New CEO Barra Faces Tough Task in Shedding Old GM

APTOPIX General Motors Recall Congress
Evan Vucci/APGM CEO Mary Barra
By MARCY GORDON
and TOM KRISHER


WASHINGTON -- "That is not how GM does business."

With statements like that, new CEO Mary Barra is trying to distance the General Motors (GM) she now leads from the overly bureaucratic company whose inattention to its customers helped land it in bankruptcy in 2009.

But it's clear from her appearance before Congress this week that she faces a difficult task. Documents submitted by GM ahead of a House subcommittee hearing Tuesday show that cost was a major consideration when the company declined a decade ago to implement fixes to an ignition switch used in small cars.

That switch is now linked to 13 deaths, and Barra, less than three months after taking over as CEO, finds herself thrust into one of the biggest product safety crises Detroit has ever seen.

Since February, GM has recalled 2.6 million cars -- mostly Chevrolet Cobalts and Saturn Ions -- over the faulty switch, which can cause the engine to cut off in traffic, disabling the power steering, power brakes and air bags and making it difficult to control the vehicle. The automaker said new switches should be available starting April 7.

At a hearing on Capitol Hill before a House subcommittee, Barra acknowledged under often testy questioning that the company took too long to recall cars equipped with the switch. At a press conference after the hearing, she said it "angers me that we had a situation that took more than a decade to correct."

Barra promised changes at GM that would prevent such a lapse from happening again.
"I think we in the past had more of a cost culture," she said, adding that it is moving toward a more customer-focused culture.

Barra herself is a product of the old GM. In more than three decades at the company she has held numerous positions, and was the head of product development before being named CEO.

Barra will be back before Congress Wednesday, this time testifying before a Senate subcommittee.

As relatives of the crash victims looked on intently, Barra told committee members that she didn't know why it took years for the dangerous defect to be announced. And she deflected many questions about what went wrong, saying an internal investigation is underway.

Barra did acknowledge, however, that GM used the ignition switch even when it knew the part didn't meet its own specifications. When she tried to draw a distinction between parts that didn't meet specifications and those that were defective and dangerous, Rep. Joe Barton, R-Texas, shot back: "What you just answered is gobbledygook."

Committee members repeatedly asked about decisions that prevented GM from recalling the cars much sooner.

GM has said that in 2005, company engineers proposed solutions to the switch problem, but the automaker concluded that none represented "an acceptable business case."

"Documents provided by GM show that this unacceptable cost increase was only 57 cents," Rep. Diana DeGette, D-Colo., said.

The 57 cents is just the cost of the replacement switch. The figure doesn't include the labor costs involved in installing the new part.

Barra testified that the fix to the switch, if undertaken in 2007, would have cost GM about $100 million, compared with "substantially" more now.

Under questioning, she said the automaker's decision not to make the fix because of cost considerations was "disturbing" and unacceptable, and she assured members of Congress that that kind of thinking represents the old General Motors.

David Friedman, head of the National Highway Traffic Safety Administration, also testified Tuesday. He blamed GM for what he said was its failure to provide adequate information to the government.

"It's my understanding that we did not have that information," Friedman said. In one example, GM didn't tell the agency that the switches didn't meet the company's specifications, he said.

Committee members questioned Friedman about why the agency didn't investigate the cars based on the information it did have. At one point, Rep. Barton was incredulous when Friedman acknowledged that NHTSA didn't fully understand how the air bags in some of the GM cars worked.

Some current GM car owners and relatives of those who died in crashes were also in Washington seeking answers. The group attended the hearing after holding a news conference demanding action against GM and stiffer legislation.

Owners of the recalled cars can ask dealers for a loaner vehicle while waiting for the replacement part. Barra said GM has provided more than 13,000 loaners.

Barra announced at the hearing that GM has hired Kenneth Feinberg -- who handled the fund for the victims of 9/11, the Boston Marathon bombing and the BP (BP) oil spill -- to explore ways to compensate victims of accidents in the GM cars. It's an indication that GM is considered some kind of compensation fund for victims, although Barra stopped short of saying that.

GM shareholders are also watching Barra. GM stock is down $2.75, or 7.4 percent, since March 11 when committees in the House and Senate said they would hold hearings on the recall and word leaked out that the Justice Department was investigating the company's handling of the issue.

On Tuesday, GM stock closed down 8 cents, to $34.34, after rising as high $35.14 prior to Barra's appearance.

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11 Comments

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Iselin007

This is the kind of stuff you get when you outsource production to the lowest bidder. Usually what you get from taking short cuts is a crappy product .

April 03 2014 at 12:53 PM Report abuse rate up rate down Reply
Iselin007

What's inexecusable is this isn't the begining of a new auto maker. Problems happen at the competition also. Business has become too focused on stock price and corporate rewards while ignoring the blue collar and lower income customers. If the customers are the elite well to do trying to pass of crap would of never been an option.

April 03 2014 at 12:27 PM Report abuse +2 rate up rate down Reply
bakeland

Ms. Barra has three strikes against her.

First, she is a woman in a male dominated industry and culture.

Second, the individual who finds problems and mistakes is NOT always welcomed.

Third, the one who corrects the problem is further NOT welcomed or rewarded by those who created the problem in the first place.

By the way, I'm male.

April 03 2014 at 12:17 PM Report abuse rate up rate down Reply
Iselin007

Could be time to merge with Briggs&Stratton.

April 03 2014 at 11:58 AM Report abuse rate up rate down Reply
Iselin007

Whatever the excuse customers were expecting quality not another Yugo. You can't blame someone new for the lemons of the past but who knows why a new person was really chosen?.

April 03 2014 at 11:44 AM Report abuse +2 rate up rate down Reply
Iselin007

Apparently the lower income customers got the crappy ignitions while those that could afford the top of the line vehicles got the no expense treatment like luxury ignitions!

April 03 2014 at 11:35 AM Report abuse rate up rate down Reply
bakeland

Very simply, these highly educated engineers has no COMMON SENSE.

All they had to do was to position the switch with the SLOT for the key ring POINTED DOWN in the ON POSITION. Any weight on the key ring would keep the car in the ON position.

The LAW of GRAVITY never fails, except in a WEIGHLESS environment.

The ignition switch would always FAIL to the SAFE position. It would take a PURPOSELY direct avtion to turn the car off.

April 02 2014 at 1:12 PM Report abuse rate up rate down Reply
smbeanuniversal

To further clarify...Berra is responsible now as regrding the total performance of GM and certainly including quality. However, Richard Waggoner was CEO at the time these particular quality issues originated and must be held accountable. Interesting to note that Waggoner was thrown out of GM at the time of it's bankruptcy. He was better at collecting his undeserved paycheck than running the company.

April 02 2014 at 8:49 AM Report abuse +2 rate up rate down Reply
sghenry4

This cost saving culture is representative of the old GM, not the new...really? Gee, it seems to me the new GM has been around almost 5 years. Was this problem dealt with in that time? It's the same deadwood running the show. Does anyone think they fired everyone from GM Corporation which went bankrupt and ushered in a whole new bunch to GM Company? We are spoon fed such crap. How generous that they've hired a lawyer to consider compensation to the victims' families since the old GM is not legally liable due to the terms of the bankruptcy. Where's big mouth Biden today with his lavish praise of GM? Once again, the government and corporate America stick it to the little guy.

April 02 2014 at 8:01 AM Report abuse +1 rate up rate down Reply
smbeanuniversal

Although Barra is clearly a very poor and totally unqualified choice for GM CEO she is not responsible for the GM failure to insure quality. If I were on the congressional committee I would be holding Richard Waggoner totally responsible since he was in charge at the time.

April 02 2014 at 8:01 AM Report abuse rate up rate down Reply