GM Top Executives Did Not Know About Ignition Defect: WSJ on GM Internal Probe

June 5, 2014

An internal probe of General Motors Co.’s delay in recalling cars with defective ignition switches linked to at least 13 deaths is expected to conclude there was no concerted coverup and clear senior management of blame, the Wall Street Journal reported, citing people familiar with the matter.

The probe is expected to conclude that CEO Mary Barra, executives who reported directly to her, the board of directors and former CEO Dan Akerson did not know about the defective switches before December 2013, the newspaper said, citing the people.

The report will conclude that GM managers did not make connections and act on evidence of problems linked to deadly accidents, and it will recommend changes to GM culture and management, the Journal said.

GM is expected to announce the dismissal of “a number of people,” including the engineer who designed the ignition switch, Raymond DeGiorgio, and some members of the company’s legal department, the newspaper said.

But GM’s general counsel, Michael Millikin, who was co-lead of the internal probe with former U.S. prosecutor Anton Valukas, is expected to continue to work for the automaker and is cleared of responsibility for the mishandling of defects and the recall delay, the people told the newspaper.

Barra is expected to announce the findings of the internal probe on Thursday. The No.1 U.S. automaker has recalled 2.6 million cars because of the switches, which GM engineers have known about for more than a decade.

In the wake of the internal report, the GM board is expected to form an operational risk-management committee, the Journal said.

GM spokesman Greg Martin did not immediately respond to an email seeking comment.

GM faces investigations by Congress, the Justice Department, the Securities and Exchange Commission and several states. It has also been sued by families of crash victims and investors, all of whom are likely to pour over GM’s report for evidence to back their claims.

On May 16, GM was fined $35 million for its delayed response to the defect, the maximum that can be imposed by the U.S. Department of Transportation.

The faulty switches are in older, inexpensive models such as the Saturn Ion and Chevrolet Cobalt. GM began recalling the cars in February.

The defective switches, which are cheap to fix, can unexpectedly turn from the “on” position to the “accessory” position, causing engines to stall, airbags to fail during crashes and power steering and power brakes to malfunction.

While the carmaker has acknowledged 13 deaths related to the ignition switches, the National Highway Traffic Safety Administration has said the number likely could be higher.

Reuters reported on Monday that at least 74 people have died in crashes similar to those GM has linked to the faulty switches, based on an analysis of government data.

The largest U.S. automaker has made several changes to its organizational structure since the recall, saying it would improve vehicle quality and safety. The company also has announced the exit of several executives in moves it said were unrelated.

In addition to naming a global vehicle safety chief in March to improve the process for catching defects and calling for recalls sooner, GM split its engineering division into two units the following month and assigned one of its top attorneys to advise the new safety chief on legal issues.

Valukas, co-lead of the probe, is well respected for his investigation of Lehman Brothers after the financial services firm collapsed in 2008. He alleged then that Lehman used accounting gimmicks and had been insolvent for weeks before it filed for bankruptcy.

But the law firm of which he is chairman, Jenner & Block, has worked with GM since 2002, and at least two of the automaker’s former top attorneys, Robert Osborne and Elmer Johnson, were partners at the Chicago law firm.

That led to questions of conflict of interest for the law firm, when the probe was announced in March. GM at the time said there was no such issue and that Valukas had been charged to go “where the facts take him.”

(Reporting by Supriya Kurane and Ankush Sharma in Bangalore and Peter Henderson in San Francisco; Editing by Gopakumar Warrier and Matt Driskill)

Topics USA

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