This "Brutal" Report Doesn't Solve General Motors Company's Problems

GM on Thursday released an in-depth report on the events surrounding its failure to recall vehicles with defective ignition switches. CEO Mary Barra summarized the report for employees at a "town hall" meeting in Warren, Mich. Source: General Motors.

General Motors (NYSE: GM  ) on Thursday released the final report of an exhaustive investigation conducted by former U.S. Attorney Anton Valukas into the company's decade-long failure to recall cars with faulty ignition switches.

The report, commissioned in March, is devastating to GM -- more specifically, to Old GM, the company as it existed before its 2009 bankruptcy. If the report is to be believed, incompetence and neglect were the hallmarks of that company. Fifteen GM employees have been dismissed as a result of the report's findings; another five were disciplined.

But in several key ways, the report is a big win for New GM, today's restructured General Motors. It clears the members of GM's current senior leadership of responsibility for the defective switch and the long delay in recalling it. 

It also failed to find any evidence that GM overtly decided to compromise safety for cost reasons, something that would be a bombshell in the many lawsuits pending against the automaker over the defect.

So is this report conclusive? Does it really capture what happened?

A "brutal" report that didn't silence GM's critics
That depends on who you ask. 

On one side, GM CEO Mary Barra on Thursday called the report "extremely thorough, brutally tough, and deeply troubling." General Motors Chairman Tim Solso called it "very thorough" and said GM's board would ensure its recommendations were put into place.

"Deeply troubling" about covers it. In a nutshell, the report says GM as a company failed to act because a whole lot of individuals within the company failed to act -- because the consequences of acting were seen as high, and not acting was perceived as a safe course. 

GM says that defective ignition switches in the Chevy Cobalt and other compact models are responsible for 13 deaths, but regulators and attorneys suing GM say the death toll may be considerably higher. Source: General Motors.

The report cites things such as the "GM nod," in which people would nod in agreement that an action should be taken and then do nothing, and the "GM salute": crossed arms, with a finger pointing to indicate that an issue was someone else's responsibility.

We've known for years that Old GM's culture was broken. This report lays that brokenness out in brutal detail. (If you'd like to see for yourself, you can download a PDF copy of the report here.) 

But an array of critics slammed the report on Thursday -- and not just the lawyers who are suing GM. Sen. Richard Bluementhal, who has been a harsh critic of GM's conduct, said the report "amounts to circling the wagons to marshal a legal defense" and characterized it as "a failure to come clean and acknowledge full responsibility."

So which is it?

We don't know, and we may never will
GM has a tricky line to walk here. 

On the one hand, Barra promised full transparency, and at 325 pages, the report certainly is exhaustive. 

On the other hand, there's a lot of litigation related to the ignition-switch defect pending, and GM's lawyers have clearly advised Barra and other company leaders to be very careful with what they say and do, so as not to inadvertently expose GM. 

But that caution can make them look evasive at times, providing more ammo to critics. And in this charged environment, simple missteps can seem damning. 

GM President Dan Ammann, CEO Mary Barra, and global product chief Mark Reuss faced reporters at a press conference on Thursday. Source: General Motors.

For instance, Barra held a press conference yesterday morning along with GM President Dan Ammann and global product chief Mark Reuss to talk about the report -- but at the time, the document hadn't yet been made available to the media. The company sent it to the National Highway Traffic Safety Administration early Thursday morning, and NHTSA released it to the public around noon -- but that was after GM's press conference. 

Without having seen the report, it was hard for reporters to compose in-depth questions: they were fishing. And when the media was able to come up with substantive questions, Barra deflected many of them to Valukas or to Kenneth Feinberg, the attorney who is putting together a settlement fund for accident victims -- but Valukas and Feinberg weren't there.

The upshot: A step forward, but we're not done
I think the report will help GM's cause to some extent. It does lay bare some harsh truths that the company would surely prefer to keep private. And it will certainly help Barra do the hard work of changing GM's culture and organization so that things like this don't happen in the future.

But it wasn't the conclusive, leaves-no-questions-unanswered report that some investors had hoped for. Perhaps that was too much to expect, given the pending litigation and ongoing political circus.

But two things are clear: The GM recall saga is still far from over, and Mary Barra has her work cut out for her as she tries to fix GM's long-broken culture once and for all.

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  • Report this Comment On June 08, 2014, at 1:09 PM, funfundvierzig wrote:

    Ms. Barra GM Chieftess and her PR flim-flam artists may pretend this investigation report is "independent", but it is anything but. The Valukas "investigation" screams, "Conflict of Interest".

    While Anton Valukas is a highly respected and ethical criminal defence lawyer in Chicago, he and his firm Jenner & Block have had long lucrative ties with GM's top brass and GM. His clients are the big bosses of GM and the General Motors Company who pay him richly, not GM customers, not GM investors, and certainly not the America people. In short, this is a White-Wash, not surprisingly taking away all the legal blame and accountability from the executive suites on high at Ren Cen.

    Perhaps Ms. Barra can fool some of the people with her Barnum & Baily-style PR stunts, but not all of the people. "Step right up, folks. Watch responsibility and decency disappear before your very eyes!"

    ...funfun..

  • Report this Comment On June 09, 2014, at 10:57 AM, SkepikI wrote:

    ^ If you want to assign blame and throw miscreants to the wolves, hire a lawyer to do an investigation and write a report. If you want to ID the failures, FIX THE PROBLEM and keep it from being repeated hire an experienced engineer, a GREAT manager and a fearless CPA to do the investigation, write the report and make sure they have zero ties to those being investigated. THEN hire a truely independent lawyer to throw the responsible parties to the wolves (and the prosecutors)

    I dont know that this is whitewash, but its certainly ill conceived. And, thanks for the rehash of the reports, JR but I think you can do better. The real question is did GM identify ALL their problems and ALL the people who caused them or are those people still there? With 15 guilty parties frog-marched out of GM, I reckon not- seems to me the 2009 bankruptcy went out of its way to protect the GM employees and execs who destroyed the company, including the 15 who supposedly did all the bad stuff....seems very unlikely to me.

    It will take about 5 or 10 years to see if the culture is really being changed. I hope the figure of merit to watch is NOT numbers recalled. That would likely mean another figure of merit, injuries and deaths per recall would be very distressing.

  • Report this Comment On June 09, 2014, at 11:45 AM, funfundvierzig wrote:

    No doubt about it, folks. This scandal and massive consumer fraud involving millions of deadly defective GM cars on the roads is not the sole creation of some rogue low-level lawyers and a couple of engineers contained in their cubicles down in the ranks. The stench of dishonesty if not conspiracy wafts from virtually every senior executive office and conference room and corridor of Ren Sin, GM's World Headquarters of Questionable Quality. The big bosses of this corrupt car-maker cannot hide in their phony "silos of information" and evade ultimate responsibility for the human roadkill they and GM caused.

    Merely the outspoken opinion of one individual retail investor and America citizen and consumer. ...funfun..

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