GM CEO Mary Barra – who has only been at her job for three months – was on the hot seat this week – as she was grilled by members of Congress regarding the U.S. automaker’s failure to recall many of its small cars that had defective ignition switches.
GM was scrutinized for its failure to announce a recall more quickly, even after 13 apparently related deaths and 32 crashes occurred. The defect may have impacted 2.53 million cars that run the risk of suddenly having their engines shut off or air bags fail.
While appearing on April 2 before the Senate Subcommittee on Consumer Protection, Barra responded the company has yet to complete its own investigation, which is being led by Anton Valukas, a former U.S. Attorney.
That led Sen. Barbara Boxer, (D-Calif.), to respond, "You don't know anything about anything."
"You're a really important person to this company. Something is very strange that such a top employee would know nothing," Boxer added.
Sen. Claire McCaskill, (D-Mo.), who chairs the Senate Subcommittee on Consumer Protection, claimed GM has "a culture of cover-up" and alleged a GM engineer lied in 2013 when he was asked about the defective ignition switch.
In fact, GM knew about faulty ignition switches in its vehicles since 2001, according to InsideCounsel.
"It might have been the old GM that started sweeping this defect under the rug 10 years ago,” McCaskill said. “But even under the new GM banner the company waited nine months to take action after being confronted with specific evidence of this egregious violation of public trust.”
In addition, McCaskill said the switch problem was revealed by a trial lawyer, rather than by GM.
“Corporations think they can get away with hiding documents from litigants and that there will be no consequences. And I want to make sure there's consequences for hiding documents. Because this is hiding the truth from families that need to know. And it's outrageous. And it needs to stop," McCaskill added.
Barra claims she did not find out about the defect until January, and shortly thereafter the company announced recalls.
At one point during her testimony, Barra responded, "There were silos and as information was known in one part of the business, for instance, the legal team, it didn't necessarily get communicated as effectively as it should have been to other parts. That is something that I've already corrected."
But when asked if she would release to the public results of the internal investigation, Barra said, "We will share what's appropriate."
That in part caused USA Today to write in an editorial, that the Congressional hearings “raised deeper questions about GM's commitment to safety…. The extra cost of the part to fix the ignition switch was 57 cents, yet GM decided in 2005 that the lead time was too long, that the ‘tooling’ and piece price were too high and that the fix might not work, lawmakers said Tuesday, citing GM documents.” Also, The Wall Street Journal reported that replacements for the defective part would have cost the company an extra 90 cents a car.
Also, GM announced this week it is hiring Kenneth Feinberg, an attorney who was special master to the victims in the Sept. 11 attacks, as well as working on the BP oil spill and the Boston Marathon bombings, to help it in the case.
"He's not a bankruptcy expert," responded Sen. Richard Blumenthal (D, Conn.), when Barra brought up his name on Wednesday. "Why not just come clean and say we're going to do justice here."
“What you're doing now is incurring both legal and moral responsibility for the actions that you're taking or failing to take," Blumenthal added. "The more I learn about what happened before the reorganization and in connection with the reorganization, the more convinced I am that GM has a real exposure to criminal liability and in fact I think it is likely and appropriate that GM will face prosecution.”
He wants GM to set up a compensation fund for victims, provide more transparency, and he urges drivers to park the defective cars until they are repaired.
“You're accompanied here by a regiment of lawyers and a battalion of public relations consultants,” Blumenthal told Barra at one point in his questioning.
The criticism for GM was not limited to Democrats. Sen. Dean Heller (R., Nev.) said, "I'm afraid we're not going to get to too many answers today." And Sen. Kelly Ayotte (R-N.H.), said at one point, “This is criminal deception.”
Barra attempted to respond to the questions during the lengthy session. “Our first step in evaluating this is to hire Mr. Feinberg, and we plan to work through with him, and understand his expertise. As I said, there's civic as well as legal responsibilities, and we want to be balanced and make sure we are thoughtful in what we do,” she said.
In a later statement, Boxer explained that a law now prohibits car dealers from selling new vehicles under recall to consumers, but there is no law banning car rental companies from selling them or renting them to consumers. A proposal by Boxer, McCaskill, Sen. Charles Schumer (D-NY) and Lisa Murkowski (R-AK) would keep rental cars that have been recalled off the road.
On Tuesday, Barra appeared before the House of Representatives, where she testified, “More than a decade ago, GM embarked on a small car program. Sitting here today, I cannot tell you why it took years for a safety defect to be announced in that program, but I can tell you that we will find out. When we have answers, we will be fully transparent with you, with our regulators, and with our customers.”
“As soon as l learned about the problem, we acted without hesitation. We told the world we had a problem that needed to be fixed. We did so because whatever mistakes were made in the past, we will not shirk from our responsibilities now and in the future. Today’s GM will do the right thing,” she added.
On Wednesday, Barra issued a statement which said in part, “The issues raised in the hearing were tough but fair. I appreciate the intense interest by the senators to fully understand what happened and why. I am going to accomplish exactly that, and we will keep Congress informed.”
In a related matter, earlier this year Toyota agreed to pay $1.2 billion to end a U.S. - government criminal probe into a sudden acceleration issue, according to InsideCounsel.