GM’s Barra Battles Tough History During Hearings

NHTSA’s Friedman likely to get rough treatment too.

by on Apr.01, 2014

GM CEO Mary Barra is testifying before a congressional committee this week. GM's history before such committees is not good.

After no fewer eight recalls covering more than 5 million vehicles since Jan. 1, General Motors will continue to generate more headlines this week as Chief Executive Officer Mary Barra testifies on Capitol Hill this week.

The latest recalls announced less only before Barra’s scheduled appearance in Washington D.C., cover more than 1.3 million vehicles, including Chevy Cobalts and HHRs, Pontiac G5 and Saturn Ion models with potentially defective ignition switches, covers the electric power steering systems on the vehicles

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Barra is in a tight spot. On the one hand, she clearly wants to cooperate with the Congressional probe but at the same time she is under pressure from the company’s own lawyers not to undermine GM’s defense in the myriad of lawsuit that are piling up against GM.

Former GM CEO Rick Wagoner, (r) and Bob Nardelli testifying before Congress.Wagoner's appearance before the committee was considered a disaster.

Meanwhile, the cost of the recall is continuing to mount. GM yesterday said it will take a $750 million charge in the first quarter to cover the expenses associated with the multiple recalls. By way of comparison rival Toyota, which came under intense scrutiny for its handling of problems with its vehicles back in 2009, has agreed to pay a $1.2 billion fine to the federal government for covering potential defects. Toyota also has agreed to settle, at an estimated cost of $1 billion, multiple lawsuits involving cases of unintended acceleration.

The cost is only part of GM’s problems as it tackles to problems created by a faulty ignition switch.

“Toyota found out the biggest damage was to their market share,” said Sean McAlinden, vice president of Research at the Center for Auto Safety in Ann Arbor. Before Toyota was flying high but as the controversy over the problems unfolded, Toyota’ Lexus division lost its leadership in luxury sales while the complete dominance of the Camry in the mid-sized segment was undermined.

In GM’s case, the company’s half-decade old effort to rebuild the reputation of GM’s passenger cars may be on the line as Barra testifies before Congress.

Prior to company’s bankruptcy in 2009 it was an article of faith among analysts that GM lost money on passenger cars. Since then thanks to a wave of fresh new products, a new willingness to address problems and concessions from the United Auto Workers and closer ties to suppliers, GM has managed to turn its passenger car business. But the effort is now at risk analysts suggest.

“They make money on cars but nowhere near as much as they do on trucks and the big SUVs,” observed Joe Phillippi, an independent analyst based in New Jersey.

McAlinden noted GM is actually in a weaker position at this point than either Toyota, which used its vaunted reputation for quality reliability and durability to shield its sales, while Ford Motor Co. was able to shift much of the blame for the Explorer rollover controversy onto a key supplier – Firestone. Nonetheless both the reputations of both Toyota and Ford suffered and they also took a beating in the market place.

Thus the appearance of Barra, the first woman to serve as GM’s top executive, on Capitol Hill becomes even more important. It’s also becoming more complicated as new evidence surfaced that GM has known about the ignition-switch defect for over a decade.

Barra’s also fighting history, which has seen GM executives stumble badly during appearances before Congressional committees.

Former CEO Rick Wagoner was completely unprepared for questions about his use of a corporate jet as he tried to make GM’s case for loan guarantees in November 2008. Wagoner’s appearance is generally considered to have been a disaster. In 1966, then-GM Chairman James Roche was pilloried over the company’s decision to pry into Ralph Nader’s private life.

“Additional evidence has surfaced to suggest GM knew about the ignition switch problem at least 10 years ago, but the new evidence hasn’t changed the fundamental challenge facing Mary Barra during this week’s congressional hearings. GM’s new CEO has shown a consistent willingness to cooperate with government officials while portraying GM as a changed company that won’t repeat the mistakes of the past. This is a good approach, and one that’s supported by a genuine shift in corporate policy,” Kelly Blue Book analyst Karl Brauer said.

(GM recalls another 1.3 million vehicles. For more, Click Here.)

Congressmen and women are equal opportunity offenders when it comes to giving auto executives a rough time during investigatory hearings. They ran roughshod over Toyota CEO Akio Toyoda and his team during the hearings about the maker’s unintended acceleration issue.

Documents collected by congressional investigators raise new questions about General Motors’ response to problems with a faulty ignitions switch in GM passenger cars that have been linked to the deaths of 13 motorists during the past decade.

Delphi, which was once part of GM and was a major supplier of components to cars such as the Chevrolet Cobalt at the center of the ignition-switch controversy, told U.S. congressional investigators last week that GM approved the original part in 2002, despite the fact it did not meet GM’s own specifications, according to a memo prepared for members of House of Representatives Energy and Commerce Committee.

(Click Here to get details on backup camera ruling.)

The information from Delphi officials was included in the memo, which is includes a chronology which goes all the back the late 1990s right up until last week when GM announced it was expanding the recall of cars with potentially defective ignition switches to include more recent models of the Cobalt, Pontiac G5, Saturn Ion, Pontiac Solstice and Saturn Sky and Chevrolet HHR built between 2006 and 2011. Earlier versions of the same vehicles had been recalled in February. The recall now covers more than 2.6 million vehicles.

GM switches in Chevrolet Cobalts and other models could be bumped or jostled into accessory mode while they were moving, shutting off the engines and disabling the power steering, power brakes and airbag and contributing to dozens of crashes some of which turned lethal.

Adam Levitt, a director with law firm Grant & Eisenhofer and one of the California lawyers leading the private consumer action, said, “We expect that congressional investigators are going to continue probing GM for its pattern of non-disclosures and late disclosures and reacting only after being called out for its piecemeal solutions, rather than stepping up and doing the right thing for millions of customers who have been hurt by the company’s actions and subsequent cover-up over its ignition switch.”

(To see more about the improved safety technology on the 2015 Ford Mustang, Click Here.)

Barra and GM are not the only ones getting exposed to the harsh glare of the congressional hearing spotlight. David Friedman, the National Highway Traffic Safety Administration’s acting administrator, is being forced to ask some difficult questions about the agency’s role in the problem.

He has defended NHTSA’s response to the problem, suggesting repeatedly that agency was unaware of a problem until recently. A  recent House of Representatives report said NHTSA declined to open investigations twice, even after one official found a pattern of problems in 2007.

“We are not aware of any information to suggest that NHTSA failed to properly carry out its safety mission based on the data available to it and the process it followed,” he said.

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One Response to “GM’s Barra Battles Tough History During Hearings”

  1. Jorge M. says:

    GM isn’t going to skate this time.