This week, General Motors' (NYSE:GM) new CEO, Mary Barra, faced her biggest challenge thus far as the leader of the nation's largest car manufacturer. After less than three months on the job, Barra took the stand to testify before a Congressional subcommittee on Tuesday in Washington, D.C., to discuss vehicle recalls and safety issues.
The hearing put Barra on the spot as Congressional leaders probed for answers to a host of questions regarding a long-standing ignition-switch defect in GM's compact automobiles. The crux of the recall is a switch that allowed the key to move out of the "run" position to the "accessory" or "off" position in select GM cars built in the early to mid-2000s.
The recall saga itself, however, is more complex than the problematic parts. Here are seven unique facts about GM's largest product safety issue since it filed for bankruptcy in 2009:
1. GM's faulty switches have been linked to 13 deaths in 31 accidents. In the world of auto manufacturing, there are minor recalls, major recalls, and then more tragic occurrences. Based on what we know, GM's falls into the latter category.
Why? For one, the company mishandled the issue internally and failed to publicize its concerns immediately, all of which is discussed below. Secondly, other recalls can grow in size without being associated with any significant harmful accidents, as pointed out by Bloomberg Businessweek; for GM and unfortunately for victims, that's not the case here.
2. GM was aware of ignition problems as early as 2001. Documents released by federal safety regulators this week indicate that GM discovered the ignition problem internally in a preproduction Saturn Ion back in 2001. Responding to Congressional inquiries in a written testimony, Mary Barra stated, "I cannot tell you why it took years for a safety defect to be announced in that program, but I can tell you that we will find out."
3. The failure was due to $0.57 worth of molded metal. Pictures of the faulty ignition part that led certain cars to stall were revealed this week. The old, failure-prone version measured 10.6 mm end to end whereas the improved replacement part was slightly longer at 12.2 mm. The tiny part allegedly cost $0.57.
4. GM failed to assign a new part number to an improved ignition component in 2006, adding another layer of confusion to the ordeal. When GM engineers upgraded from a less-reliable ignition part to an improved version in 2006, no internal employees bothered to change the part number. Because of this oversight, investigators had difficulty pinpointing why accidents curtailed around 2006. When lawmakers inquired about GM's processes that led to the oversight, Barra remarked that her company's actions back then were "completely unacceptable."
5. In the mid-2000s not only were some of GM's cars flawed, the company and its suppliers were in dire straits. Around the time GM was figuring out that it needed to upgrade the ignition part, the company was hemorrhaging money. Between 2005 and 2007, GM reported $51 billion in losses. And Delphi, the giant auto supplier that manufactured those parts, was going through bankruptcy.
6. Less than three months after becoming the first female chief executive in the American car industry, Mary Barra is enduring a barrage of Congressional questioning over GM's largest recall in years. The timing of her transition has coincided so closely with the investigation that some have speculated she was ushered in to take the fall for GM's past mistakes. Those rumors, however, lack merit, as Micheline Maynard over at Forbes has deftly pointed out. Still, Barra's experience as a "GM lifer" and her strategy to shape a "new GM" provide context in this critical moment where GM strives to distinguish its latest autos from those of the past.
7. GM has hired the same attorney who fought to compensate victims in the BP oil spill case. For victims of the GM recall saga, there's hope that the compensation process will not follow down a path of confusion and chaos: GM has asked Washington attorney Kenneth Feinberg to oversee the distribution.
Feinberg has dealt with these types of injury cases for decades and managed the BP oil spill catastrophe, as well as the mass shootings at Aurora, Colo., and Virginia Tech. His experience in this arena will be invaluable, and Bloomberg contributor and author Paul Barrett notes that Feinberg is "fair, honest, and industrious."
Isaac Pino, CPA has no position in any stocks mentioned. 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.