Mary Barra, General Motors’ chief executive, is struggling to contain the fallout from the revelation that the carmaker failed for more than a decade to reveal concerns about the safety of ignition switches on some of its compact cars.
GM this week announced a slew of new recalls and more than doubled its expected charge this quarter to $750m. On Tuesday, Ms Barra and David Friedman, acting administrator of the National Highway Traffic Safety Administration, appear before the US House of Representatives’ energy and commerce committee to explain what went wrong and why.
Robert Wright and Shannon Bond report from New York
Ahead of the hearing, relatives of those killed in accidents linked to GM’s cars gathered outside the Capitol in Washington, calling for answers. Here Ken and Jayne Rimer, the parents of Natasha Weigel, who died in the crash of a 2005 Chevy Cobalt, speak to the press.
(Credit: AFP/Getty Images)
Mary Barra faces a tough task in this hearing. She’s sought since the start to balance sounding caring and concerned about the deaths and injuries that resulted from this fault with making it clear that the “new GM” no longer makes those vehicles and is a different company.
But it’s a message that she may find it hard to get across in the confrontational atmosphere of a congressional committee hearing.
Photographers await Ms Barra’s appearance in the hearing room
The hearing kicks off with an opening statement from Representative Tim Murphy of Pennsylvania, chair of the oversight and investigations subcommittee. He lays out the facts that the committee is investigating.
“The red flags were there for GM and NHTSA but, for some reason, nothing happened,” he says. “Are people talking to each other? What we have here is a failure to communicate and the results were deadly.”
Politically, we may see an interesting split. The committee’s Democrats look likely to go after Ms Barra and on Monday accused the company of hiding some of the faults with its ignition switches. The committee’s Republican majority, meanwhile, looks set to go harder at the National Highway Traffic Safety Administration, for failing to spot the problems.
Mr Murphy says: “It’s my hope today that we won’t hear a blame game and finger-pointing.”
That seems a forlorn hope.
LA Times business reporter Jim Puzzanghera is in the hearing room:
Representative Diana DeGette of Colorado has brought an example of a defective ignition switch. She shows how easy it is to move the key in a faulty switch, which could cause the engine to turn off:
Ms DeGette reads an email in which a GM engineer concluded it would cost too much to introduce a new ignition switch.
“The tooling and piece price are too high,” it reads. This email looks set to be read out many times this afternoon.
Ms DeGette wraps up by addressing the members of bereaved families in the room. “We’re going to get to the bottom of this,” she promises.
Representative Fred Upton of Michigan – GM’s home state – is up next. He notes two of the people killed in these accidents were his constituents.
A Republican, he is chairman of the overall energy and commerce committee and is the first representative to focus his criticism on NHTSA.
“NHTSA engineers did crash investigations as early as 2005 and twice considered whether the crashes constituted a trend,” he says. Why did it take so long to recognise the pattern, he asks.
“We want to know who knew what when,” says Representative Marsha Blackburn of Tennessee. “And Ms Barra, that includes you.”
So far, despite ritual protestations that the investigation is bipartisan, it’s easy to tell which party a member represents by what he or she says. Criticising GM more heavily? It’s a Democrat. Members criticising NHTSA, meanwhile, are Republicans.
Henry Waxman, Democrat from California, is taking his turn to criticise GM. He includes some criticism of NHTSA – but blames it mainly on GM’s hiding information.
The representative goes on to say he’s introducing a new vehicle safety law to tighten up regulation.
Mary Barra is sworn in and reads her prepared testimony. As Mr Murphy introduces her, she looks nervous – as well she might. It’s the biggest day so far of her career.
“Sitting here today, I cannot tell you why it took so long for a safety defect to be announced for this programme,” Ms Barra says of GM’s small cars programme. “But I tell you we will find out.”
Ms Barra refers to how her father also worked for GM. But she goes on: “I’m here representing the men and women who are part of today’s GM and who are dedicated to putting the safest possible vehicles on the road.”
She says GM has brought in Kenneth Feinberg to help handle compensation to families of victims. He is a well-know Washington lawyer who has handled compensation claims for events including the 9/11 attacks and BP’s Gulf of Mexico oil spill.
GM’s full statement on hiring Kenneth Feinberg is here.
“My mandate from the company is to consider the options for dealing with issues surrounding the ignition switch matter, and to do so in an independent, balanced and objective manner based upon my prior experience,” Feinberg said.
Ms Barra gets into technical details with her first questions from Mr Murphy.
He says the ignition switch initially fitted to the vehicle in 2002 didn’t meet GM’s specifications and Ms Barra agrees. He asks whether it’s ever acceptable to use a part that doesn’t meet specifications.
It can sometimes be acceptable to use parts that don’t meet specifications, she says.
“When you’re purchasing steel, we will set a specification for steel but then, because of the different suppliers and specifications, we will assess the performance, the functionality, the durability, the aspects of the part or, in this case, steel that’s necessary to live up to what the performance and durability of the steel needs to be.”
She accepts, however, that the switch as fitted wasn’t acceptable.
“As we clearly know today, it’s not,” she says.
Ms Barra and Ms DeGette have a tense exchange over when exactly GM first learnt of the problems with the switches. Ms Barra says the internal investigation will produce a timeline; Ms DeGette finds that unacceptable.
Ms DeGette hammers away at a point that the committee’s Democrats appear to think is very significant: what kind of switch was fitted to the vehicles after 2006. They are convinced that the redesigned switches that were fitted after 2006 weren’t good enough because they still didn’t meet the required standards.
Ms DeGette wonders whether the new switches fitted after the recall will be based on the 2006 switch.
“It’s going to be . . . the old design that meets the performance that’s required,” Ms Barra replies.
Mr Upton, a Republican, focuses on why the new, redesigned ignition switch was given the same part number as the old one. This seems to have exacerbated the confusion about the part. Ms Barra says she doesn’t know who made the decision not to create a new part number.
“I want to know that just as much as you because that’s unacceptable and it’s not the way that we do business,” she says.
Ms Barra seems not entirely prepared for some of these questions, notes Nick Bunkley of Automotive News:
Henry Waxman, the California Democrat, keeps picking away at the question of whether the post-2006 switches were safe. Democrats on the committee appeared convinced that, because the switches still fell short of GM’s specifications, they were just as defective as the original switches. Ms Barra doesn’t accept that.
She gives an assurance that the new switches being fitted will be up to the job.
“Our executive director responsible for switching is personally looking at the performance of the new switches. We will do 100 per cent end-of-line testing.”
Marsha Blackburn, Tennessee Republican, gets to the issue that is surely on the mind of many of her fellow party members watching this.
“Was it to do with the auto bailout?” she asks, referring to the government-led rescue of GM and Chrysler in 2009 – a policy that many Republicans bitterly opposed.
Ms Barra says she needs the results of their internal investigation to discover that.
Ms Barra is questioned by John Dingell of Michigan – the longest serving House member ever – who takes her through a rapid set of yes-or-no questions. That’s his preferred format.
Republican Joe Barton of Texas explains his own past as an engineer and says he can’t understand why GM accepted parts that didn’t accept its own specifications
Ms Barra says the company checked when accepting parts that didn’t meet its specifications that they met the company’s performance and safety requirements.
“It’s your specification,” he says. “What you just answered is gobbledegook.”
Ms Barra goes on to say that, since there has been a recall of vehicles with defective ignition switches, it’s clear those parts didn’t meet the performance, reliability and safety requirements.
“If we find we have a part that’s defective, that doesn’t meet the requirements, we do a recall,” she says.
Mr Barton asks: “Right now how many parts are being used in General Motors products that don’t meet your own company’s specifications?”
Ms Barra says she does not know.
“That’s not an acceptable answer, I think, to the American people,” Mr Barton replies.
(Credit: AFP/Getty Images)
Inside the hearing room, family members have placed pictures of Richard Bailey, Sarah Trautwein, Joshua Wooten and other victims of the car accidents
Democrat Jan Schakowsky of Illinois wants to know what GM will offer injured victims and the families of those who died. Ms Barra says the company has yet to determine that, but they are having a first meeting with Mr Feinberg on Friday.
“Does GM accept responsibility for the accidents caused by the company’s defective vehicles?” Ms Schakowsky asks.
“We are going to work very hard to do the right thing for our customers,” Ms Barra says.
Ms Schakowsky’s questions focus on whether the new GM will recognise the liabilities of the old GM, from before the 2009 bankruptcy, for the crashes.
“We at General Motors want to do the right thing for our customers,” Ms Barra says. “That’s why we feel this is an extraordinary situation. It took too long to get . . . to an understanding about this part.”
It’s for that reason GM has hired Mr Feinberg to work on the issue, she adds.
Ms Barra stops short of accepting all the old GM’s liabilities for issues such as the ignition switch problems.
But she says: “We will make the best decisions for our customers, recognising that we have legal responsibilities, as well as moral obligations.”
As the hearing goes on, GM’s shares are up very marginally – a 0.23 per cent rise to $34.50.
That suggests investors think Ms Barra is coping so far.
GM has just now put out its March sales figures, which were delayed this morning because of “system issues”.
Our colleagues at FastFT have the details:
The largest US automaker said sales rose 4.1 per cent from a year earlier to 256,047 vehicles in March, topping Wall Street expectations.
Sales were lifted by demand for the Chevrolet Silverado pickup truck and Cruze sedan, even GM scaled back incentives.
Paul Tonko, a New York Democrat, pushes Ms Barra to promise to give the committee the full internal report on the events when it’s ready.
“We will share the appropriate findings,” she says.
Mr Tonko presses her more.
“I’m sure we will be very transparent,” she replies. But, she says, she’s not sure what form the report will take.
(Credit: Getty Images)
Mary Barra faces congressional questioning
Louisiana Republican Steve Scalise, in true Capitol Hill investigation style, wants to see heads roll, starting with the engineer who approved changes to the affected vehicles’ ignition switch design without asking for a recall.
“Has anyone been held accountable as of now?” he asks, holding up a copy of the paper the engineer approved.
Ms Barra insists that the internal investigation has to be allowed to run its course.
“I want to know the answers to the questions you’re asking just as much as you do,” says Ms Barra, for the latest of many times during the hearing.
Morgan Griffith, a Republican from Virginia, asks whether Ms Barra heard about the problems during the time she led GM’s engineering operations, from February 2011 until January this year.
“It never got to you?” Mr Griffith asks.
“No, it did not,” Ms Barra replies.
Mr Griffith tries to probe a potential link between the failure to recall the vehicles and GM’s financial problems in the period, which led up to its 2009 bankruptcy.
“Wouldn’t the potential liabilities have had the potential to dissuade private investors or the federal government from giving cash to GM?” Mr Griffith asks.
“As soon as you identify an issue and fix it, there are no liabilities,” Ms Barra says. “The liabilities are contained.”
Democrat Peter Welch of Virginia focuses on how much money the company might have saved if it had acted earlier. Ms Barra is clearly finding this line of questioning slightly baffling.
But she says of the cost if it had been found earlier: “It would have been substantially less in that time frame.”
Billy Long, a Republican from Missouri, goes in for some old-fashioned committee grandstanding.
“This is a day I want to look back on and say, ‘I think I made a difference’,” he says during a very lengthy introduction to his questions. “I would like to say, ‘Yes, we made a difference’.”
He’s now describing the GM car his parents bought him in the early 1970s. It’s not clear where his questions are going.
Mr Long eventually gets to some penetrating engineering analysis of the issues.
“Why do you reinvent the wheel when you go to design a new ignition switch for every vehicle?” he asks.
Ms Barra says she values the opportunity to talk to NHTSA about new designs.
(Credit: Getty Images)
Ed Crooks, the FT’s US industry and energy editor, sends some thoughts on Ken Feinberg, whom GM named today to work on compensation for victims:
Mr Feinberg’s most recent high-profile job was as administrator of BP’s compensation programme for victims of its 2010 oil spill in the Gulf of Mexico.
His appointment, backed by BP’s commitment of $20bn to cover claims, helped put a stop to the immediate crisis faced by the company.
Over time, however, Mr Feinberg’s administration came under mounting criticism, with many claimants arguing that he demanded excessively detailed proof of losses and awarded insufficiently generous payments.
More than 100,000 people and businesses refused to seek recompense from his programme, and took action against BP in court instead.
Here is a 2010 FT story about Mr Feinberg’s work on BP.
Gregg Harper, a Republican from Mississippi, wants to know what the trade-off between cost and safety at GM is. Like several other representatives, he refers to the memo that dismisses the idea of replacing the ignition switch on cost grounds.
“How does cost factor into decisions about safety?” he asks.
“They don’t,” Ms Barra replies. “I can only speak to the way that we’re running the company. If there’s a safety defect, if there’s a defect identified, we go fix the part, we fix the system. It’s not acceptable to have a cost put on a safety system.”
Nebraska Republican Lee Terry is being allowed to ask questions, even though he isn’t a member of the investigation committee.
He apologised for being late, saying his aircraft had been delayed “with mechanical issues”.
“Probably an ignition switch,” he drawled.
This might not have been the wisest quip when in a room where many people lost relatives because of the problem.
Kathy Castor, a Democrat from Florida, tried to probe why GM didn’t act on the ignition switch issues when a New York Times reporter wrote about how his wife had had a Chevrolet Cobalt’s engine cut out when she was driving it because of the ignition switch’s shifting.
She tries to tie Ms Barra to the problem, asking whether she was aware of the article when it appeared in 2005 and she was working in GM’s engineering department.
“I don’t have a recollection of that article,” Ms Barra said. “I wasn’t aware of this issue until January 31.”
She was aware in December, before she became chief executive, that there were investigations under way into the Cobalt, one of the recalled vehicles, but not that it was related to the ignition switch.
The panel has finished questioning Mary Barra. The session was typical congressional committee stuff – many references to the human cost of the problem being investigated, much pulling of serious faces and many solemn promises to get to the bottom of the issue.
It’s not clear, however, that the representatives turned up any strikingly new information.
Ms Barra, calmly for the most part, stuck to her insistence that she was awaiting the outcome of the company’s internal investigation.
Much of the argument was over the distinction between a part that fell short of the required specification and one that was defective.
Ms Barra insisted that the early ignition switches fitted to affected vehicles were defective but more recent ones weren’t. Representatives expressed varying degrees of bafflement and scepticism that the distinction was real.
But the recently-appointed Ms Barra broadly passed one of the archetypal tests for the modern US chief executive – an appearance before an aggressive congressional committee.
There was little brilliance to her appearance but she remained polite and unflustered – and stuck to putting across the message she had come to deliver.
It’s a skill on which she’ll need to rely regularly over coming months as the recall scandal – and questions over the 12 deaths involved – rumbles on.