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Senators Attack Culture Of GM

By Jim Puzzanghera and Jerry Hirsch, Los Angeles Times

WASHINGTON — For just a few million dollars, General Motors Co. could have replaced a defective ignition switch that ultimately has been linked to 13 deaths and is expected to cost the automaker billions in repairs, fines and litigation.

GM need only have spent an additional 90 cents on each switch to handle the problem. But the automaker balked at the expense, according to company documents.

That fateful decision came into sharp focus during the second day of hearings on Capitol Hill over the safety scandal. GM now faces multiple investigations by congressional committees, the Department of Justice and the National Highway Traffic Safety Administration into why it didn’t recall 2.6 million cars with the bad switch when it first learned of the problem more than a decade ago.

The switch can unintentionally turn off the vehicle, disabling the power steering and air bags. Spending 90 cents more on each car would have bought a “more robust” design that would prevent “inadvertent ignition offs,” according to the 2005 memo by John Hendler, a GM engineer.

“I think it’s pretty much incontrovertible that GM knew about this safety defect, failed to correct it … and then concealed it from the courts and the United States,” Sen. Richard Blumenthal (D-CT), told GM Chief Executive Mary Barra during a hearing by a Senate Commerce subcommittee Wednesday.

The problem will now cost the automaker as much as $3.5 billion, said Brian Johnson, an analyst with Barclays Capital.

Johnson’s estimate includes a $1 billion trust for plaintiffs involved in accidents that occurred prior to GM’s 2009 bankruptcy and restructuring, along with $500 million in expenses related to accidents after GM emerged from bankruptcy.

Most bankruptcy experts believe that the restructured GM is shielded from liability for crashes in the cars prior to the bankruptcy. But Johnson believes the automaker will set aside money for those victims anyway.

The automaker already has set aside $750 million to pay for recall repairs, and much of that money will be spent on fixing cars with the faulty switches.

The company also has hired Kenneth Feinberg, who helped determine compensation for victims of the Sept. 11 terrorist attacks, the Boston Marathon bombing and other high-profile cases. Feinberg will advise the company on options for handling compensation demands by families of victims of crashes in recall vehicles that took place before GM’s 2009 bankruptcy restructuring.

“Why not just come clean and say … ‘We’re going to do the right thing, we’re going to compensate the victims?’” Blumenthal asked Barra.

She said that the company retained Feinberg because it believes it has “civic as well as legal responsibilities.” But she would not commit to compensation until Feinberg finishes his work.

During the two days of hearings, Barra called the decision to go with the cheaper switches a “mistake.”

But David Sullivan, a manager of product analysis for consulting firm AutoPacific Inc., told the Los Angeles Times that the automaker has long focused on such cost-saving measures.

“The culture within GM at the time of the memo was concerned with every fraction of a penny change in price,” said Sullivan, who previously worked for a parts company that supplied GM’s switch group. “It was purely a cost-driven culture, and now that is going to eat their lunch.”

During Wednesday’s hearing, senators aggressively questioned Barra about the years of delays in recalling vehicles with the faulty switches, accusing the company of trying to hide the problem.

The panel’s chairwoman, Sen. Claire McCaskill (D-MO), referred to a “culture of cover-up.”

Sen. Kelly Ayotte (R-NH), said that revelations that GM redesigned the switch in 2006 — but kept the same part number as the faulty switch already in millions of cars — “strikes me as deception.”

Ayotte said, “I think it goes beyond unacceptable. I believe this is criminal.”

In a statement released by GM after the hearing, Barra said the issues raised at the hearing were “tough but fair.” She has called the failure to identify the redesigned switch as a new part “unacceptable.”

“I appreciate the intense interest by the senators to fully understand what happened and why,” she said. “I am going to accomplish exactly that, and we will keep Congress informed.”

But senators criticized Barra for deflecting questions about the problem by saying she needed to wait for the completion of an internal investigation.

McCaskill said GM withheld information about the defect from a private attorney investigating a fatal 2005 accident involving a recalled GM model, the Chevrolet Cobalt. She criticized Barra for not firing the GM employee, Ray DeGiorgio, who signed a 2006 memo about a redesigned ignition switch — even though he swore during a legal deposition that he knew nothing about the change.

“It is hard for me to imagine you would want him anywhere near engineering anything at General Motors,” said McCaskill, a former prosecutor.

Barra said it appeared DeGiorgio had lied in the deposition, but that neither he nor anyone else at GM has been fired for the recall delay.

Photo: Mark Ralston via AFP

‘Pattern’ Of Problems Seen In GM Cars, But Regulators Declined To Act

By Jim Puzzanghera and Jerry Hirsch, Los Angeles Times

WASHINGTON — Federal regulators twice declined to investigate faulty ignition switches in General Motors Co. cars that led to 13 deaths — even though one official found “a pattern” of problems, according to a new congressional report.

The report, released Sunday, added fresh details to a controversy that has shaken the revitalized automaker.

Already under fire for lengthy delays in recalling the vehicles, GM also was accused in the report of allowing the defective part to be installed in millions of vehicles after testing showed it did not meet the company’s own specifications.

The developments came in a 16-page report that summarized an investigation by the House Energy and Commerce Committee ahead of a high-profile hearing Tuesday.

“We now know the problems persisted over a decade, the red flags were many, and yet those responsible failed to connect the dots,” said Rep. Fred Upton, R-Mich., the committee’s chairman.

GM Chief Executive Mary Barra and David J. Friedman, the acting administrator of the National Highway Traffic Safety Administration, are scheduled to testify Tuesday before the panel’s Oversight and Investigations subcommittee about the reason for delays in recalling vehicles with the faulty ignition switch.

The defective switch caused vehicle engines to turn off, disabling the air bags. The part has been linked to a series of crashes and, by GM’s latest disclosure Friday, at least 13 deaths in six models. The Detroit automaker has recalled more than 2.6 million vehicles globally.

“The revelation that NHTSA had teed up an investigation and deep-sixed it is very troubling,” said Sean Kane, president of Safety Research and Strategies, an independent, for-profit safety research company.

The NHTSA on Sunday defended its handling of the GM ignition switch problems.

“As we have stated previously, the agency reviewed data from a number of sources in 2007, but the data we had available at the time did not warrant a formal investigation,” the agency said. “Recent data presented by GM provides new information and evidence directly linking the ignition switch to the air bag non-deployment. That’s why we are aggressively investigating the timing of GM’s recall.”

Meanwhile, a group of siblings and parents of 16 people who were killed or injured in crashes linked to the faulty switches have sent an open letter to Barra, seeking a meeting when she is in Washington.

“Now that the truth has come to light — with more head-shaking disclosures every day — you must do what’s right,” lawyer Bob Hilliard wrote on behalf of the families in a letter over the weekend.

“They need to hear from you, listen to your voice to know you are truly sorry and that you share in their grief and, to an extent at least, you understand their loss,” he wrote.

Greg Martin, a GM spokesman, reiterated that company officials “deeply regret the circumstances that led to the recall” and would cooperate fully with the NHTSA and Congress “to help get them a better understanding of the facts.”

House investigators have received more than 235,000 pages of documents from GM and the NHTSA as part of the investigation, and “they paint an unsettling picture,” said Rep. Tim Murphy, R-Pa., the subcommittee’s chairman.

The NHTSA and the Justice Department have opened investigations into why it took so long for GM to recall the vehicles. Documents filed with the NHTSA indicate the company knew about the problem as early as 2001.

Kane said he wasn’t surprised by the agency’s failure to launch an investigation.

“NHTSA is very scattershot about what they decide to do and when they decide to do it and they have resisted setting guidelines for when to decide to take enforcement actions,” he said.

The chronology investigators put together demonstrated why the safety agency needs clearly established and transparent standards for launching probes and establishing recalls, he said.

After some crashes involving GM vehicles in which air bags did not deploy, the chief of the NHTSA’s Defects Assessment Division emailed other agency officials in September 2007 proposing an investigation into problems in 2003-06 Chevrolet Cobalts and Saturn Ions.

The email said there was “a pattern of reported non-deployments” of air bags in complaints from vehicle owners that first was observed in early 2005.

At the time, GM indicated “they see no specific problem pattern,” the committee report said.

A PowerPoint presentation prepared by the Defects Assessment Division, dated November 17, 2007, said its review of the problem was prompted by 29 complaints and four fatal crashes.

But the NHTSA’s Office of Defects Investigation declined to investigate further, the committee report said, noting that “the panel did not identify any discernible trend and decided not to pursue a more formal investigation.”

In 2010, after another accident in which the air bags in a Cobalt failed to deploy, the NHTSA’s Office of Defects Investigation again considered if there was a problem “but determined the data did not show a trend,” the report said.

GM did not begin recalls until this February. Models recalled were the 2003-07 Saturn Ions, 2007-10 Saturn Skys, 2005-11 Chevrolet HHRs, 2006-10 Pontiac Solstices, and 2005-10 Chevrolet Cobalt and Pontiac G5 models.

The timeline investigators put together on the automaker showed that a 2001 pre-production report for the 2003 Saturn Ion “identified issues with the ignition switch,” investigators said.

In February 2002, Delphi, which supplied the switch, submitted a part approval document to GM for it. Delphi officials told House committee investigators that GM approved the part “even though sample testing of the ignition switch torque was below the original specifications set by GM,” the report said.

GM opened its own engineering inquiry in November 2004 into a complaint that a 2005 Cobalt could be “keyed off with knee while driving,” the House report said.

Three months later, GM engineers met to consider whether there were problems with the ignition switch that made it easy to accidentally turn off the engine, which also would prevent the air bags from deploying.

The engineers considered changing the torque needed to turn off the ignition switch, “but were advised by the ignition switch engineer that it is ‘close to impossible to modify the present ignition switch’ as the switch is ‘very fragile and doing any further changes will lead to mechanical and/or electrical problems,'” the report said.

The engineering manager for the Cobalt project decided to close the review with no action. The main reasons cited for the decision were that changes would take too long, that costs were too high and that none of the proposed fixes seemed to fully solve the problem, the report said.

The committee said the documents it had reviewed “do not explain the criteria for an ‘acceptable business case’ and how the decision was made in this case.”

Despite the automaker’s public apologies and recalls of 2.2 million vehicles in the U.S. to fix the ignition switches, GM legally shed responsibility for crashes before the automaker’s 2009 bankruptcy and federal bailout.

In emerging from bankruptcy, GM’s legal slate was wiped clean. The restructuring created a new company, which bought the assets of the old GM, but allowed it to shed its debts and legal liabilities.

AFP Photo/Mark Ralston