Mary Barra, General Motors Senior Vice President, Global Product Development
APGM CEO Mary Barra
By Keith Naughton and Jeff Plungis

At the heart of General Motors' slow response to fatally flawed ignition switches is a committee culture that impeded the flow of information from the engineering ranks to the corner office.

The company began investigating reports of faulty switches in 2004. Yet GM's top executives, including new Chief Executive Officer Mary Barra, didn't learn of the situation until "a few weeks ago," she wrote March 4. Company documents show that during that period, multiple layers of engineers and corporate committees analyzed and failed to fix a flaw that led to the deaths of 13 people. GM (GM) told authorities that before announcing the recall, the company engaged in several internal probes featuring an array of committees that left federal bureaucrats baffled.

Now, as it tries to shake off a humbling bankruptcy and period of government stewardship, GM is grappling with a damaging recall of 1.6 million cars. In the coming months, the world's second-largest automaker will replace switches that could slip out of the "on" position when jarred or used with heavy key rings, cutting off power and deactivating air bags.

"At the old, lethargic, slow-moving GM, people didn't want to push bad news upward," said George Cook, a former Ford Motor (F) executive who is now an executive professor of marketing at the University of Rochester's Simon Business School. "They laid on it way too long. You can't gamble with people's lives."

House Committee

The House Energy and Commerce Committee will explore whether the automaker or the National Highway Traffic Safety Administration missed "something that could have flagged these problems sooner,"
Fred Upton, the panel's chairman and a Michigan Republican, said last night in a statement. GM said it will fully cooperate with the panel.

In the Senate, Jay Rockefeller, a West Virginia Democrat, has asked for a subcommittee hearing on the matter from Claire McCaskill, a Missouri Democrat, said a person familiar with the matter. The Detroit News reported the request earlier.

For Barra, the recall poses a challenge: Can the new CEO change the culture at a company where she has worked for 34 years? The recall, issued a month after she became CEO on Jan. 15, risks harming GM's reputation just as it tries to shake the "Government Motors" tag from its federally funded bankruptcy.

Show Change

"We're looking for evidence that they can move more quickly," said Brian Johnson, an auto analyst for Barclays. "The committee culture of the old GM was rooted in organizational paralysis and characterized by a lack of accountability."

Still, while the cars involved were built before the 2009 bankruptcy, the slow-motion investigation into the ignition switches continued after GM was reborn as a supposedly leaner organization. The cars recalled were the 2003-07 Saturn Ion, 2005-07 Chevrolet Cobalt, 2006-07 Chevy HHR, 2006-07 Pontiac Solstice, 2007 Saturn Sky, 2007 Pontiac G5, 2005-06 Pontiac Pursuit in Canada and 2007 Open GT in Europe.

Greg Martin, a spokesman for GM, said the automaker had "nothing further to add to the previous statements" it made on the recall.

Barra has a responsibility to explain what took so long, said Joan Claybrook, a former NHTSA administrator and a longtime consumer advocate.

Claybrook said it suggests "a failure of communications at General Motors on a massive scale, so that the various sections of the company didn't talk to each other about the need for a recall."

GM's Timeline

GM's own timeline that it submitted to NHTSA shows how its investigation wound through a complex committee structure with an alphabet soup of acronyms. In 2011, for example, the automaker said the probe moved through a Field Performance Assessment, or FPA, which conducted a Field Performance Evaluation, or FPE, and assigned a Field Performance Assessment Engineer, or FPAE. The engineer then presented findings to a Field Product Evaluation Recommendation Committee, or FPERC, which may or may not be the same as the Field Performance Evaluation Review Committee, also FPERC, which received additional findings last year.

107 Questions

NHTSA asked GM to explain the difference, if any, between the two committees with the same acronym in a 27-page federal filing last week that included 107 questions the automaker must answer under oath.

"Are these two different committees?" wrote O. Kevin Vincent, NHTSA's chief counsel. "If yes, describe the purpose of each committee. If no, explain the reason GM's chronology uses two names for this committee."

Barclays's Johnson said he was amazed that "even the government bureaucrats" couldn't understand GM's plodding processes. Barra, an engineer who previously ran GM's product development and human resources, needs to streamline its culture, he said.

"Someone who came from both an engineering and an HR background should be paying more attention to creating organizational processes that actually worked," Johnson said. "But it's too early to tell."

GM slid 1.6 percent to $36.51 at 11:33 a.m. New York time. The shares fell 9.2 percent this year through yesterday.

CEO's Pledge

Barra pledged to personally take control of the recall in her March 4 Web posting to employees. That includes "an internal review to give us an unvarnished report on what happened," Barra wrote. "We will hold ourselves accountable and improve our processes so our customers do not experience this again."

Barra's promise came after GM issued a public apology for the recall and acknowledged its own investigation "was not as robust as it should have been."

Such an admission opens GM to further lawsuits for the failed ignition switch, said Jon Harmon, a crisis communications consultant. Indeed, NHTSA asked GM to "describe in detail the ways in which" the internal investigation fell short and how that will change in the future.

"You've got to balance between the legal jeopardy of taking away some of the tools of your legal defense and the positives you get from owning up to it," said Harmon, who handled media relations at Ford during the 2000-2001 recall of Ford Explorers with shredding Firestone tires. "If you know that there has been a misstep, you ought to own up to it as soon as possible."

Reputations at Stake

Reputations can be ravaged by poorly handled recalls, Harmon said. And that will cost an automaker more in sales and profits than lawsuits will in jury awards.

Toyota Motor's (TM) gold-plated image for quality was marred by a recall of more than 10 million vehicles in 2009 and 2010 for incidents related to unintended acceleration, said Tom Libby, an analyst for IHS Automotive. Toyota's U.S. retail market share fell from 16.3 percent in 2008 to 13.5 percent last year, according to data provided to Bloomberg by IHS using Polk vehicle registration records.

As far back as 2004, GM had an opportunity to avoid a recall crisis, according to its timeline. Late that year, GM learned of a Chevy Cobalt losing engine power because the car key moved out of the run position in the ignition switch. Engineers identified the flaw and came up with solutions to fix it. Yet "after consideration of the lead time required, cost, and effectiveness of each of these solutions" GM closed the investigation without taking any action, the automaker said.

More Fixes

Engineers came up with another solution to the flaw in 2005 that "was initially approved, but later canceled," GM said. Instead, the automaker issued a "service bulletin" to dealers to fix the fault if customers asked about it. Dealers fixed it on 474 cars, GM said.

The automaker came up with a third fix in 2006, yet didn't believe the new switch design had been implemented because the part number from its supplier, Delphi Mechatronics, didn't change. GM now says the supplier, a unit of its former parts division Delphi Automotive Plc (DLPH), made the change "at some point during the 2007 model year" without informing the automaker.

During the first nine years of GM's investigations and proposed fixes, the fault never rose to the executive level, according to the timeline.

That finally occurred on Dec. 17, 2013, when the Field Performance Evaluation Review Committee presented its findings to the Executive Field Action Decision Committee, or EFADC, GM said. On Feb. 13, 2013, GM issued a recall for 778,562 models, which 12 days later was expanded to 1.62 million cars.

Last to Know

Top executives are usually the last to know of internal recall investigations because engineers are always running down reports of flaws resulting from accidents, said Tom Stallkamp, a former president of Chrysler when it was part of DaimlerChrysler, who left the automaker in 1999.

"If you tried to react to every single issue coming in, or every dozen issues spread over a dozen cars, you'd go crazy," Stallkamp said. And "there's always a little tension between the quality and safety offices and the engineering offices because they're kind of looked at as the cops watching over them."

The lack of executive involvement until the end of GM's investigation is not evidence of a coverup, said independent auto analyst John Wolkonowicz, a former Ford product planner who worked as a consultant to GM. It's just GM's corporate inertia.

"The GM bureaucracy is so convoluted and deep, it could take 10 years because there's so many spots in the company where somebody can say, 'Oh, this doesn't matter,' " said Wolkonowicz, who is based in Boston. "This is the most complicated company I've ever encountered. And I don't think it got fixed after the bankruptcy. It's still at least a version of what it was."


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ROY

The same conditions that brought about the bankruptcy at GM still exist. Nothing was changed, GM just claimed they had reorganized and got out of their old habits. Just lies...like they have always done. These people should have become politicians. I used to like some GM products years ago. But over time they built more and more crap. They spent billions of projects like the Vega, the Citation (X-body cars) that literally self destructed over short time. Just to refresh peoples memories, Ford did not take any federal money. Chrysler took the money, but did repay all of it. The only money lost on these bailouts was to GM. I realize beauty is in the eye of the beholder. However, to me their cars have become more generic than low level import brands. Most of GM products are ugly...like all the good designs were taken. I think that GM's business model in the Federal government. And we all know how well Uncle Sam spends our money.

March 15 2014 at 3:43 PM Report abuse rate up rate down Reply
sxygrl

waz up

March 15 2014 at 3:33 PM Report abuse rate up rate down Reply
redmer1

GM's biggest challenge is repairing their culture. From Lopez forward their selfish,arrogant attitude moved them to mistreat their employees, their suppliers and eventually their customers. They would regularly extort money out of their suppliers in the form of coerced "givebacks" or "rebates". They would regularly debit suppliers into bancruptcy. We kicked GM out of our office when a buyer tried to persuade us to circumvent our Tier 1 customer( who had a contract with GM) in order to supply them direct. They became for us a "toxic" customer.Over the last 15 years they've puked out a whole generation of GM bile in the form of displaced middle management into a host of other industries to infect those industries with the flawed ethics and practices that ruined GM. Perhaps a heavy dose of humility is what was needed...I don't know. Everyone that I know that works there is looking for something else. If your own people don't believe in your vision...how will your customers? Culture.

March 15 2014 at 2:11 PM Report abuse rate up rate down Reply
mondobass

I bought a 2004 Saturn Ion and gave it to my daughter, in good faith, a few years later. It makes me want to put my foot up GM's collective ass for knowingly putting her in danger. I have to wonder how many of THEIR kids were allowed to drive those cars after they discovered the issue.

March 15 2014 at 2:00 PM Report abuse rate up rate down Reply
Erbie's

Don't guess George Cook worked for Ford when the Pinto came out, how many people were trapped in one after a rear end collision jammed their doors shut and the gas tank exploded. Ford knew of the problem before the first Pinto hit the street and could have fixed it for less than $10.00 but that would have thrown it out of the cost limits the executives had set up for it. Ford refused to fix the problem, they dropped the Pinto not long after the disclosure of the problem they knew they had before selling the first one.

March 15 2014 at 12:53 PM Report abuse rate up rate down Reply
Mark

Interesting that Ford made the comment that you cannot gamble with peoples lives. Ford is the one that did the math and decided that it would be cheaper to pay people that were killed in one of their cars then to recall them all. Remember the Pinto wagon with the gas tank that would explode on impact. It is all about the money and they are all a bunch of ******. I also remember when Ralph neder wrote his book on another Chevy, the Corvair. It was named, "Unsafe at any speed", I believe.

March 15 2014 at 11:44 AM Report abuse -1 rate up rate down Reply
RetireeGoneWild

"At the old, lethargic, slow-moving GM, people didn't want to push bad news upward," said George Cook, a former Ford Motor (F) executive.......

Well, that's also how government runs things. Lessons learned.

March 15 2014 at 11:42 AM Report abuse -1 rate up rate down Reply
floatgod

Shut'em down!
They should have gone out of business six years ago. Only the strong survive, and we taxpayers will continue to kick money down the rat hole.

March 15 2014 at 11:08 AM Report abuse rate up rate down Reply
crazy ray

Led to thirteen deaths? Well, at least one of those deaths was a driver who was drunk, speeding and on the wrong side of the road. She didn't need a switch to kill her.

March 15 2014 at 8:52 AM Report abuse rate up rate down Reply
antoniusaurelius

When you see the documentary film "Who Killed the Electric Car", you will understand GM's mindset. They could have had a corner of the market in 1998 had they chosen to do the right thing. It could have possibly saved them from bankruptcy. Of course, California politicians didn't help the situation any either. Click on the link below to see a short excerpt from the film and watch the full version to really understand what happened, then go ballistic.
www.youtube.com/watch?v=nsJAlrYjGz8
I have bought Cadillacs one after another for the last 45 years in order to "Buy American", but the last Cadillac I have purchased has been one repair nightmare after another. It's a crying shame what our Country and American standard of quality workmanship has come to and General Motors is leading the band.

March 15 2014 at 7:53 AM Report abuse +1 rate up rate down Reply