By Nick Bunkley and Mike Colias, Crain News Service
DETROIT (June 2, 2014) — Anton Valukas is about to become one of the most influential men in the auto industry.
Nearly three months ago, General Motors Co. CEO Mary Barra drafted the former federal prosecutor to delve into some of the most vexing questions surrounding the company’s botched response to a shoddy ignition switch: How could GM engineers decide that a car suddenly stalling wasn’t a safety problem? How could top lawyers not have known about the potential defect, even after GM settled lawsuits involving crashes linked to the faulty switch?
Now the answers are coming due, as GM prepares to release findings from Mr. Valukas’ investigation as early as this week.
Mr. Valukas was given “free rein” to follow the facts “unimpeded,” Ms. Barra told members of Congress at hearings in April, during which she mentioned Mr. Valukas by name at least 15 times during four hours of testimony.
Those assurances have heightened expectations that Mr. Valukas’ account will serve as the official narrative of what went wrong. GM is counting on Mr. Valukas’ reputation to lend credibility to the findings. A former U.S. attorney who prosecuted judicial corruption in Chicago, Mr. Valukas compiled a 2,200-page report on Lehman Brothers’ 2008 collapse, faulting executives for negligence. The judge who presided over the case said Mr. Valukas’ account read “like a best-seller.”
His review of GM’s mishandling of the switch defect is likely to be a page turner in its own right, with big implications for the company and the industry.
Trial lawyers are sure to seize on the findings to build their cases. The report could influence how regulators and lawmakers move to safeguard against future lapses. And it could shape how GM further overhauls its own vehicle development processes.
Much is already known about the lapses that allowed the switch defect to linger for so long, from GM’s account to regulators, findings from trial lawyers and leaked GM documents. The Valukas report could fill in many of the remaining blanks.
Who knew what, when?
During the congressional hearings, lawmakers tossed around the terms “cover-up” and “criminal deception.” Yet none of the documents to surface so far indicated that GM employees flagged the flimsy ignition switch as a safety problem.
In fact, GM reached an understanding with federal regulators in October 2004 that played down the seriousness of stalling unless it was accompanied by a risk of engine fire or other consequences.
In a letter to the National Highway Traffic Safety Administration (NHTSA), Gay Kent, GM’s then-director of product investigations, wrote: “Among other things, NHTSA and GM agree that stalling is not a per se safety-related defect, and that the specific facts and circumstances need to be analyzed in considering whether a particular problem constitutes such a defect.”
Documents show that GM engineers debated improving the switch, even if they didn’t deem it safety-critical. A 2005 internal e-mail discussion of that issue indicated a sense of urgency on the part of Lori Queen, then GM’s vehicle line executive for small cars, who wrote: “I’m not sure it’s OK to wait.”
Mr. Valukas’ report should show whether any insiders deemed the switch a safety defect and tried to suppress information about it, and how high up GM’s organizational chart knowledge of the defect went.
What happened with the 2006 redesign?
GM engineer Ray DeGiorgio, 61, became a central figure in the recall after the release of documents showing that he had approved a change to the ignition switch in April 2006.
Paperwork that GM says didn’t surface until seven years later, when provided by supplier Delphi, shows that Mr. DeGiorgio authorized increasing the switch’s torque, but specifically decided not to change the part number, impeding GM’s ability to discover the change for years. In an April 2013 deposition, Mr.DeGiorgio denied at least 10 times that he knew of or authorized the change.
Although already-released documents reveal that numerous Delphi employees were aware of the planned modification, they don’t provide evidence that anyone else at GM knew of it. Fourteen months before signing off on the switch redesign, Mr.DeGiorgio himself had told another engineer that implementing such a change would be “close to impossible” without creating other problems.
Mr. Valukas’ report should put to rest the question of whether anyone else at GM helped facilitate the quiet redesign. It also could lead GM to re-examine its internal processes to prevent a lone engineer from stealthily authorizing a part redesign.
Why didn’t GM issue a recall earlier?
It’s well-documented that GM engineers missed several opportunities to fix the problem before anybody died. In January 2004, for example, one GM engineer wrote in a company report that the flimsy ignition switch in the Saturn Ion was a “basic design flaw and should be corrected if we want repeat sales.”
But over the years, evidence piled up suggesting an even more serious problem than stalling. By October 2012 at the latest, GM engineers knew that airbags would be disabled if the ignition switch slipped out of “run” mode, internal GM emails show. But GM also got a report in May 2009—three weeks before filing for bankruptcy protection—showing that the airbags would be disabled within a fraction of a second after the engine lost power.
NHTSA’s acting administrator, David Friedman, said that report, prepared by supplier Continental Automotive, made a “clear connection” that should have prompted GM to take action.
The Mr. Valukas report may show who at GM was aware of the Continental document. Lawyers suing GM point to it as evidence that the auto maker knew the cars were defective before bankruptcy, when it was required to disclose all potential liabilities.
Lawmakers, for their part, will be looking to the Valukas report for answers that Ms. Barra couldn’t provide about why the New GM didn’t move faster even in the few months leading up to its Feb. 13 recall announcement—a period that included Dan Akerson’s December decision to retire as CEO and the elevation of Barra, his successor.
Several senators noted that depositions given by Mr. DeGiorgio and four other GM engineers in the spring of 2013 as part of a civil lawsuit rendered details that should have sounded alarm bells. The senators also questioned how, by last year, word of multiple settlements with families of victims who died in crashes wouldn’t have bubbled up to high-ranking executives.
“Even a year ago, what was told and who knew what, when?” Sen. Kelly Ayotte, R-N.H., pressed Ms. Barra at the April 2 hearing.
“That will be part of Mr. Valukas’ investigation,” Ms. Barra assured the senators.
What happens next?
Along with the Mr. Valukas report, it’s likely that GM will announce a plan outlined by attorney Kenneth Feinberg to compensate crash victims.
Mr. Feinberg, who oversaw funds for victims of the 2010 BP oil spill and other disasters, faces a complex task of determining which of the thousands of crashes involving the recalled cars were due to the faulty switch and which victims deserve compensation.
GM also is expected to announce more changes to vehicle-development processes stemming from the Valukas findings. The company already has made several moves in recent months to prevent future safety lapses, including a program that encourages employees to speak up if they see potential problems.
“It’s very important...that we get a detailed understanding of exactly what happened,” Ms. Barra told lawmakers during the hearings. “Because that’s the only way we can know that we can fix processes and make sure it never happens again.”
This report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.