Photo courtesy of General Motors

GM CEO Fires 15 Over Ignition Switch Scandal

By R. Alan Clanton | published June 5, 2014 |
Thursday Review editor

It has been a tough six months for General Motors. GM has issued so many recalls—millions just this year—that the venerable company has broken every recall record in American automotive history, and managed to exceed all the combined recalls of Toyota, Honda, Ford and Chrysler for the past five years.

General Motors has faced withering political criticism and legal scrutiny for its failure to implement a correction in a faulty ignition switch problem which some engineers and analysts believe may date back over a decade. Though internal correspondence and emails—and even videotaped depositions—show that engineers and designers were aware of the potentially fatal problem years ago, GM executives and engineers failed to take direct action, fearing the cost of an early recall and perhaps calculating that the problem would not be as costly as offering incremental repairs.  Also, engineers apparently dismissed the main problem as an inconvenience issue for customers, and did not see it as a safety concern.

Primarily at issue has been a defective ignition switch. Under some circumstances, and depending on the type of keychain and its weight, the car could cut off suddenly, rendering all systems useless—power steering, power brakes, drive train, even the airbags. By General Motors’ own admission at least 13 people have died as a direct result of the ignition switch problem, though multiple studies are underway and numerous lawsuits are proceeding with the assumption that the number of dead attributed to the problem could rise into the scores, even the hundreds.  Some consumer advocates believe the total number of deaths attributed to the problem may rise to as many as 500.

The ignition switch affected a variety of GM cars, including Chevy Cobalts, Chevy Malibus, and Saturn Ions, some manufactured as far back as 2003 and reflecting engineering mistakes made as early as 2001. Since the beginning of this year, GM has recalled more than 2.5 million vehicles. In all, and not limited to the ignition switch defect, GM’s total recalls for 2014 exceed 13 million, and affect almost every car product manufactured, according to Bloomberg Businessweek. GM was also forced to pay a fine of $35 million in May, the biggest ever assessed by the National Highway Traffic Safety Administration against an auto maker, though consumer advocates and many members of Congress have pointed out that $35 million is small change for a company as large as General Motors.

GM CEO Mary Barra announced the dismissal of 15 employees—some of them part of GM’s legal team, and others who were among the top engineers with the company—for failing to act responsibly and proactively when the problems came to light years ago. Five other high-ranking executives have been disciplined, with the possibility of more firings and early retirements on the horizon for a dozen more at GM.

Barra spoke to one thousand employees on Thursday at a mass meeting in Warren, Michigan, where she said it pained her to present such bad news with members of the GM family. Barra’s presentation was also narrowcast via video to more than 212,000 employees worldwide.

“I hate sharing this with you,” she told GM employees, “just as much as you hate hearing it. But I want you to hear it. I want you to remember it.” Barra said that GM’s own internal investigation into the mess was mostly complete, though much work was still to be done to bring the final stages of the investigation to a conclusion. Barra said that there was “a pattern of incompetence and neglect” at General Motors in the long run-up to the current crisis.

“Repeatedly, individuals failed to disclose critical pieces of information,” Barra said, “that could have fundamentally changed the lives of those impacted by the faulty ignition switch. If this information had been disclosed—and I believe this in my heart—the company would have dealt with this situation differently and appropriately.”

“Furthermore,” Barra said, “numerous individuals did not take the responsibility to drive the organization to understand what was truly happening.”

During a lengthy press conference later, Barra declined to comment directly to questions about her own responsibility for the ignition switch imbroglio. Barra had previously served as chief product development officer, a role that required many safety issues to pass across her desk.

Some in Congress are skeptical the conclusions reached in GM’s 350-page report, copies of which were made available to reporters and regulators today. While 15 employees were fired, most top management was spared. The report was largely the work of a team led by attorney Anton Valukas, who was hired by GM in early spring to conduct a thorough internal review and investigation. Barra said that Valukas interviewed hundreds of employees and pored over thousands of documents, memos and emails to reach his initial conclusion.

The report confirms that many key employees chose to bypass the problem of the ignition switch, preferring to categorize it as a “customer satisfaction” issue rather than a genuine safety problem. Some engineers viewed the ignition switch problem as minor, unrelated to a potential crash. Some in GM’s legal department shrugged off the long-range implications of steering and airbag failures. Still other lead engineers and supervisors chose to bypass implementing simple repairs which may have cost as little as 57 cents.

One of those fired this week was Ray DeGiorgio, a top engineer who approved the retrofit of a replacement ignition switch in 2006, but failed to follow GM internal policy by giving the replacement switch a new part number. As a result, dealerships and auto repair facilities could not tell the difference, and in subsequent years the part number confusion only grew worse, meaning it would be impossible to tell with certainty that the correct (safer) ignition switch was being installed. DeGiorgio's omission also made it difficult for investigators to trace the problem.

Numerous members of Congress—both Republicans and Democrats—say that Barra and some of her top executives will likely be called to testify in Washington again in the near future. Barra had faced intense grilling in Congress back in April 2014.

Barra said this week that more recalls are coming soon, and auto industry analysts say that in an effort to restore confidence, GM is clearing the boards of any and all mechanical and safety issues, no matter how small. The report issued by General Motors is only one of many major investigations and inquiries into safety issues at GM, but the internal report will likely be used by state attorneys general and members of several Federal probes into the matter. Several major class action lawsuits, as well as numerous individual legal actions, are moving through the early stages of litigation.

General Motors has at times circled its wagons in the face of the gathering number of lawsuits it may soon encounter. Barra, though offering apologies and contrition, has also indicated that the company may seek to shield itself from the heaviest damages by reverting to the terms of its 2009 bankruptcy. When GM filed for Chapter 11 financial protection, while it restructured five years ago at the height of the recession, the company set in motion a set of circumstances which may largely protect it from litigation.

Barra became CEO in mid-January, only weeks before news of the ignition switch problem was thrust into the spotlight. Barra is a legacy member of the GM family; her father worked for General Motors for nearly 40 years. As a teenager, Barra received a fellowship from GM to attend college, and she attained an MBA from the Stanford Graduate School of Business. She has worked for GM since she was 18 years old.

In 2013, Forbes magazine named her the 35th most powerful woman in the world.


Related Thursday Review articles:

Will Automatic Braking Become Standard?; Thursday Review; Friday, May 30, 2014.