5 Key Takeaways From GM’s Botched Recall Internal Investigation

Credit: http://www.flickr.com/photos/mkumm/

On Thursday, General Motors (NYSE:GM) — more specifically its CEO, Mary Barra —  issued a report and press statement detailing the results on an internal study commissioned by the company to determine the cause of the catastrophic breakdown in communication that led to a ten-plus year delay for the recall of 2.59 million vehicles with faulty ignition switches.

Just how bad was the internal communication at GM? The report says that the company’s highest ranking executives — Barra included — were not aware of the issue before January of this year, as the problem had been so effectively buried under suffocating layers of corporate bureaucracy. “The Valukas report confirmed that Mary Barra, Mike Millikin, and Mark Reuss did not learn about the ignition switch safety issues and the delay in addressing them until after the decision to issue a recall was made on January 31, 2014,” GM Chair Tim Solso said.

The company is firing over a dozen people closely associated with the botched recall effort, and is also doubling down on its efforts to regain the public’s trust. However, no conspiracy to hide the problem was made evident, and blame was placed squarely on a combination of neglect and general incompetence.

Here are the five major takeaways from General Motors’ statement.

GMMaryBarra01.JPG

1. Bureaucracy is to blame, not cover-ups

This doesn’t come as a particular surprise, but GM is adamant that there isn’t — or wasn’t — a conspiracy to hide the truth. Instead, it was a pattern of “incompetence and neglect” that led up to the deaths of (at least) 13 people over the span of (at least) 47 accidents stemming from the (at least) 2.59 million recalled vehicles for the faulty ignition switch. Barra described the internal report, which was complied by an external investigator (a certain Anton Valukas, former U.S. attorney), as “extremely thorough, brutally tough, and deeply troubling.” 

“Overall the report found that, from start to finish, the Cobalt saga was riddled with failures which led to tragic results for many,” Barra said. The Cobalt was one of the several models recalled for the ignition failure, and represented perhaps the largest slice of the 2.59 million vehicle pie. The company, as illustrated in the report, prioritized “bureaucratic processes” over the well-being and safety of its consumers, she added. 

gm ceo mary barra buick (640x435)

2. There will be a compensation fund set up for victims

Barra acknowledged on Thursday that Kenneth Feinberg, the lawyer retained to manage reimbursement claims for victims, will “administer a compensation program for those who have lost loved ones or who have suffered serious physical injuries as the result of an ignition switch failure in recently recalled vehicles,” the company said. Many were unsure whether this fund would be formed or not, given the legal complications with the “Old GM” and “New GM” that imply that the new company formed as a result of the bankruptcy wasn’t responsible for the legal obligations that the old company was on the hook for.

Source: Thinkstock

Source: Thinkstock

3. Heads are rolling

Many thought that those deemed responsible for the botched recall would simply walk away from the situation with their jobs intact, but that won’t be the case after all; 15 people, so far undisclosed by the company (with one exception), will be fired from their posts for their respective roles in the situation, and disciplinary actions have been taken against five other employees, the company said. It was revealed, however, that Ray DeGiorgio — a design release engineer of the Cobalt who had been placed on involuntary leave earlier this year — is among of the 15 dismissed. 

Mary Barra, General Motors

4. Recalls will be the “new norm”

General Motors has so far issued 29 recalls covering 15.8 million vehicles worldwide, 13.8 million of which are in the United States. That contrasts to 2013′s 23 recalls spanning 757,677 vehicles for the entire year cumulatively, but don’t expect it to let up. Auto News quoted Barra as saying that GM will remain more aggressive in bringing its vehicles back into dealerships for repairs. “In the near term,” she said, “you might expect to see a few more recall announcements,” the site reported.

GeneralMotorsDetroit

5. GM’s committed to righting the wrongs

GM has taken a lot of flack and by all means should be held accountable for the grotesque failures that led up to its huge recall scandal, but it’s hard to argue that under Barra’s command, the company hasn’t been putting effort into making things right. Immediately after uncovering the issue, Barra set about suspending the alleged responsible parties, beefed up the company’s safety oversight division, created the Vice President of Global Vehicle Safety (which it filled with Jeff Boyer), added 35 product safety investigators that will allow GM to identify and address issues much more quickly, and retained the services of Kenneth Feinberg to initiate contact with the affected parties.

Coupled with all that, the company has been cleaning house by hitting the recall switch for just about every possible safety concern that’s arisen since in efforts to get everything cleared up and over with at once so it can begin it’s long and arduous climb back up.

More From Wall St. Cheat Sheet: