GM ousts 15 employees over ignition-switch scandal
Friday, June 06, 2014 12:00 AM
WARREN, Mich. (AP) — General Motors said Thursday that 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 said more than half the 15 employees forced out were senior legal and engineering executives who failed to disclose the defect and were part of a “pattern of incompetence.”
Five other employees have been disciplined, she said, without identifying any of 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. GM said not say how much money will be involved, but a Wall Street analyst estimated the payouts will total $1.5 billion.
Barra called the report “brutally tough and deeply troubling.”
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 portrayed 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 on paper, and general bureaucratic resistance to change.
He described 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.
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 at more than 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 Rimer, whose 18-year-old stepdaughter, Natasha Weigel, was killed in a 2006 Cobalt crash in Wisconsin.
Last month, GM paid a record $35 million fine for failing to promptly report the bad ignition switches to federal highway safety regulators. Federal prosecutors are also investigating and could bring criminal charges against the automaker and some of its employees.
Deep within the company, engineers and others believed the ignition switch flaw was a “customer convenience” issue rather than a safety problem, the report said. Engineers believed that the cars could still be adequately steered when the engines shut off, and they 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.
Around GM, engineers were instructed not to use words like “dangerous,” ”defect” or “safety” when describing problems in writing, which contributed to the lack of urgency in dealing with the problem, Valukas wrote. In addition, some workers told Valukas they did not take notes at safety meetings because they believed GM lawyers didn’t want a paper trail.
In 2005, according to documents supplied recently to Congress, GM failed to make a repair of the switch that would have cost just 57 cents.
In his report, Valukas said he found no evidence that any employee made “an explicit trade-off between safety and cost” in dealing with the switch. But he said there was “tremendous cost pressure” at GM at the time, and he left open the possibility that it influenced the automaker’s handling of the problem.
The report could hurt GM in legal proceedings and complicate matters for lawyer Kenneth Feinberg, the compensation expert hired by GM to settle some of the many lawsuits, said Carl Tobias, a law professor and product liability specialist at the University of Richmond in Virginia.
But plaintiffs’ lawyers already know most of what’s in the report from depositions in previous cases, and Valukas was “careful not to open too much liability exposure,” Tobias said.
Under a judge’s order, GM is shielded from legal claims from before it emerged from bankruptcy in 2009, and company officials wouldn’t say Thursday whether they will use that protection against death and injury lawsuits. Lawyers are trying to overturn the shield, alleging GM deceived the judge.
Barra, who took over as CEO in mid-January, didn’t directly answer a question about whether she should have figured out the switches were a deadly problem. Before the took the top job, 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.
Sen. Richard Blumenthal, D-Conn., criticized the investigation as “the best report money can buy.”
“It absolves upper management, denies deliberate wrongdoing and dismisses corporate culpability,” he said.
Barra said Valukas interviewed 230 employees and reviewed 41 million documents to produce the report, which also makes numerous recommendations for handling safety problems more effectively.
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.
In addition, GM has put procedures in place to make sure that departments communicate and that safety issues get reported to the top. Barra said people who don’t think such problems are being addressed should contact her.
Barra, who testified on Capitol Hill in April but deflected many questions by saying she was waiting for the results of Valukas’ investigation, is certain to 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.”
Barra, a 34-year GM veteran, told 1,000 employees gathered at the automaker’s suburban Detroit technical center that the report was “enormously painful.”
“I want you to never forget it,” she said in a speech that was also broadcast to the company’s 212,000 employees worldwide.
Associated Press writer Jeff Baenen in Minneapolis contributed to this report.