While the GM Town Hall meeting last week and the following press conference were devastating demonstrations of the complete failure of product development, legal and management executives at GM to do the right thing, the worst is yet to come in the deadly GM ignition switch disaster. It truly is the “switch from hell” as the GM engineer in charge of it said. (Hear Ken Zino discussing this in detail on Car Concerns, part of the Lifestyle Talk Radio Network.)
Last Monday, former U.S. Attorney Anton Valukas presented the findings of his investigation into GM ignition switches that caused airbag failures to the GM Board of Directors. The Valukas report, paid for by GM, was the result of an inquiry that was claimed by GM to have “complete independence” covering the activities of the people working on it from the law firm Jenner & Block. The investigation covered more than 350 interviews with at least 230 individuals and examined – it’s said – 41 million documents.
One key finding claimed Mary Barra, GM CEO, and Mark Reuss, the head of global product development who was formerly in charge of GM North America, were unaware of the safety issues that are known to be responsible for at least 13 deaths, maybe more. All it is going to take is one e-mail to Barra or Reuss or one whistle blower to discredit the report, but given the high-priced legal talent on the case employed by GM – in the US you get all the sufficient legal services you can afford – it’s not clear that justice will ever be served.
Moreover, criminal charges against GM are certain, as happened to Toyota with its stuck accelerator pedal cover-up (that cost the leading Japanese company $1.2 billion in a controversial plea agreement that critics said left the scofflaws off too easy). Possibly individual criminal charges are likely as well. The U.S. Justice Department is investigating. Counting the recall costs, victims’ compensation, lawsuits and fines, GM shareholders will take a ~$5 to $10 billion dollar hit in AutoInformed’s view, a number contested as too high by GM and stock analysts.
The product liability lawyers, helped by Clarence Ditlow at the Center for Auto Safety, aka CAS – who sometimes plays fast and loose with the facts in my view – will now start selectively leaking testimony or depositions on GM ignition switch lawsuits. These will be out of context – and chosen for their maximum media value – as in sensationalism and an attempt to poison potential jury pools.
The suppliers Delphi and Eaton, now a part of Continental, thus far are not involved, but do not be surprised if they eventually are entangled in this fiasco.
How about lawsuits from the ex-GM people, against GM. This depends on the packages they were given, but I previously noted the very careful language on that from the beleaguered company. Barra said 15 individuals who were determined to have acted inappropriately on the ignition switches are no longer with the company. Disciplinary actions have been taken against five other employees. GM declined further comment about whether these were retirements or dismissals or buyouts and would not name names.
Observation, perhaps telling, during the press conference Mark Reuss looked like a cat on a hot tin roof, excuse the cliché. Is this ignition switch the only part number on a clearly defective part that was modified but the part number wasn’t changed? The Valukas report does not address that. How many more, if any? Reuss has – who knows how many issues – on his desk now. I do not believe he has fixed the product development system as he implied. And most assuredly more, many more recalls are coming given the culture at GM.
GM has already announced more of these recalls – three safety recalls and one non-compliance recall, all of which were reported to the NHTSA on Thursday, June 5, 2014. Included are 57,512 model year 2014 Chevrolet Silverado LD, 2014 GMC Sierra LD and model year 2015 Silverado HD, Tahoe and Suburban and 2015 GMC Sierra HD and Yukon and Yukon XL models because the radio may not work, preventing audible warnings if the key is in the ignition when the driver’s door is opened. Yup, another ignition switch related issue.
Then there is the arbitration process to compensate victims. The program will be independently administered by Kenneth Feinberg, who is highly regarded for his handling of other significant compensation programs, including the Boston Marathon bombing, the deadly BP Deepwater Horizon oil spill and the World Trade center terrorist attacks on September 11. The program is expected to cover approximately 1.6 million model-year 2003-2007 recalled vehicles manufactured with the ignition switch defect and approximately 1 million model year 2008-2011 recalled vehicles that may have been repaired with a recalled ignition switch.
Until we see the Feinstein proposal / rules, it’s unknown what will happen. There are many angles and minefields here, particularly for law firms that have multiple cases. Better to settle than litigate? However, I assume GM will apply some discount rate – or at least what product liability attorneys think is a discount so to speak – in return for an immediate check that eliminates the cost and risk of litigation. Maybe none or very few of the cases are litigated.
Then there is the grand standing, do nothing Congress. If I were at any auto company right now, I would be worried, very worried. There will certainly be further legislation prompting more scrutiny of safety issues at all auto companies. This will be costly and time consuming at a minimum. It might even impede the progress we’ve made in safety improvements. (I know this is heresy among the safety establishment wonks, which I submit has mixed motives. Spare me the protests, although I will read them.)
The greater irony here is that NHTSA – the National Highway Traffic Safety Administration – will be the federal agency enforcing whatever new legislation that emerges. NHTSA is just as culpable as GM in this tragedy, but do not hold your breath for the government to investigate itself. Not likely. Ever.
The coming months will see this played out in by every news organization in all media formats. That is why I think the worst is yet to be on what a GM employee called the ignition switch from hell.
In a quest to assess the financial damage to GM consumers on vehicles affected by the recalls in the courts, the process has come to a halt. GM is reported to be going back to the bankruptcy court to see if they can dismiss some of their losses under the 2009 bankruptcy. While Ms. Barra has inherited the disaster and is dealing with it in a straightforward manner, the lawyers are still looking at ways to hide from the liabilities. There has been financial loss to the vehicle owners and must be determined to what extent. Many of the older vehicles are almost valueless but the newer cars will have a stigma for years. This will equate to lost value. Should they be able to escape this by reopening the bankruptcy?
(Jan: As I see, it is an unlikely with a slim or negative probability that US bankruptcy law will be overturned, which in its current version dates back to US Congressional approval in the1860s. That is why the yet announced Feinstein rules on compensation of ignition switch victims is important here. GM is trying, apparently, and certainly publicly, not to give the impression that it is hiding behind the bankruptcy code, I think GM understands that mere legalism – and it is protected under the bankruptcy code – is not sufficient to handle this case of what I submit is corporate malfeasance.
The arbitration process to compensate victims is unknown. The program will be independently administered by Kenneth Feinberg, who is highly regarded in the US for his handling of other significant disasters, including the Boston Marathon bombing, the deadly BP Deepwater Horizon oil spill and the World Trade center terrorist attacks on September 11. The program is expected to cover approximately 1.6 million model-year 2003-2007 recalled vehicles manufactured with the ignition switch defect and approximately 1 million model year 2008-2011 recalled vehicles that may have been repaired with a recalled ignition switch.
Until we see the Feinstein proposal / rules, it is unknown what will happen. There are many angles or minefields here, particularly for law firms that have multiple cases. Better to settle than litigate? I assume GM will apply some discount rate – or at least what opposing product liability attorneys think is a discount, so to speak – for an immediate check. Maybe none or very few of the cases are ever litigated. We will see. – editor)
Why didn’t they just rotate the switch so the heavy wad of keys just hung straight down? Fixing the underlying problem would have been better, but even this cheap and dirty stopgap would have killed fewer people.
Appalling. I hope they fire some of the actuarial geniuses who with their convoluted statistics convinced “management” that it was better to settle a few deaths than issue a recall. Probably the same who sunk the financial industry. Black swans are not an infinitesimal probability when the whole system is broke.
Clearly, there was a failure in GM’s process, and almost certainly ones that regulatory agencies and courts across the land have pilloried other car companies for of late. Toyota comes to mind…
The question is whether those agencies and the courts will be willing to punish GM for transgressions that happened Before the Bankruptcy. And undoubtedly even if there are no fines levied, this battle will be fought in court by individual plaintiff’s attorneys hundreds of times. It’s gonna be ugly.
General Motors is a very large company that depends on everyone facing the same way in what they do on a day to day basis. In many ways the people of this company are as they say birds of a feather. They all stick together and when an issue occurs (by the way issues occur all the time) a solution is made and over time corrections are made.
The problem was not with the ignition switch is a wonderful example. Placing a key into the ignition with the leverage weight of other keys, and other junk make it possible to have the added weight to LEVERAGE THE IGNITION KEY INTO An OFF POSITION RESULTING IN LOSS OF POWER, SEAT BELTS, AIR BAGS ETC.
Is GM responsible, NO. THE MISS USE OF ADDED WEIGHT TO A IGNITION KEY MAY RESULT IN DEATH, OR INJURY.
(This seems to me a classic ‘blame the customer’ response to a deficient design. Surely GM knows how key chains are used. – editor)