Delayed Recall

04.07.14

The Old General Motors Is Back

The automaker was supposed to get rid of its unresponsive culture in exchange for taxpayer salvation. Instead, it dithered as faulty ignition switches killed customers.

In a room crowded with lawyers, cameras, journalists, and the families of car crash victims, the Transportation Secretary gazed steely eyed at the member of Congress grilling him about a government investigation.

“Do you honestly believe that Toyota is being held to exactly the same standard as General Motors and everybody else?” Rep. Jason Chaffetz asked Raymond L. LaHood.

“Absolutely, 100 percent,” the secretary snapped.

That February 2010 exchange came to mind last week, when, in another crowded hearing room, GM Chief Executive Mary Barra faced her own barrage of questions.

This time, representatives were intent on learning why GM had taken so long to recall 2.6 million cars built from 2003-2011 for faulty ignitions that were linked to 13 deaths.

“We had more of a cost culture,” Barra said, talking about the GM before the $50 billion federal bailout in 2009 that rescued the company, “and now we have a customer culture.” The idea was skewered by Saturday Night Live last weekend.

In two days of testimony, Barra tried very hard to delineate between an Old GM and a New GM, insisting that the company has been run differently since the bailout and 2009 bankruptcy.

But, given that Barra has admitted she only first heard about problems with the Chevrolet Cobalt in late December, and that senior management was only told about the need for a recall on Jan. 31, when the first wave was announced, it is easy to believe that the Old GM is still in firmly in place.

That is not how 2014 was supposed to be for the biggest U.S. carmaker. In December, the Treasury Department sold the final shares in its 60 percent stake in the company. Only a day later, Barra’s surprise announcement as the first female Detroit CEO was made. Both steps signaled a fresh start.

Instead, GM is right back under Washington scrutiny, as it has been since November 2008, when then-CEO Rick Wagoner sat in a line of Detroit CEOs before a House committee, asking for help to survive. 

Then-Rep. Paul Kanjorski pressed him to be specific about how much money GM was requesting.

“Worst case scenario is that the amount of money would be significant,” Wagoner said, using the same flat, well-scripted tone that Barra displayed in her own testimony. 

But, as with Barra, Wagoner insisted repeatedly that GM faced a promising future, led by technology focused cars such as the Chevrolet Volt, which was then in development.

The amount GM alone received was double the $25 billion the CEOs then were seeking as a “bridge loan” to get through what looked like dark months following the Wall Street meltdown. (The total bailout was $82 billion, including help to Chrysler as well as dealers, suppliers and towns with now-defunct car plants.)

In accepting an initial check from President Bush on his way out the door, and by agreeing to be taken in and out of bankruptcy by President Obama’s auto task force, GM signed over its fate to the forces of Washington. And, with the work of the auto task force, GM was supposed to be made leaner, and more responsive.

In two days of testimony, Barra tried very hard to delineate between an Old GM and a New GM, insisting that the company has been run differently since the bailout and 2009 bankruptcy.

Instead, as documents are showing, GM delayed dealing with the problems on Chevrolets, Saturns and Pontiacs long after it had been given a new start under government guidance. As Barra’s predecessor, Dan Akerson, frequently complained, GM’s self-protective culture apparently got in the way of faster reforms.

GM’s situation now is a little like the antiques store sign: “You break it, you own it.” Only, in this case, Washington’s view is, “You broke it, we owned it” and thus, GM has to accept a greater level of scrutiny than a car company that was not led back to prosperity by a federal bailout.

Declining to answer detailed questions from House and Senate members, even those referring to material submitted by GM, Barra has promised a thorough investigation of the ignition situation.

GM has retained plenty of help, including Kenneth Feinberg, who determined compensation for victims of 9/11, the British Petroleum oil spill and the Boston Marathon bombings. GM also has hired Jeff Eller, the crisis expert who advised the Clinton Administration.

No matter the sage advice that GM receives, neither man will be able to undo the situation that GM got itself into five years ago, and which will color everything the company does for the foreseeable future. 

Perhaps in a century, the federal assistance will have been forgotten, but for now, the Old GM is back.