GM recall issues run long, deep, and wide

So General Motors’ Dan Ammann says the recall of 2.6 million Chevrolets and other models has made no dent in GM’s car sales so far. Citing his company’s 4% U.S. sales gain in March and a “decent start” in April, the new president says, “It’s hard to say there’s a measurable impact there.”

Ammann may be singing a different tune in 10 days or so when GM (GM) reports April sales results. Its performance so far in 2014 has been shaky, with market share seven-tenths of a point below 2013 and overall sales down 2%. Some brands are already showing weakness. In March, sales of high-profit Cadillacs and pickup trucks looked shaky. GM finished the month with just 16.7% of the market, less than a percentage point ahead of Ford Motor (F). GM investors aren’t waiting to see the numbers and are already heading for the exits. They have sold down GM shares 17.3% since the beginning of the year.

All shoppers, even weekend tire-kickers, should be paying attention to the recall. While none of the recalled cars are still in production and they are long gone from dealer showrooms, there has been a steady drip of disturbing information about what really goes on inside GM. It brings back memories of the company that investigated Ralph Nader in the ’60s and quietly put Chevy engines in Oldsmobiles in the ’70s, and suggests that GM is not nearly the upstanding corporate citizen it has portrayed itself to be for more than a half-century.

Critics have been unchained. In a blistering broadside posted on the investor website Seeking Alpha, Michael Blair, retired CEO of Canadian parts supplier Automodular went right to what he sees as the heart of the GM problem. “In my view,” he wrote, “GM has a culture that is puerile, focused solely on short-term profits and replete with bad practices and weak governance.”

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Blair knows firsthand. He says Automodular got burned after it invested millions of dollars in equipment and training to fulfill a contract for the subassembly of cockpits for the Chevy Camaro. As soon as production was about to begin, by his account, GM demanded a 50% reduction in price or threatened it would move the business to another supplier. When Automodular refused, GM dropped the hammer, and it was forced to shut down production — at a loss of millions of dollars. He concludes: “It seems that GM knew of the [ignition switch] problem, hid it from sight until it could not be hidden any longer, and now profusely apologizes for the “terrible things” their actions gave rise to. The apology is likely hollow.”

Blair isn’t the only one who doesn’t think GM walks the talk. Similar examples dot the 619 pages of GM engineering documents released by the House Energy and Commerce committee that I first saw posted on The Truth About Cars website.

Here’s just one: Less than a year ago, a member of NHTSA’s Office of Defect Investigation wrote an unusually candid memo to GM about its tardy response to NHTSA inquiries. “The general perception is that GM is slow to communicate, slow to act, and at times requires additional effort that we do not feel is necessary with some of your peers.”

That’s a damning assessment for a company that purports to be a responsible corporate citizen. But it came after GM has spent the better part of decade sidestepping responsibility for the faulty ignition.

Like Captain Renault discovering that there is gambling going on in Rick’s Café, Mike Robinson, GM’s vice president for environment, energy and safety policy, is shocked, by the criticism. “This note from NHTSA, both the content and tone, comes like a bolt out of the blue,” he states in reply. “We worked way too hard to earn a reputation as the best, and we are not going to let this slide.”

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To me, the most shocking disclosure in the documents is not that GM prevaricated owning up to the defect, then decided that a fix was uneconomical, and didn’t move on a recall until the evidence of a safety danger was overwhelming. GM is, after all, a large, lumbering, corporation under acute financial pressure. Budgets — and, more important, careers — were at stake with the small cars, and GM was determined to make them successful. The evidence in the accident reports was confusing because many of the fatalities involved alcohol and improper use of seatbelts. NHTSA isn’t blameless either, since it needed years to get to the root of the problem.

No, what really worries me is evidence of deliberate fraud by a GM engineer. In a violation of standard industry practice, the engineer signed off on a design change that included a stronger spring and a longer plunger — and didn’t assign a new part number to the switch — thus covering up the defect. Since there was no documentation of the change, GM didn’t find out about it until a lawsuit led to a junkyard investigation of discarded models. During depositions in the suit in 2013, the engineer responsible for the Cobalt switch said he didn’t recall ever authorizing such a change. (He has since been suspended).

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CEO Mary Barra, a GM lifer, has vowed to fully vet GM’s failures, and to do so, she has named another GM lifer, Jeff Boyer, to the newly created post of global safety chief. His experience may be valuable, but to some observers his appointment is like asking a goldfish to critique the water it swims in. “When people are within an organization for a long time, there is a certain institutional myopia that sets in” says Gary S. Vasilash, longtime editor of Automotive Design & Production. “There is a certain ingrained notion of “this is how we do things.”

Barra is going to have to dig deeply to find out what is rotten at GM’s core. And car buyers are going to have to play close attention.

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