GM finds negligence, no cover-up in recall

General Motors President Dan Ammann (from left), Chief Executive Officer Mary Barra and Executive Vice President Mark Reuss hold a news conference Thursday in Warren, Mich.
General Motors President Dan Ammann (from left), Chief Executive Officer Mary Barra and Executive Vice President Mark Reuss hold a news conference Thursday in Warren, Mich.

WARREN, Mich. -- General Motors said Thursday that a pattern of incompetence and neglect, not a larger conspiracy or cover-up, is to blame for a long-delayed recall of defective ignition switches.

GM Chief Executive Officer Mary Barra, who released the results of an internal investigation into the company's missteps, said 15 employees -- many of them senior legal and engineering executives -- have been fired for failing to disclose the defect, which the company links to 13 deaths and 54 crashes in which the air bags didn't deploy. Five other employees have been disciplined.

"Repeatedly, individuals failed to disclose critical pieces of information that could have fundamentally changed the lives of those impacted by a faulty ignition switch," she said. "If this information had been disclosed, I believe in my heart the company would have dealt with this matter appropriately."

She did not say who the discharged employees were, nor which departments they worked in. She said only that "more than 50 percent" were executives, and that two who had been suspended were later dismissed. In April, two midlevel engineers, Raymond DeGiorgio and his supervisor, Gary Altman, were placed on paid leave.

GM also said it will establish a compensation program for families of victims and those who suffered serious injuries in accidents related to the switches. The program is expected to begin taking claims Aug. 1.

Barra called the 315-page report by attorney Anton Valukas, whom GM hired in March to do the investigation, "brutally tough and deeply troubling." Mistakes were made repeatedly as far back as 2002, when GM decided to use a switch that didn't meet its own specifications.

"That was a decision made by an engineer that led to tragic consequences," Barra said.

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 down the engine. That disables the power-assisted steering and brakes and can cause drivers to lose control. It also disables the air bags. Trial lawyers suing the company put the death toll from the switches close to 60.

Deep within the company, engineers and others believed the ignition-switch problem was an inconvenience, a "customer satisfaction" issue, rather than a safety problem. Engineers believed that cars could still be steered when the engines shut off, even though the loss of power steering could cause drivers to lose control.

In 2005, the company failed to make a repair that would have cost an estimated 57 cents per switch. A year later, engineer DeGiorgio approved a change in the switch design but didn't follow GM's policy to change the part number. That made the problem much more difficult for investigators to track later on.

Barra didn't directly answer a question about whether she should have figured out that the switches were a deadly problem. Before becoming CEO on Jan. 15, she was product development chief for three years, and safety personnel reported to her through GM's chain of command.

"I wish I had known, because the minute we knew we took action," she said. Barra has said she first learned about the issue in December.

Barra told 1,000 employees gathered at GM's suburban Detroit technical center that the report was "enormously painful."

Barra said Valukas interviewed 230 employees and reviewed 41 million documents to produce the report.

"Because of the actions of a few people, and the willingness of others in the company to condone bureaucratic processes that avoided accountability, we let these customers down," Barra said. She again apologized to the families of those who died, well as those who were injured.

Last month, GM paid a $35 million fine -- the largest ever assessed by the National Highway Traffic Safety Administration -- for failing to report the problem quickly to federal regulators. GM knew about problems with the ignition switches as early as 2001, and in 2005 it told dealers to tell owners to take excess items off their key chains so they wouldn't drag down the ignition switch.

The Highway Administration also investigated the issues twice, in 2007 and 2010, but was unable to show that Cobalts were stalling or their air bags were failing to deploy at higher rates than peer vehicles.

GM began repairing the cars in Apri, and had fixed 113,000 as of Thursday, Barra said. But the company doesn't expect to fix them all until October. GM said the cars are safe as long as customers use only the key and have no extra items on their key chains.

Barra named a new safety chief at GM in March, and the automaker has recalled a record 15.8 million cars and trucks in North America so far this year.

The company took a $1.3 billion charge in the first quarter to pay for the recalls. It expects to take a $400 million recall-related charge in the second quarter.

GM shares fell 25 cents to close Thursday at $36.27.

The report doesn't end GM's recall saga. The automaker still faces a criminal investigation by the U.S. Justice Department -- led by the same team that recently reached a $1.2 billion settlement with Toyota over its 2010 sudden acceleration recall. It also faces multiple lawsuits from victims and from owners who say their cars have lost value.

Barra, who testified before House and Senate committees in April, will also likely be called back to Washington for hearings.

Lance Cooper, a lawyer for crash victims, said the report can help draw out more details in civil cases.

"It was disappointing that the emphasis in the remarks was, this was a case of incompetence and neglect, this was negligence on the part of company employees, but then highlighting the fact that [Barra] says there was no evidence of a trade-off in safety and cost," he said.

Information for this article was contributed by Tom Krisher and Dee-Ann Durbin of The Associated Press, Bill Vlasic of The New York Times and Tim Higgins, Jeff Green and Jeff Plungis of Bloomberg News.

Business on 06/06/2014

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