What Will General Motors Look Like Once It Weathers the Storm?
For General Motors (NYSE:GM), the investigations are underway, the vehicles known to be affected by the massive 2.6 million-unit ignition switch recall have been flagged, and the appropriate people have been hired to both mediate the existing situation and protect against a future incident of this magnitude. So now what happens?
Despite the issue continuing through its third month, there’s still a lot of dust kicked up that, once settled, will give observers, investigators, and the company itself a bit more of an idea of how to proceed. Currently, it’s still unclear as to whether the recalls will continue moving forward or if that part has passed.
What is clear is that the burden of responsibility falls squarely on GM’s shoulders, rather that of its supplier. Internal documents uncovered in the investigation indicate that Delphi Automotive, the supplier of the ignition switch, warned GM that the components were not up to code with the company’s internal requirements for that particular part. Nonetheless, they ended up being used anyways.
As a result, at least thirteen people have died out of more than thirty accidents because of their vehicles turning off unexpectedly and disabling the airbags. However, now victims are finding out something rather frustrating: The firm responsible for creating the defective vehicles is a different firm than the one that exists now, meaning that legally speaking, today’s GM can’t be sued for damages caused by the old, pre-bailout GM.
This leaves an open-ended question as to whether GM will set up a special fund with which to compensate the victims. So far, CEO Mary Barra — who had this mess dumped in her lap within two weeks of becoming CEO — has been mute on that note, but the company did retain the services of lawyer Kenneth Feinberg, who has helped with the claims associated with the BP oil spill in 2010.
Feinberg said that GM is exploring the possibility of the creation of a fund, which is broadly supported by observers. But whether the fund is created or not, one thing moving ahead is for certain — the company will be spending a lot of money on this effort, regardless of how. In the event that a fund is formed, Feinberg — who has established himself as an authority on mediating values in macabre circumstances such as these — will likely see the dispersement of a few million at least to the families of the deceased and the injured from the defective vehicle. Settlements aside, recalls are just damn expensive in the first place.
In a broader sense, the recall effort has shown a lot of light on the faults of not only GM, but the safety system as a whole. The National Highway Traffic Safety Administration has been hit with similar questions as to how the agency missed the pattern in the millions of accident reports that it sorts through every year, and while GM has put a team in place to monitor the safety of its vehicles internally, chances are likely that the NHTSA will get some further safeguards to better identify accident trends to ensure it can flip the recall switch faster.
As far as GM goes, the weather is a bit cloudy at the moment as emotions are running high. However, Toyota’s unintended acceleration problems a few years back showed that a company can survive an outstanding PR thrashing and still come out on top. And better for GM, none of the cars it recalled are still on the market today. Sales at the Detroit-based company haven’t shown any meaningful dips — at least not yet.
If you’re looking for sweeping changes to consume GM, we’ve likely already seen about most of it; a new safety czar, Jeff Boyer, has been appointed to keep GM’s safety ducks in a row. Outside of Boyer and his team — as well as the aforementioned crew headed by Mark Reuss – the company hasn’t made any indication of sweeping reformations despite the reputation for being virtually handicapped due to bureaucracy and internal red tape. Whether it will be enough, only time will tell.