GM tries to calm waters of perfect storm
DETROIT – The executive meetings must sound something like this: "We have to put this behind us. What can we do to calm things down in this ignition switch recall? If there is going to be pain, let's rip off the band aid and get it over with. A consent agreement would make sense, admit wrongdoing, pay the fine and hope things die down."
GM was already cast in a terrible light. Tonight, you get the idea the company was going out of its way to be the bad guy in a movie about uncaring, unfeeling corporate titans. We've all seen how corporate executives are cast this way by Hollywood.
This isn't an excuse, but when you consider what was transpiring at GM during the time-frame NHTSA was talking about, you realize everyone in the company wasn't concerned so much about balky ignition switches as they were frightened half to death the company would go fins up any minute.
This isn't about heartless bastards wishing people to die behind the wheel. This was about desperate people trying to figure out if they were going to be employed the next day. Whatever the reason, however, there is absolutely no justification for what happened inside what was once the biggest and best car company on the planet.
What the National Highway Traffic Safety Administration revealed, and much of it for the first time, is a company so poorly run that it deserved bankruptcy and little sympathy.
The General Motors of 2008 coached its employees not to discuss recalls. The problems surrounding them were not treated as problems. They were "issues."
In 2009, auto supplier Continental sent a memo from its engineering staff telling General Motors it had discovered that GM's small sedans were losing their ability to deploy their airbags in accidents because of the bag ignition switch. GM looked the other way.
Federal law requires a car company to report significant, life threatening defects within five business days. GM waited five years. NHTSA said Continental's memo was a smoking gun Friday. GM agreed, as part of its consent order they acknowledged this is correct information.
NHTSA believes there was an all-out campaign to run away from the deadly results of ignition switches popping into the off position where air bags would not deploy.
NHTSA said this was a two-fold problem, a driver's knee could hit the key and it would stall the car [which means a poor original design]. The car could also hit a bump and a key with other keys on its ring would pop the ignition into the off position [which means the switch itself was terrible]. Do this under extreme conditions like on a highway, or with a teenager behind the wheel, and the resulting loss of power steering is jarring.
Hitting something at high speed without that airbag turned deadly in at least 13 cases.
The suspicion is the situation is much worse than that. While NHTSA didn't confirm such speculation Friday, but you can imagine a bigger headline in the future without a lot of surprise.
U.S. Transportation Secretary Anthony Foxx said Friday: "They had that information and they told no one. They didn't tell NHTSA, they didn't tell their customers, in the meantime those customers were driving cars with a dangerous safety defect."
NHTSA Administrator David Friedman said GM engineers knew about the defect, GM investigators knew about the defect, GM lawyers knew about the defect, but GM did not act to protect Americans from that defect.
Friedman said there is no evidence new GM CEO Mary Bara herself knew about this problem, still you may never again hear such damning and direct comments from an auto safety bureaucrat in your lifetime!
GM's conduct will create problems for the entire auto industry. For instance much like the Federal Reserve "stress tested" the banks during the financial crisis of 2009, NHTSA, in an unprecedented move, promises to do the same with GM.
The federal agency will give GM engineers reams of data to look at to see if they can pick out a problem the government engineers put in there. NHTSA wants to see if GM is capable of finding the problem, then test how quickly the company can come up with a solution--if at all.
GM is paying the maximum $35 million fine to NHTSA for their delay. But that amount viewed in Washington as a "rounding error" sized fine. In other words, GM received the proverbial parking ticket for the equivalent of leaving a car illegally parked in the middle of a busy airport runway.
The Feds are now going to proceed with something they affectionately call the "GROW AMERICA" act. Its goal is to grow America's general fund with the proceeds of errant automakers.
Instead of a top fine of $35 million, the act looks to plump the fine to $300 million! Now, everyone is on notice.
GM is still paying a $7,000-a-day fine in all of this as it looks to answer 107 questions NHTSA already asked it to answer as part of this investigation. The meter won't stop running until all the answers are in to NHTSA's satisfaction. They are not there yet.
But there are so many other costs associated with this travesty. GM has hired renowned attorney Ken Feinberg to determine how much money the company needs to set aside to pay the families of those killed behind the wheel of a small GM sedan prior to 2009 -- which, by the way, is when the fatal accidents in the current universe of research happened.
You will recall that's when GM entered "quick rinse" bankruptcy at the government's behest. Republican Congressman Fred Upton (R-MI) chairs the House Energy and Commerce Committee and he put out a statement today slamming GM, promising more investigations and bare-knuckle politics in the future.
"When it comes to vehicle safety, a matter of life and death, there is no margin for error, GM's admission that it failed to follow the law is an important milestone, but our investigation into how the system failed is far from over. We continue to gather documents and interview key players involved in the ignition recall to determine why it took so long to connect the dots and take action."
The Department of Justice is looking at all of this and recall that just a few weeks ago Toyota paid a $1.2 Billion fine for its sticky gas pedals. GM will likely pay more than that when it's all said and done..
The consent order makes sense, media relations experts told us today. It happened today and not six months from now. But GM's problem is that this is turning into death by a thousand cuts and this one is just one of the first.
Warren Buffett had Berkshire Hathaway sell off much of its stake in GM today.
Ironically, in the showroom, in the factory, and in the design suites GM has never been better. It's new Impala is considered the best sedan on the road. It's quality scores are top notch, and yet it must agree with a federal official who says "the fact that GM took so long to report this defect says something was very wrong with the company's values. GM must rethink the corporate philosophy reflected in the documents we reviewed."
Mary Barra's tepid response, which came in the form of a statement in a press release, does little to help the company's reputation.
"GM's ultimate goal is to create an exemplary process and produce the safest cars for our customers- they deserve no less. We will emerge from this situation a stronger company," she said.
Perhaps, but this is the Perfect Storm for GM. It is battered like one of those boats on the reality show "Deadliest Catch."
At least those guys are prepared for that weather. In comparison, GM looks like guys in penny loafers and Dockers trying to lay a string of pots.
This is not going at all well.
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