The GM Report on the Ignition Switch Recall

gm report on recallIn one of the most important documents in General Motors history, GM CEO Mary Barra addressed employees last week to reveal the findings of a 315-page independent audit regarding the recent GM ignition recall.

I spoke to several dealers who watched via satellite and were extremely pleased with the way Ms. Barra handled the situation.

General Motors has dismissed 15 employees, including at least eight executives, after an internal investigation found “a pattern of incompetence and neglect” that led to 11 years of delays in recalling millions of cars for a fatal defect related to flawed ignition switches, CEO Mary Barra said.

The investigation found that GM employees at many levels failed to recognize that cars shutting off posed a safety risk by disabling the airbags, neglected to share information about complaints and crashes, treated problems as someone else’s responsibility to fix and ignored data showing evidence of a possible defect.

It concludes there was no intentional cover-up and that cost was never prioritized over safety but cites numerous instances when employees — particularly one engineer who has now been fired — made decisions now known to have “tragic results.”

A 315-page report by former federal prosecutor Anton Valukas says GM categorized reports of cars stalling as a matter of customer “convenience” rather than one that could lead to crashes or deaths. It says a 2005 service bulletin sent to dealers was specifically worded to avoid attracting attention from federal safety regulators, and that GM lawyers agreed to settle a lawsuit in 2013 for $5 million, the maximum they were permitted without seeking approval from higher-ups.

The report says GM lacked urgency even as recently as December, when the trio of executives who voted on whether to issue recalls was first informed of the issue but was not told it was linked to any deaths.

Speaking to employees last week, Barra promised that the company would address future safety issues far differently, warning that failing to report risks would make them “part of the problem” and even inviting them to contact her directly if they couldn’t get potential defects addressed themselves.

She also confirmed plans to set up a compensation fund for people affected by crashes related to the ignition switch, though details about the plan have not been finalized yet. GM said claims would be accepted beginning around Aug. 1.

Another five GM employees have been disciplined as a result of the company’s handling of the recall, GM said.

GM Chairman Tim Solso said in a statement that the board of directors will create a stand-alone committee to oversee “risk-management” issues. He also said the report concluded that Barra, Ammann and global product-development chief Mark Reuss did not learn of the ignition switch matter until December, shortly before the decision was made to issue a recall.

“The board, like management, is committed to changing the company’s culture and processes to ensure that the problems described in the Valukas report never happen again,” Solso said in the statement.

Barra called Valukas’ report “extremely thorough, brutally tough and deeply troubling.” She said engineers and others who learned of problems with ignition switches as early as 2003 “misdiagnosed the problem from the very beginning” and failed to treat it with the appropriate level of urgency.

Barra did not identify the employees who were fired or resigned.

Two engineers who had been suspended with pay since April 10 — Ray DeGiorgio, who designed the ignition switch, and Gary Altman, the program-engineering manager for the Chevrolet Cobalt — are among them, two persons familiar with the matter said. Neither DeGiorgio nor Altman have commented publicly on their situations.

GM also ousted Bill Kemp, a senior lawyer who was responsible for safety issues within its legal department, as the automaker reforms the operations that failed to address defective parts linked to 13 deaths, two persons familiar with the matter said.

Two former directors of product investigations, Carmen Benavides and Gay Kent, also are out, two people familiar with the matter said. The Valukas report notes that interviews with Benavides and Kent revealed that there was concern while writing a 2005 service bulletin to dealers that using the word “stall” might spur regulators to investigate whether a safety issue was involved.

Lawrence Buonomo, a senior GM lawyer who oversaw product-liability cases, has also left the company as a result of the report’s findings, a source familiar with the matter said.

Buonomo chaired committees beginning in March 2012 that decided how GM would settle lawsuits filed by accident victims. The Wall Street Journal first disclosed Buonomo’s departure late Thursday.

According to his Linkedin profile, Buonomo had been with GM since August 1994 and focused on complex commercial and class action litigation, as well as supplier insolvency and restructuring issues. He had also served as the administrative head of GM’s in-house litigation team.

One of the committees chaired by Buonomo, the Roundtable, existed to evaluate legal claims, but a number of lawyers said it also served to spot safety problems, the Valukas report says.

The report signaled Buonomo out as a lawyer who didn’t share that view of the Roundtable committee’s primary role.

“Buonomo, for example, said that it was not the Roundtable’s function to spot trends and that if a lawyer had to flag a trend, then the system had already failed,” the report states.

Barra said most or all of the dismissed employees worked in the engineering, legal, public policy and quality departments and that more than half were senior-level executives. Five additional employees have been disciplined, she said.

GM executives said the eligibility rules for the compensation fund would be set by attorney Ken Feinberg, meaning he could decide to count deaths that are not among the 13 that GM has tallied.

President Dan Ammann said victims or the families of those killed could opt out of the fund and choose to pursue a traditional lawsuit but that if they do they will have “the same legal rights that they do today.”

That means GM could assert in court that it is not liable for pre-bankruptcy crashes. Ten of the 12 deaths identified by Automotive News and many of the non-fatal crashes occurred before GM’s bankruptcy.

GM in May admitted breaking federal law and agreed to pay a $35 million fine levied by NHTSA. It also has to meet with NHTSA officials monthly to discuss potential safety issues and implementation of the changes recommended by Valukas’ report.


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