How one rogue employee can upend a whole company

June 11, 2014, 11:58 AM UTC
Lawmakers Holds News Conference With Family Members Of Victims Of GM's Defective Ignition Switches
WASHINGTON, DC - APRIL 01: Sen. Ed Markey (D-MA) holds a GM ignition switch during a news conference at the U.S. Capitol, on April 1, 2014 in Washington, DC. The families want to know why it took GM so long to recall the faulty ignition switch on certain models.. (Photo by Mark Wilson/Getty Images)
Photograph by Mark Wilson—Getty Images

Tales of rogue employees who go astray are as much a staple of business news coverage as overpaid CEOs and 20-year-old Internet billionaires.

Some of the better-known rogues have become household names, like derivatives trader Nick Leeson of Barings Bank, J.P. Morgan’s “London Whale,” and, of course, Edward Snowden of NSA notoriety.

In most cases, their motivation seems clear. Leeson and the Whale were in it first for the money, and then to cover up their losses, while Snowden saw himself as the whistleblower on the intelligence community’s data gathering.

It is a lot more difficult to understand what may have driven engineer Ray DeGiorgio to undermine the standards and procedures of General Motors (GM) for more than a decade. DeGiorgio’s alleged deception is a key reason–perhaps the most important reason–why GM waited so long to fix the faulty ignition switch on the Chevrolet Cobalt and subsequently has been forced to recall 2.6 million cars. Lawsuits and injury settlements likely to amount to hundreds of millions of dollars will follow.

Evidence of the damage one man can wreak is there for all to see to in the exhaustive 325-page report by former federal prosecutor Anton Valukas of Chicago’s Jenner & Block to the GM board on the delayed Cobalt recall. In an embarrassing account of repeated examples of corporate buck-passing and responsibility-ducking, DeGiorgio’s story is the most compelling narrative. It raises the Valukas report to the level of literature, worthy of a place on the bookshelf alongside such GM classics as My Years with General Motors by Alfred P. Sloan, John Z. DeLorean’s ghost-written memoir On a Clear Day You Can See General Motors, and Ralph Nader’s Unsafe at Any Speed.

DeGiorgio was the design release engineer who first approved an ignition switch that didn’t meet specifications and then secretly replaced it with an upgraded switch, with the full knowledge that he was violating long-established engineering standards, according to the report, all the while disclaiming any responsibility of the defects or the change.

If he was thinking far enough ahead to create an alibi for himself, the evidence doesn’t show it. DeGiorgio’s defense to date, in lawsuit depositions, congressional inquiries, and GM’s own internal investigation, has been to repeat, again and again and again, some version of “I don’t recall.” DeGiorgio was suspended with pay from GM for two months in April and then dismissed in early June.

DeGiorgio continues to deny he did anything wrong. As the report states, “When asked in 2009 and in the years that followed whether the ignition switch had changed, DeGiorgio said that it had not. To this day, in formal interviews and under oath, DeGiorgio claims not to remember authorizing the change to the ignition switch, or his decision, made at the same time, not to change the switch’s part number. DeGiorgio’s deliberate decision to not change the part number prevented investigators for years from learning what had actually taken place.”

DeGiorgio had worked at GM as a design release engineer since 1991, and his career focused on vehicle switches. He took over responsibility for vehicle switches between October 1999 and March 2001 and was working on the Cobalt platform in 2002.

As part of his work, the report states, DeGiorgio ultimately approved an ignition switch that fell well below the lower limit of acceptable torque or turning pressure that he himself had specified. But it is not clear why DeGiorgio was said to be preoccupied with starting problems with the switch. In any event, it was a troublesome part.

The switch required many fixes between March 2001 and late 2002, and it simply didn’t work when it went from design to production as an actual part. In January 2002 validation-testing by Delphi, the switch supplier, every sample set fell below specification. DeGiorgio discussed the problem with Delphi, according to the report, and in February 2002, he had a choice: do nothing to fix it or change the switch and delay production. In an email to Delphi that has since become notorious, DeGiorgio said he would stay the course, signing the note “Ray (tired of the switch from hell) DeGiorgio.”

DeGiorgio didn’t tell anybody that the Delphi switch was substandard, according to the Valukas report. And after interviewing hundreds of witnesses, the Valukas team couldn’t find anybody else who knew. The switch was approved for production in 2002, and questions were subsequently raised in 2003, 2004, and 2005, but at no time, the report said, did DeGorgio inform anybody that the switch was out of spec. It was his secret.

In an incident in 2004, some GM engineers repeatedly experienced a moving stall in a Cobalt when the driver slightly grazed the key, which turned the engine off. The Valukas report said an engineer forwarded the complaint to DeGiorgio, asking if there was a torque spec and if Cobalt was meeting it. But he never responded. “Despite being informed of the problem, DeGiorgio made no changes to the switch, and no one was alerted to the fact that it didn’t meet specification,” the report contends.

By May 2005, customer complaints about stalling had begun coming in. DeGiorgio’s name appeared on an email chain regarding the complaints, but he claimed not to have seen it. When asked by other engineers, he also claimed there had been no complaints. According to the report, there is evidence that he received warranty data reports with incidents of stalls but claimed he did not recall these reports.

Unbeknownst to anybody else at GM, the report said that DeGiorgio then began communicating with Delphi about how to fix the ignition switch by increasing the torque in future models. A stronger spring and plunger was approved on April 26, 2006 for use on the 2007 model. The change was made at no cost with a part that had been available in 2001, and no paperwork accompanied the change. Later investigators didn’t know about it because DeGiorgio didn’t tell them, the report said. DeGiorgio told investigators he did not recall changing the switch or failing to change the part number.

The omission was critical because it delayed the accident investigation for seven (!) years. Given the significance of the change, the part number should have been updated so an investigator looking at Cobalt accidents would understand why they decreased in later models. The report trenchantly observes: “Had others known, the recall would have happened sooner.” DeGiorgio offered no explanation for the omission.

His stonewalling was Watergate-caliber. When a safety engineer from Field Performance Assessment in 2009 directly asked DeGiorgio whether there had been a change in the switch, the Valukas report said he told him there had been none that would affect the shut-off problem–throwing the investigator off the track for years. DeGiorgio was asked what it would take to develop a new switch. He proposed one with more torque, according to the report, and said it would take 18 to 24 months to get it ready. He didn’t disclose that the switch had already been redesigned and had been put in production.

DeGiorgio’s alleged deception wasn’t uncovered until April 2013 when a plaintiff’s lawyer in a lawsuit examined photographs of the Cobalt ignition switch and discovered it had been changed from 2005 to 2008. In a deposition, DeGiorgio acted like it was news to him. And in a subsequent congressional hearing, DeGiorgio said he had forgotten about the change.

His motivation for a cover-up is difficult to discern. DeGiorgio certainly wasn’t in it for the money, because no money seems to have changed hands. He wasn’t going to advance his career either, because at age 61, he was a midlevel engineer who wasn’t going any higher. Nor did the project he was working on have a high priority.

My best guess is that DeGiorgio was driven by a familiar bureaucratic reflex: Cover your ass. He had had an unusual career–a fine arts major in college, he didn’t get an engineering degree until age 38, according to Automotive News–and may have felt insecure in a company that was under tremendous pressure to produce results. That something as simple as fiddling with the torque standards on an ignition switch could create a series of circumstances that have so far been linked to 13 deaths was probably the furthest thing from his mind.

As the Valukas report makes clear, there is plenty of blame at GM to go around, from the high-potential engineers who passed the buck to company lawyers caught up in bureaucratic red tape. Observers are having lots of fun with the “GM nod” and the “GM salute.” But the narrative that is now emerging of how one rogue employee out of 220,000 can hamstring an entire corporation and escape detection for more than a decade is the one that I find the most chilling.