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REUTERS

U.S. lawmakers slam GM's 'culture of secrecy'

June 18, 2014 - 11:45am


(Reuters) — U.S. lawmakers on Wednesday reprimanded General Motors Co. for a "culture of secrecy" and said a company investigation that found top executives did not know for years about a deadly ignition-switch defect does not absolve them of responsibility.

GM CEO Mary Barra returned before a House of Representatives Energy and Commerce subcommittee to face harsh questions about why the No. 1 U.S. automaker waited more than a decade to recall millions of vehicles with the defect linked to at least 13 deaths.

Ms. Barra, who became CEO only in January but is a GM veteran of more than 30 years, has said she did not become aware of the problem until December 2013.

Rep. Diana DeGette, D-Colo., said it is "frankly alarming" that a GM report released earlier this month found that top executives were not made aware of the deadly flaw for years, even though there was widespread evidence among lower-level engineers and lawyers.

"This is nothing to be proud of," she said. She also said GM's "culture of secrecy" must be changed through more than structural management adjustments.

The company has pushed out 15 employees since the recalls were announced, including some high-ranking officials, but the departures have not affected the top level of executives.

Lawmakers also said they are concerned that the number of recalls connected to ignition-switch issues continues to grow.

GM has issued 44 recalls this year totaling about 20 million vehicles worldwide, which is more than total annual U.S. vehicle sales. Of the recalls this year, nearly 6.5 million of the vehicles were recalled for ignition switch-related issues, including more than half a million Chevrolet Camaros on Friday.

In just the past week, GM has recalled more than 3 million vehicles that apparently suffer from a separate ignition defect than the 2.6 million vehicles already recalled for the deadly ignition flaw. GM is taking recall-related charges of $2 billion so far this year.

"We are currently conducting what I believe is the most exhaustive, comprehensive safety review in the history of the company," Ms. Barra said on Wednesday.

Chrysler probes

But lawmakers pounced on the mounting recalls as potential evidence of bigger safety problems at GM.

Rep. Tim Murphy, R-Pa., chairman of the oversight subcommittee holding the hearing, said the latest recalls are "hauntingly similar" to the prior recalls connected to more than 13 deaths.

GM has not tied any fatalities to the more recent recalls.

The ignition-switch problems can cause the cars to stall during operation. Because of the engine stalls, air bags failed to deploy during crashes — some of them fatal — and drivers had difficulty operating their vehicles because power steering and brake systems also malfunctioned.

Separately on Wednesday, U.S. safety regulators said they have opened two investigations into Chrysler Group L.L.C. vehicles involving possibly faulty ignition switches that can be bumped out of the "run" position, disabling air bags in the event of a crash.

The issue is similar to the GM recalls. No deaths and one injury are linked to the ignition-switch issue suspected in about 1.25 million vehicles covering five Chrysler Group models involved in the new investigations by the National Highway Traffic Safety Administration, the agency said.

Chrysler Group is a unit of Fiat Chrysler Automobiles N.V.

Compensation fund

Ms. Barra said in her testimony on Wednesday that GM is addressing any and all safety concerns. She also said the company is committed to change.

"I want this terrible experience permanently etched in our collective memories. This is a tragic problem that never should have happened. And it must never happen again."

Ms. Barra also said a compensation fund that GM is creating will cover all victims who suffered a serious physical injury, as well as families of victims who died.

Ms. Barra appeared with Anton Valukas, the GM-hired investigator who delivered the report earlier this month that spared top executives and pinned blame on lower-level engineers and lawyers.

The report said those employees either did not appreciate the danger of the flaw or did not share the risk with their superiors.

GM and Ms. Barra have so far weathered the scandal with few signs of permanent damage. The automaker's May U.S. sales were up 12.6 percent from the prior year, well above analyst expectations, and its share price is slightly stronger than just before the announcement of the first ignition-related recall on Feb. 13.

 



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