Even a hardened former executive like me has to admit to getting a bad feeling in his gut, watching a congressional committee grill a fellow business leader. I’ll even cop to thinking “better her than me” as General Motors (NYSE:GM) chief executive Mary Barra got raked over the coals last week.
What can I say, it disgusts me to see a mob of self-serving bureaucrats gang up on an American that actually works for a living, pays taxes, and contributes to the nation’s GDP. Nevertheless, it comes with the territory. That’s why big company CEOs make the big bucks.
While I was rooting for Barra, I knew she had to be genuine, transparent, and forthcoming about the crisis her company’s facing. So when she told Congress that the culture at General Motors has changed since its 2009 bankruptcy and bailout – that customer safety trumps any business consideration – I wanted to believe her words were true.
Unfortunately, I’m not seeing it.
Not only is it apparent that GM covered up an ignition-switch defect that led to the deaths of at least 13 people, it also looks as if the nation’s top automaker was dragged into a recall of over 2 million vehicles kicking and screaming. Had it not been for a lawsuit involving a woman who died in a Chevy Cobalt accident in 2009, there’s a good chance that fatal safety flaw might never have come to light.
What puzzles me is why everyone is overanalyzing this. I read story after story asking all the usual questions: who knew what and when did they know it? But this is not a whodunit. Even if everything the company already admits to being true is the worst of it, it’s pretty damning, if you ask me. Just look at the timeline, none of which is in dispute:
Engineers at GM first observed the defect during pre-production testing of the Saturn Ion in 2001, then again when the Chevy Cobalt launched in 2004.
Scott Oldham, now editor-in-chief at Edmunds.com, had a near disaster while test-driving the Cobalt at a launch event for journalists and analysts. When his knee accidentally hit the ignition key, it shut the engine and its power steering off. After struggling to stop the car and get it off the road, Oldham and a GM engineer could easily see that the switch was faulty.
After receiving several such complaints, Cobalt program engineers began tracking the problem and held several meetings during 2005. While it was clear that the ignition switch was fragile and needed to be replaced, all proposals were rejected as being too expensive. According to a House Subcommittee report, none of the solutions represented “an acceptable business case.”
Later that year, a fatal crash involving a Chevy Cobalt revealed that the driver’s airbags failed to deploy because the ignition switch was in the “accessory” position at the time of the accident. That resulted in the first of what would be many investigations by the National Highway Transportation Safety Administration (NHTSA), but no recall.
Apparently, GM figured that, even without engine power, power breaks, power steering, and airbags, drivers could still somehow safely operate the vehicle. So, instead of a recall, GM issued a service bulletin to dealers recommending that customers remove heavy items from their key rings. No, I’m not kidding. I wish I was.
Then, sometime in 2006, Cobalt program engineers did authorize a redesign. And while officials at Delphi (a GM subcontractor) say the new ignition switch still didn’t meet GM’s original specification, the modification was deployed for the 2007 model year and beyond.
But here’s where things get interesting. GM’s engineers never changed the part number from the old switch to the new one. That simply can’t happen on its own – when a part changes, so does the part number. There are systems to ensure that’s the case, but not this time.
Fast-forward seven years to a 2013 deposition involving the woman who was killed in 2009. GM switch engineer Ray DeGiorgio said he was not aware that the switch could be easily toggled from the “on” position to the “accessory” position and that he never signed off on the change when, in fact, documents showed that he did.
As I always say, if it looks like a duck, walks like a duck, and quacks like a duck, it’s probably a duck. No matter how you look at it, this was a cover-up.
In the meantime, there were more fatal crashes, dozens of field reports and complaints, and more investigations by regulators. And while there was a clear pattern of ignition switches turning off – cutting power to engine, break, steering and airbag deployment systems – amazingly, NHTSA investigators failed to connect the dots.
In 2009, GM filed for bankruptcy protection and got bailed out by the U.S. Treasury. According to last week’s compelling congressional testimony by its new chief executive, that supposedly marked a new era at the company, a new culture where business cases never came ahead of customer safety.
But the sad truth is that, by 2012, GM had identified at least six fatalities and far more injuries caused by accidents attributable to the defect. And still, there was no recall. It actually wasn’t until that fateful deposition in June of last year that GM finally knew its goose was cooked. And even then, it didn’t act.
By the end of 2013, the automaker had determined that the switch was to blame for at least 13 deaths and 31 crashes. And yet, the first recalls didn’t begin until mid-February. Even then, it took another six weeks before all the vehicle models at risk due to the faulty switch were actually recalled, at least as far as we know.
Had GM replaced a $2 component when it first learned of the problem, more than a dozen people would still be alive today. Instead, it put short-term profits ahead of customer safety and engaged in an unconscionably corrupt cover-up that spanned more than decade.
As much as I wanted to believe that Barra’s statements were true, that her impassioned testimony was genuine, I have to admit that the facts say otherwise. There is no evidence that anything has changed at GM, at least none that I can see.