GM Hires Feinberg to Handle Recall; CEO Barra Testifies Before Congress

By and | April 1, 2014

General Motors Co. has retained Kenneth Feinberg, who supervised claims funds after the BP Plc oil spill and other calamities, as a consultant to explore options for families of accident victims whose vehicles are being recalled for ignition-switch defects.

Calling in Feinberg is the latest move for Chief Executive Officer Mary Barra, who has also hired Jenner & Block LLC Chairman Anton Valukas, who headed the probe of Lehman Brothers Holdings Inc.’s 2008 downfall, to run an internal investigation of why it took GM more than a dozen years to respond to the flawed parts with a recall.

Barra has also apologized for the loss of life and hired a new executive to focus on global vehicle safety.

“I consider this to be an extraordinary event and we are responding to it in an extraordinary way,” Barra said today in her opening testimony before a U.S. House panel. “As I see it, GM has civil responsibilities and legal responsibilities. We are thinking through exactly what those responsibilities are and how to balance them.”

Feinberg oversaw compensation limits for executives at GM and six companies bailed out by the U.S. Treasury, including insurer American International Group Inc. He also ran compensation funds for victims of mass shootings in Aurora, Colorado, and at Virginia Polytechnic Institute and State University, the school known as Virginia Tech.

Consumer groups and representatives, including Consumers Union, Consumer Federation of America and Ralph Nader, have requested that GM establish a fund for victims of its defective products.

133 Times

Today’s hearing before the committee is focused on ignition switches that turned off when jarred, cutting power to the car. Barra reiterated today that she doesn’t know why it took so long to recall the 2.6 million vehicles affected.

House investigators said in a memo today that consumers complained to GM dealers 133 times about cars unexpectedly stalling or turning off when they went over bumps or nudged the ignition key. At a news conference outside the U.S. Capitol, family members of crash victims called for tougher criminal penalties for automakers that fail to report defects.

Henry Waxman, the top Democrat on the U.S. House Energy and Commerce Committee, said he will introduce legislation today to increase penalties on automakers that fail to disclose defects, strengthen disclosure requirements for companies, and boost funding for the National Highway Traffic Safety Administration.

“We must improve the law to prevent the next auto tragedy,” Waxman said.

The crisis is GM’s biggest since emerging from bankruptcy in 2009. Yesterday, the Detroit-based automaker doubled its recall-related charges to $750 million after saying faulty power steering in 1.5 million other vehicles needs to be fixed. So far this year, GM has recalled almost 7 million vehicles worldwide, denting a reputation for quality that the automaker had only recently repaired after emerging from a government-sponsored bankruptcy.

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