around 57 cents. A year later, engineer Ray DeGiorgio — one of the 15 workers forced out — approved a change in the switch design but didn't follow GM's policy of changing the part number. That made the problem much more difficult for investigators to track.
Barra didn't directly answer a question about whether she should have figured out the switches were a deadly problem. Before becoming CEO in mid-January, she was product development chief for three years, and safety reported to her through GM's chain of command.
"I wish I had known, because the minute we knew, we took action," she said.
The 34-year GM veteran told 1,000 employees gathered at the automaker's suburban Detroit technical center that the report was "enormously painful."
"I hate sharing this with you just as much as you hate hearing it," Barra said in a speech that was also broadcast to the company's 212,000 employees worldwide. "But I want you to hear it. I want you to remember it. I want you to never forget it."
Some were critical of the report.
"It seems like the best report money can buy," said Sen. Richard Blumenthal, D-Conn. "It absolves upper management, denies deliberate wrongdoing and dismisses corporate culpability."
Barra said Valukas interviewed 230 employees and reviewed 41 million documents to produce the report, which also makes recommendations for handling safety problems more effectively.
Last month, GM paid a $35 million fine — the largest ever assessed by the National Highway Traffic Safety Administration — for failing to promptly report the bad ignition switches to regulators.
Barra has already named a new safety chief and pledged to work quickly through a backlog of potential recalls. As a result, the automaker has recalled a record 15.8 million cars and trucks in North America so far this year.
The automaker took a $1.3 billion charge in the first quarter to pay for the recalls. It expects to take a $400 million recall-related charge in the second quarter.
But more trouble could lie ahead: Federal prosecutors are investigating and could bring criminal charges that carry billions of dollars in fines. GM also faces numerous lawsuits from crash victims and from owners whose say their cars have lost value. A Wall Street analyst projected GM's legal costs from the problem at about $2.5 billion.
Barra, who testified on Capitol Hill in April but deflected many questions by saying she was waiting for the results of Valukas' investigation, will be called back.
Sen. Claire McCaskill, D-Mo., said she intends to hold a hearing this summer.
"I won't be letting GM leadership, or federal regulators, escape accountability for these tragedies," she said in a statement. "The families of those affected deserve no less."