GM Report Identifies Corporate Incompetence and Neglect

GM also fired 15 employees and reprimanded five others for their part in an 11-year delay in recalling cars with an ignition switch defect that could cause the switch to move to the off position, shutting down electric power to the car and causing the vehicle’s air bags to fail to deploy. Thirteen deaths have been linked to the defective switches.

Neither Barra nor former CEO Dan Akerson were reported by Valukas to have had any knowledge of the defective switch prior to December of last year. The defect affected vehicles from model years 2003 to 2011.

GM has initiated a cash compensation program for crash victims and will begin accepting claims on August 1. The company is shielded from liability for events prior to its 2009 bankruptcy, according to The Wall Street Journal. Richard Wagoner was the CEO from 2003 to 2009, the period when most of the defective cars were sold and is also presumably protected by the bankruptcy filing.

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In her remarks Barra said:

[T]he report is extremely thorough, brutally tough and deeply troubling. For those of us who have dedicated our lives to this company, it is enormously painful to have our shortcomings laid out so vividly. I was deeply saddened and disturbed as I read the report. …

You [GM employees] should know that Mr. Valukas’ report revealed no conspiracy by the corporation to cover up the facts. In addition, the investigators found no evidence that any employee made a trade-off between safety and cost.

The problem is this case is more complicated and more nuanced. What Valukas found was a pattern of management deficiencies and misjudgments — often based on incomplete data — that were passed off at the time as business as usual. …

Repeatedly, individuals failed to disclose critical pieces of information that could have fundamentally changed the lives of those impacted by a faulty ignition switch. If this information had been disclosed, I believe in my heart the company would have dealt with this matter appropriately.

What Barra describes here is the history of a corporate culture in which top managers did not want to hear bad news and that knowledge trickled down to employees who clearly got the message. Whether she can change that culture remains to be seen.

GM shares traded down about 0.7% in the late morning Thursday, at $36.26 in a 52-week range of $31.13 to $41.85.

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