GMC Fires 15 Executives, Others Disciplined After Internal Probe


In a move that displayed what appeared to be an unprecedented amount of transparency, GMC CEO Mary Barra says that 15 employees, the majority of which are senior executives in the legal and engineering departments have been fired and others face disciplinary actions after an internal probe surrounding the recent massive recall issued by the company for defective ignition switches.

Blame for the delay in the recall was attributed largely to incompetence and neglect, as the now-former GMC employees failed to disclose the defect in a timely manner. The defects have also been linked to 13 fatalities, and more than 50 accidents, and are expected to cost the company more than $1.2 billion in reparations. The company also states that compensations will be paid to the families of the victims, and others who were injured in accidents involving the faulty ignition switches, after claims begin on August 1.

In a 315-page report, prepared by attorney Anton Valukas, who was contracted for the internal investigation, recently appointed GMC CEO Barra, says there are some disturbing and painful realizations that employees acted irresponsibly, when errors were made repeatedly as early as 2002. The report has been scrutinized by Congress who continues to investigate the Corporation.

The investigation, which involved interviewing 230 employees, and reviewing 41 million documents, revealed that engineers authorized the use of switches that did not meet the required specification, and saw the problem as an inconvenience, rather than a severe safety issue that resulted in fatalities. In addition to the firing of the 15 employees, the company is also facing lawsuits as several other fatalities have since been associated with the recall that involves more than 2.6 million Saturn Ions, Chevrolet Cobalts and other older compact models. The faulty ignition switches can, without warning, cause the engines to shut down, disabling the brakes and power assisted steering, and airbags, causing the drivers to lose control.

It was also disclosed that a repair, estimated to cost the company 57 cents was neglected in 2005, and 12 months later, engineer Ray DeGiorgio , who was one of those fired, approved a change in the design of the switch, but neglected to change the part number, making the problem much more difficult to track. Mary Barra has been with General Motors for 34 years, before being appointed CEO in January of this year, and was responsible for safety for three years as head of product development. She said that she only learned of the issue in December of 2013, and addressed the issue immediately.

Reaction to the presentation, held at the company training center at the GMC headquarters in Detroit MI, and was broadcast to more than 200,000 employees around the globe, appears to be positive , but there were also a few reservations and criticisms. Sen. Richard Blumenthal, D-Conn says that the report denies culpability, and absolves corporate management, while Barra apologized to the families of the deceased and those who sustained injuries, saying that there appeared to be a willingness to avoid accountability.

GMC paid a fine of $35 million in May, which was the largest fine issued by the National Highway Traffic Safety Administration, when the company failed to report the problem to regulators. The company was aware of the problems with ignition switches since 2001, and in the investigations that resulted in the firing of the 15 executives, reveal that dealers were told to tell owners to remove items from their key chains so that the ignition switches will not be affected.

By Dale Davidson


The Globe and Mail 
The Financial Post

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