GM hires 9/11 victims' attorney Feinberg to aid recall response

By Mike Colias, Crain News Service

DETROIT (April 2, 2014) — General Motors Co. has hired attorney Kenneth Feinberg to help the company evaluate how to handle any potential liability to families of victims of accidents involving cars that have been recalled for faulty ignition switches, GM CEO Mary Barra told a congressional panel April 1.

Ms. Barra said the hiring of Mr. Feinberg, who oversaw the U.S. government's September 11th Victim Compensation Fund as well as trusts established for victims of last year's Boston Marathon bombing and the 2010 BP oil spill in the Gulf of Mexico, is “the first step in assessing its responsibility” to the victims' families.

That disclosure came at the outset of a nearly 2 1/2-hour hearing before the House Energy and Commerce Committee's oversight panel.

Ms. Barra repeatedly declined to answer specific questions about why it took GM more than a decade to recall cars with the faulty switch, which has been linked to 35 crashes and 13 deaths, saying the company's own investigation isn't finished yet.

But Ms. Barra several times made clear her disapproval of the decisions engineers made during the decade that the defect was left to linger.

One lawmaker read from GM's own timeline to regulators describing how engineers exploring a possible defect in the switch in 2005 decided not to change it because of the “lead time required, cost and effectiveness.”

‘Disturbing' and ‘inconceivable'

“I found that statement to be very disturbing,” Ms. Barra said. “That is unacceptable. That is not how we do business in today's GM.”

Asked whether it was unusual for GM to have failed to change the part number for a redesigned switch that a GM engineer approved in 2006, she called it “inconceivable.”

“It is not our process and it is not acceptable,” she told the panel.

Ms. Barra, 52, who took over as CEO in January, remained composed throughout the hearing, during which she was at times cut off and her answers chided by committee members.

‘Gobbledygook'

At one point, when Ms. Barra contended that there are circumstance when a vehicle part does not necessarily need to meet GM's own specifications, one lawmaker called her answer “gobbledygook.” Another committee member said she was “underwhelmed” by Ms. Barra's recent appointment of a global safety chief.

Asked by Rep. Marsha Blackburn, R-Miss., whether she thinks the failure to fix the problem earlier and recall cars with the defective switch “was a coverup or sloppy work,” Ms. Barra answered: “That is the question I have asked Mr. Valukas to uncover,” referring to former U.S. Attorney Anton Valukas, who is conducting GM's internal investigation.

Ms. Barra said no GM employee has been terminated yet because of the recall crisis, adding that the company will wait for the conclusion of Mr. Valukas' investigation before dealing with personnel matters.

Ms. Barra also fielded questions about GM's culture during the years during which the faulty switch was allowed to remain in production. She seemed to acknowledge a communication breakdown within the company, without giving specifics.

“It appears there was information at one part of the company and another part of the company didn't have access to that,” she said.

Victims' fund?

Lawmakers pressed Ms. Barra several times on whether the hiring of Mr. Feinberg points to GM's intention to set up a victim's fund. Ms. Barra said GM executives are meeting with Mr. Feinberg March 28 and that it would likely take 30 to 60 days before decisions are made on made on whether or how it would compensate victims.

“We will make the best decisions for our customers, recognizing that we have legal obligations and responsibilities as well as moral obligations,” she said.

Attorneys and critics have called on GM to either establish a trust for victims or waive the shield that protects the company from liability related to accidents before its mid-2009 bankruptcy. Analysts have estimated the size of such a trust to be $1 billion to $3 billion.

String of recalls

Ms. Barra's testimony came in the wake of an embarrassing string of recalls beyond the faulty ignition switch at the center of the hearing.

So far this year, GM has announced 13 recalls covering 7 million vehicles globally—vs. an average of 1.8 million vehicles recalled by GM annually from 2009 through 2013.

The spate of recalls is partly a result of GM having redoubled its focus on safety in the wake of the ignition-switch recall, the company has said. Still, the drumbeat of negative news about safety problems threatens to mar GM's improving reputation for building better vehicles that can compete with Japanese rivals.

“It reinforces the message that GM is still a company that has a lot of problems it's working out,” said David Johnson, CEO of Strategic Vision, a leading public relations and branding agency that specializes in crisis communications. “This threatens to send them back to their starting point of having to rebuild the new GM brand.”

GM stunned many industry insiders last year when it became the first Detroit 3 auto maker to top an annual J.D. Power survey of initial quality. Other wins include the redesigned 2014 Chevy Impala being name Consumer Reports magazine's top-rated sedan.

Those headlines have been supplanted by today's images of victims' families rallying outside the Capitol for tougher vehicle-safety legislation, and stories of Ms. Barra shedding tears during her meeting with families on March 31.

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This report appeared on autonews.com, the website of Automotive News, a Detroit-based sister publication of Tire Business.