- The Washington Times - Thursday, June 5, 2014

General Motors‘ new chief announced the dismissal of 15 employees and the creation of a compensation fund for victims of a faulty ignition switch on multiple GM models, but an internal probe of the company said the safety crisis was the result of engineering and bureaucratic mistakes and not a deliberate effort to deceive customers and regulators.

General Motors CEO Mary Barra, who has headed the company’s top carmaker since January, addressed company workers in an extraordinary corporate “town hall” meeting Thursday morning, saying the more than a dozen deaths, recalls and brutal publicity stemming from the switches amounted to a “history of failures.”

“I want it known that this recall issue isn’t merely an engineering or a manufacturing or a legal problem,” she said. “It represents a fundamental failure to meet the basic needs of these customers.”

Ms. Barra said the ignition switch flaw has gone back 11 years. It led to the recall of several different vehicles, including the Chevrolet Cobalt, Saturn ION and Pontiac Solstice, adding up to 2.6 million cars, amid reports that at least some GM officials tried to keep the safety failings secret.

Whether Ms. Barra’s moves, and the scathing internal report conducted by former U.S. Attorney Anton Valukas, will be enough to satisfy the company’s critics remained an open question.

“We need more than an accounting of past mistakes,” said Sen. Edward Markey, Massachusetts Democrat. “We need to ensure accountability and that permanent measures are put in place to prevent future deaths.”

Some 15 employees, with more than half holding senior and executive positions, are no longer with the company. Five employees were met with disciplinary action, Ms. Barra said.

Dozens have been injured and several died in accidents caused by the ignition-switch flaw that Ms. Barra blamed on a “pattern of management deficiencies and misjudgments often based on incomplete data that were passed off at the time as business as usual.”

The ignition-switch flaw poses the risk that a car could turn off while driving if the key is weighed down by a key ring or if the car is traveling on a bumpy road. GM is in the process of ordering parts and scheduling service appointments with car owners.

After an investigation by the National Highway Traffic Safety Administration, GM agreed to pay a record civil penalty of $35 million for not reporting the ignition switch defect in a timely manner.

Even while investigations and hearings ensue, GM is staying afloat. With $1.3 billion pre-tax charge for recalls in North America, GM came out with $37.4 billion in revenue in the first quarter of 2014, compared with $36.9 billion in 2013’s first quarter. GM’s stock closed Thursday at $36.27, down 0.68 percent. The company also just announced surprisingly strong May sales figures.

The report conducted by Mr. Valukas, which Ms. Barra reassured was independent, was based on about 350 interviews and 41 million documents. “I can tell you this report is extremely thorough, brutally tough and deeply troubling,” said Ms. Barra.

General Motors plans on setting up a compensation program in upcoming weeks to the 13 who died and to others who were injured due to the ignition switch flaw. The Reuters news agency reported that other records suggest that as many as 76 may have died in GM vehicles with reasons similar to the ignition switch flaw.

It is unknown now whether GM’s official number of those who died will rise after criteria and eligibility for compensation will be determined by noted compensation expert Kenneth Feinberg. GM hopes to begin accepting claims August 1.

Ms. Barra’s moves garnered a wide range of reactions from analysts and lawmakers alike.

Ken Reimer, stepfather of Natasha Weigel who was killed in a 2006 Cobalt crash, told the Associated Press GM’s handling of the situation was satisfactory.

“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,” he said.

Karl Brauer, senior analyst at Kelley Blue Book, said Ms. Barra showed an “impressive combination of leadership, empathy and resilience.”

“She wants to not only change GM’s corporate culture, but to keep this incident top-of-mind going forward so the automaker won’t ever experience these failures again,” he said. “Mary’s speech was a clear rallying cry to GM’s employees worldwide.”

For others, however, Ms. Barra’s comments rang hollow.

“In truth, it seems like the best report money can buy. It absolves upper management, denies deliberate wrongdoing and dismisses corporate culpability,” Sen. Richard Blumenthal, Connecticut Democrat, said in a statement.

Hearing in both the House and Senate are planned on the issue.



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