Barra struggles to sell lawmakers on ‘today’s GM’
FORTUNE — On the second day of sworn testimony before congressional lawmakers, General Motors (GM) CEO Mary Barra attempted to distance her company from its past, repeatedly referring to the automaker as “today’s GM” as she responded to questions and accusations over a decade-long failure to reveal a defective ignition switch that has been linked to at least 13 deaths.
Barra, who took over as CEO in January, told lawmakers during a Senate Consumer Protection, Product Safety and Insurance subcommittee hearing that she first learned about the faulty ignition switch on Jan. 31, after an executive committee made the recall decision. In February, the automaker issued a recall of the 2003-2007 model year Chevrolet Cobalt and HHR, Saturn Ion, Saturn Sky, Pontiac G5, and Pontiac Solstice. The recall was later expanded to include all model years, affecting about 2.6 million cars worldwide.
“Today’s GM will do the right thing,” Barra said. “Our customers and their safety is at the center of everything we do.”
In the late 1990s, GM had more of a cost culture, Barra said. Since the 2009 bankruptcy, that culture has shifted more toward customers and safety, she said.
Barra’s assurances were met with skepticism from lawmakers, including a former state attorney general and prosecutor, who accused GM of a cover-up. Lawmakers were particularly concerned that GM redesigned the defective ignition switches in 2006, but never changed the identifying part number.
“This goes beyond ‘unacceptable,'” said Senator Kelly Ayotte of New Hampshire. “I believe this is criminal.”
Ayotte later said GM’s failure to change the part number after the redesign amounted to criminal deception.
Senator Claire McCaskill of Missouri, who is a former prosecutor, also used the term cover-up and called GM engineer Ray DeGiorgio a liar.
During a deposition last year related to a suit against GM, DeGiorgio, the lead switch engineer on the Cobalt, said he could not explain why the part was changed and that he had not approved it. However, an internal document showed DeGiorgio had signed off on the change, McCaskill said during the subcommittee hearing.
Several lawmakers, including Ayotte, questioned why GM’s general counsel didn’t immediately alert the CEO about problems with the same part number after the deposition. Lawmakers also questioned why Barra, who has been with the company for 33 years, didn’t learn about the faulty ignition switch sooner and was unable to answer more of their questions.
“Something is very strange, that such a top employee would know nothing,” said Senator Barbara Boxer of California.
Problems with the ignition switch were identified as early as 2001 in a pre-production report for the model year 2003 Saturn Ion, according to documents provided prior to an earlier hearing before the House Subcommittee on Oversight and Investigations. The report said a design change resolved the problem.
However, issues persisted, and in 2004 GM opened an engineering inquiry to look into a complaint that a 2005 Chevrolet Cobalt vehicle could be “keyed off” while driving. Ultimately, no action was taken. A year later, the driver of a 2005 Chevrolet Cobalt was killed in a crash. A National Highway Traffic Safety Administration investigation determined the frontal airbag system didn’t deploy and that the vehicle power mode status was in “accessory,” not “run.”
“What we know now is that would have only cost $2 to repair,” said Senator Ed Markey of Massachusetts. “It was apparently $2 too much for General Motors to act despite the decade of warnings, accidents, and deaths.”
Markey asked Barra if GM would voluntarily provide all documents, including accident reports, notices that a fatal accident could have been caused by a faulty part, and all details from consumer complaints it receives about all of its vehicles.
Markey and fellow Massachusetts senator Richard Blumenthal introduced legislation last month that would require auto and equipment manufacturers to automatically submit an accident report or other document that first alerted them to a fatality involving their vehicle to an early warning reporting database operated by NHTSA. The federal agency would then be required to make those documents public in a searchable, user-friendly format.
Boxer asked if Barra would support legislation that would ban recalled vehicles from becoming rental cars. When Barra ducked the lawmaker’s question, Boxer said, “The culture that you’re representing here today is the culture of the status quo.”
Earlier this week, GM announced a separate recall of 1.3 million vehicles in the U.S. over concerns they may experience a sudden loss of electric power steering. On Friday, GM extended its ignition switch recall by another 824,000 vehicles to cover all model years of the Chevrolet Cobalt and HHR, Pontiac G5 and Solstice, and the Saturn Ion and Sky in the U.S. because faulty switches may have been used. In all, the ignition switch recall affects 2.19 million vehicles in the United States.
GM also announced Monday that it has more than doubled its first-quarter charge to $750 million to cover the cost of recall-related repairs. This amount includes a previously disclosed $300 million charge for three safety actions announced March 17 and the ignition switch recall announced Feb. 25.
GM’s total number of recalled vehicles in the U.S., including the power steering issue, ignition switch, and three other safety issues, has now surpassed 5 million.