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Heads roll at GM after investigation of defective switch

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General Motors says a pattern of incompetence and neglect, not a larger conspiracy or cover-up, is to blame for a long-delayed recall of defective ignition switches.

GM CEO Mary Barra, who released the results of an internal investigation into the company's missteps on Thursday, said 15 employees—many of them senior legal and engineering executives—have been forced out of the company for failing to disclose the defect, which the company links to 13 deaths. Five other employees have been disciplined.

GM also said it will establish a compensation program for families of victims and those who suffered serious injuries in accidents related to the switches. The program is expected to begin taking claims Aug. 1.

Barra called the investigation, which she ordered in March, "brutally tough and deeply troubling." It took GM more than a decade to report the deadly switch failures to regulators and the public, and to recall the cars.

"I hate sharing this with you just as much as you hate hearing it," Barra told employees in a town hall meeting at GM's suburban Detroit technical center. "But I want you to hear it. I want you to remember it. I want you to never forget it." Barra then promised to "fix the failures in our system."

The crisis began in February, when GM recalled 780,000 older-model Chevrolet Cobalt and Pontiac G5 small cars because of defective ignition switches. GM soon added the Saturn Ion and other small cars to the recall, which ballooned to 2.6 million cars worldwide.

The switches in the cars can slip out of the "run" position and shut down the engine. That disables the power-assisted steering and brakes and can cause drivers to lose control. It also disables the air bags. GM reiterated Thursday that it only links 13 deaths to the problem, but trial lawyers suing the company put the death toll closer to 60.

Barra said attorney Anton Valukas interviewed 230 employees and reviewed 41 million documents to produce the report, which also makes recommendations to avoid future safety problems. The government was expected to release the report later Thursday.

Barra said the report found that the company was operating in "silos," and individuals who could have helped uncover the problem didn't speak up.

"Because of the actions of a few people, and the willingness of others in the company to condone bureaucratic processes that avoided accountability, we let these customers down," Barra said. She again apologized to the families of those who died.

Last month, GM paid a $35 million fine—the largest ever assessed by the National Highway Traffic Safety Administration—for failing to report the problem quickly to federal regulators. GM knew about problems with the ignition switches as early as 2001, and in 2005 it told dealers to tell owners to take excess items off their key chains so they wouldn't drag down the ignition switch.

In 2006, GM engineer Ray DeGiorgio—who designed the switch—approved a change in the switch design, but didn't inform the government or change the corresponding part number. In subsequent years, that made it harder for other GM engineers to figure out why older Cobalts performed worse than newer ones.

Barra confirmed Thursday that two employees placed on leave in April have been fired; DeGiorgio was one of those employees.

GM began repairing the cars in April, and had fixed 86,000 as of Thursday. But it has said it doesn't expect to fix them all until October. GM says the cars are safe as long as customers only use the key and have no extra items on their key chains.

Barra named a new safety chief at GM in March and pledged to quickly work through a backlog of potential recalls. As a result, the automaker has recalled a record 15.8 million cars and trucks in North America so far this year.

The company took a $1.3 billion charge in the first quarter to pay for the recalls. It expects to take a $400 million recall-related charge in the second quarter.

The report doesn't complete GM's recall saga. The automaker still faces a criminal investigation by the U.S. Department of Justice—led by the same team that recently reached a $1.2 billion settlement with Toyota over its 2010 sudden acceleration recall. It also faces multiple lawsuits from victims and from owners whose say their cars have lost value.

Barra, who testified before House and Senate committees in April, will also likely be called back to Washington.

Sen. Claire McCaskill, D-Mo., chairman of the Senate Commerce, Science and Technology Committee's consumer protection subcommittee, said she intends to hold a hearing on the delayed recalls later this summer.

"I won't be letting GM leadership, or federal regulators, escape accountability for these tragedies," she said in a statement. "The families of those affected deserve no less."

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  • GM's downfall
    GM was Obama Motors during this debacle. This should be the greatest company in the world. Like many other companies, it has become strangled by too much middle management and red tape. Yes, I've worked at the headquarters on W. Grand Boulevard just before the beginning of the end. It was a magical place. Unfortunately, it is following Detroit down the drain. Maybe it's time to LISTEN to the consumer. Bring back American muscle cars!
  • Private VS Public
    GM had to be called on the carpet for this action to take place. Under the watchful eye of a free media this story was brought to the forefront. Regretful and disgraceful as this was, GM has held people accountable for the inexcusable, unnecessary deaths of 13 people. Reportedly hundreds of veterans have died waiting for treatment under the VA. Only one person has resigned, and note he was not fired, as he should have been. Unfortunately he was the scapegoat. The real criminals are still working at the VA. Where are the firings and prosecutions here? This is difference between private and public accountability, and why poeple don't trust the government. GM will suffer because the market will stop buying their product. The VA will live on becuase veterans have no other choice for their care. And some wonder why people are concerned about Obamacare?
  • Can see how it happened, but still the right decision.
    As someone who worked there for 25 years, corporate culture promotes this sort of thing...naysayers and contrarians, especially if management knows deep down they are right, are not appreciated. This is why Dilbert is such a funny cartoon, it is for the most part true. GM didn't make a decision in the last 15 years I was there that didn't consider stockholders prior to everyone else. Preserving the money train for right now was the mentality...as for the government bailing them out Lee, the issue is not just GM...GM, and most other car companies, quit making a lot of their own components many many years ago...when you allow a company to go bankrupt that still has a huge share of the overall market (though way less share than say 30 years ago), you are not just affecting that company, but the hundreds of other companies who supply that company...allowing GM to go under would have crippled many of those businesses, and would have forced many of them to close altogether, resulting in mass layoffs of exponentially more employees at hundreds of different firms, than just those at GM. As for GM killing certain favored brands (Pontiac, Olds, Saturn, Hummer), given how manufacturing works at the automakers, and the market saturation, that would have been a much more speculative venture than bailing out GM...Saturn, given the sort of independent nature of it's development, might have had a shot at that, and there was discussion of an employee takeover...but the others...given the economic climate at the time, I don't know how you would capitalize such a venture in that atmosphere...as for their reputation, people have a short memory, we see that in politics every year...I see no reason GM can't rebuild it's reputation if it handles this crisis well, Toyota has recalled millions of cars over the last few years...on balance, GM was absolutely going to be bailed out, because at the time the decision was made, that was the only option that actually made sense, given the ripple effect that letting them go under would have caused...also, like it or not, the government set a precedent with Chrysler years before, as well as with big banks...as for Chip's comment that this is what happens with regulations, I can assure him that the plant I worked at spent millions trying to comply with all manner of regulation, and it does drive the cost of the vehicle up but... his contention that corporations can't be trusted is correct...articles of incorporation are exactly that...they insure that decision makers make decisions that benefit the company first, from a profit and stockholder stand point, and everything else is secondary to that...because the focus is there, there will always be decision makers who will cover up, deny, pretend that nothing is wrong, and their underlings, afraid for their jobs, are likely to not speak up...the whistleblower always gets the axe...
  • Hmm
    This is what happens WITH regulations. Imagine an America with fewer regulations and the unabashed corporate malfeasance that would result. Corporations can't be trusted, so all of you windbags complaining about regulations being job killers can just shut it.
  • so rescued GM neglects customer safety and life
    Interesting, was GM worth rescuing if they hide defects that injure or kill customers and no matter the cost, save money at the expense of customer safety. Would have been better to let them fail so other auto companies could buy the pieces and start again. They killed brands that could have been picked up by other auto companies and were worth more by individual brand. Their reputation is now now worth anything. The recession of 2007 they were bailed out, then lied to the public and continued to sell and produce bad product. Great job.

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