Drip, drip, drip. Daily, media report by media report, the news surrounding the ignition switch recall gets worse for General Motors.
A New York Times report we detailed today paints, at its worst, a picture of a callous decision-making process at ‘old GM’.
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It appears to have gone like this. Big automaker knows of serious fault with critical component used on millions of now-out-of-production popular small cars, is aware of flow-on effect that disables airbags in crashes – and the subsequent death tally – yet denies that when victims’ relatives make contact and, worst of all, calls in the lawyer suits to beat the ‘little man’ victims into submission.
This is the image that newly minted, ‘new GM’ CEO Mary Barra and her management and public affairs/media relations teams are going to have to work very hard to mitigate using every means and communications channel at their disposal. All the while continuing to make, sell and support new vehicles.
And, boy, are there some weapons aimed at the automaker already. GM’s lawyers are doubtless readying return fire for the class action law suits now in the pipeline. The federal government, in the form of bodies such as Congressional committees, the Justice Department and NHTSA are sniffing around – was bankruptcy fraud committed during the Chapter 11 process some years back, were the bankruptcy emergence terms absolving ‘new GM’ from future product liability actions involving ‘old GM’ products too generous?
Is GM – ‘old’ or ‘new’ criminally liable for the way the ignition switch defect was identified, reported, the vehicle models recalled?
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By GlobalDataAnd, so it will go, engaging many skilled (and as we say here in the UK, ‘learned’) minds for months, or more likely, years to come.
And, boy, is there precedent. I’m old enough to remember the allegations that surrounded Ford over the 1970s Pinto’s tendency to catch fire all too easily after a rear-end accident.
After we heard heart-rending tales of young lives snuffed out too easily (the Pinto, like the Chevrolet Cobalt and its Pontiac G5 and Saturn Ion clones, was a popular ‘college kid’s car’), we heard the allegations Ford could have fixed the problem with a modification costing just as few bucks per car but the management of the day (possibly influenced by the opinions of the sorts of corporate attorneys often wonderfully lampooned by the yes-men characters surrounding The Simpsons‘ nuclear power station potentate Monty Burns) decided it would work out cheaper to pay off the individual lawsuit claims than pay millions to repair millions of cars.
Callous? Yes. Cynical? Yes. I hope, for ‘new GM’ and Mary Barra’s sake, all the upcoming investigations don’t unearth a similar backstory. The Ford/Firestone recall events – costing a small fortune and severing a century-old supplier/automaker relationship – of a decade-and-a-bit ago should have carried a more contemporary health warning for automakers dealing with recalls as should the Toyota ‘unintended acceleration’ debacle that echoed around much of the world in the last five years or so and, just last week, cost that automaker’s US unit another US$1.2bn.
So far, GM’s bill is an estimated $300m for direct recall costs alone, a charge it will book in this first quarter. Likely still to come, based on the Toyota precedent, is an up-to-$35m fine levied by the NHTSA. Automakers have a legal obligation to act on and report safety-related defects in a timely manner and Congress last year increased the maximum fines NHTSA can impose to $35m to hold automakers more accountable after Toyota’s ‘sudden acceleration’ recalls in 2010. So far, Toyota and Ford have paid the largest fines of more than $17m for delaying recalls.
As we used to say in the newspaper business, this “story has legs”. And they only just started running.
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