No Joke: GM CEO Barra Gets Grilled by House on April Fools’ Day
While it might have been a joyous April Fools’ Day for many, filled with mirth and (hopefully harmless) shenanigans, General Motors (NYSE:GM) CEO Mary Barra didn’t have such an enjoyable time, as she spent a good portion of Tuesday sitting before a House subcommittee to testify about why it took GM the better part of a decade to get around to initiating a recall while the resulting fatalities ticked into the mid-teens.
Perhaps making matters worse is that the whole mess — and a slew of other unrelated recalls from the last couple of months — all fell into Barra’s lap when she took the wheel at General Motors in January, replacing Dan Akerson as CEO. She now has to prove that the new GM, which emerged as a different company under its bailout conditions, is different than the old, bureaucratic snarl that defined the old company. Much of that perception is riding on how she handles the situation that GM is in now.
In her testimony, Barra said that she found the employee statements that cost considerations may have discouraged the prompt replacement of faulty ignition switches ”disturbing,” and in efforts to reconcile with the families affected by the recall, General Motors has deployed the services of Kenneth Feinberg, a consultant, to determine possible responses to families of those injured or killed in crashes involving the recalled cars.
GM’s recall now stands at 2.6 million vehicles, having been expanded twice since its initial launch in January. In the affected vehicles, the ignition switches can shut off the power to the car during operation and render the airbags, power steering, and power brakes useless.
An internal document presented at the hearing said that General Motors avoided a fix in 2005 because the parts would have cost about $1 per vehicle to repair, Reuters reports. The change would have cost an extra 90 cents per unit and additional tooling costs of $400,000, an email obtained by the news service showed. Those tooling costs typically are amortized over several years, according to Reuters.
Barra assured the subcommittee that that isn’t the way they do business at the new GM. Delphi Automotive, which made the original switch, had even warned the company that it may not be fit to use, but an email from engineer John Hendler said his team was prepared to continue using a switch despite it not meeting General Motors’ specifications. That was in 2002.
Barra was continuously badgered by the panel over GM’s weighing costs against consumer safety. She maintained that this was no longer the practice, and that the company is now moving from a “cost culture” to one focused on customers. To her credit, the recent surge of recalls indicates that this might be the case.
Despite Barra’s about-face with the issues, there were some questions that she couldn’t answer because of the ongoing internal investigations, which reportedly left some on the House committee feeling “dissatisfied,” per CNBC. Barra will be sitting before a Senate subcommittee on Wednesday, where she will likely be answering more similar questions.
“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,” Barra said in an advance copy of her prepared statements. “When we have answers, we will be fully transparent with you, with our regulators and with our customers.”
Also present at the testimonies was David Friedman, who heads up the National Highway Traffic Safety Administration. The agency was also chided for not being more on top of the GM recall debacle, though according to Friedman’s statements, the NHTSA was unaware of the link between the ignition faults and the airbag non-deployments. General Motors, however, could have helped establish that connection, Autoblog quoted him as saying.
“GM had critical information that would have helped identify this defect,” Friedman said, per the publication.
It’s still difficult to see where this will lead in terms of fallout for General Motors or even for the NHTSA, but early instincts indicate that if Barra sticks to the choices the company has made so far — mass recalls to address outstanding problems, the hiring of a safety chief to ensure against future incidents of this magnitude — then it shows that there might just be a difference between the “new” GM and “old” GM after all.