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

It's an exhaustive report on GM's failures, but critics say it still leaves big questions unanswered.

Jun 8, 2014 at 11:05AM


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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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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