General Motors Company to Congress: We Take the Blame

New CEO Mary Barra hit the right notes in her first day of testimony before Congress.

Apr 2, 2014 at 7:02PM

Barra Before Congress

GM CEO Mary Barra appeared before a U.S. House of Representatives committee panel on Tuesday. Photo credit: General Motors Co.

Tuesday marked a new stage of the recall crisis engulfing General Motors (NYSE:GM): The finger-pointing stage. That's not a knock on GM. CEO Mary Barra, to her immense credit, is not pointing fingers at anyone other than her own organization. 

But as Congress began its hearings into the issue, and as federal regulators frantically sought to deflect blame for their own institutional shortcomings, it was clear on Tuesday that the Blame Game was on.

GM's new CEO isn't playing the Washington blame game
There's plenty of blame to go around, of course. The emerging picture suggests that years of bureaucratic bungles deep inside GM led to a long delay in recalling defective ignition switches, which are believed to have played a part in 13 deaths. 

Members of the House Energy and Commerce Committee had plenty of tough questions for Barra, of course. But they also had tough questions for David Friedman, the acting chief of the National Highway Traffic Safety Administration, or NHTSA. The key question for Friedman: Why didn't the NHTSA force GM to do a recall once the pattern of problems started to emerge? 

Friedman pushed the issue -- and the blame -- back on GM, saying that GM hadn't provided NHTSA with enough information to see the patterns. That assertion may be open to dispute as time goes on. There's a fair argument to be made that NHTSA shares some of the blame here, and some members of the committee weren't shy about making it.

Friedman's effort to shift all of the blame back on to GM wasn't surprising. But it made for a dramatic contrast with Barra's calm willingness to apologize and take responsibility. 

Barra shows calm leadership under fierce pressure
Barra continues to shine in what must rank as one of the more challenging situations to land on any brand-new CEO's desk. 

It seems hard to remember now, but when Barra was tapped to become GM's CEO late last year, GM was on a roll. The U.S. government had sold the last of its shares, and GM's recent products were garnering strong reviews. Profits and quality indicators were moving in the right directions. GM's future was finally starting to look bright.

But these recalls have tarnished that emerging shine. Now, the deep flaws of the old GM are being unearthed, and exposed to harsh critical eyes. 

By refusing to be defensive, by insisting on transparency, and by ordering that vehicles be recalled if there's any question about their safety, Barra is absolutely doing the right things -- even if she sometimes seemed vague under harsh questioning on Tuesday. 

Barra clearly doesn't -- yet -- have all of the answers that Congressional leaders, and the public, are seeking. That made her non-answers to pointed questions seem frustrating at times on Tuesday. But she's making the right moves with what she has: She met privately with victims' families on Tuesday morning, and she announced yesterday that GM had retained Kenneth Feinberg, an attorney best known for gracefully managing the September 11th and Boston Marathon bomb victims' funds, to advise GM on how best to proceed in addressing claims related to the ignition-switch defect.

On a larger level, Barra is clearly looking to draw a line between Old GM and New GM -- while making clear that New GM will willingly take at least some responsibility for the mistakes of its predecessor, even though the terms of GM's bankruptcy agreement could let the current company off the hook for claims originating before 2009. That seems like the right strategy. 

So far this year, GM has recalled more than 2.5 million vehicles around the world, for a variety of potential problems. That may seem excessive -- but Barra has clearly decided to face all necessary consequences now, so that GM can move forward later. 

Barra continues to make the right moves for the long-term health of General Motors (and the long-term prospects of GM's stock). But in the short term, it's going to continue to be ugly for GM -- and perhaps for GM's shares, as well. Stay tuned. 

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John Rosevear owns shares of General Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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