News reports have not been kind to General Motors of late. Its new CEO, Mary Barra, seems to be spending most of her time being harangued by members of Congress for the company's failure to report problems with GM cars.
Looking up from the newspaper yesterday, the Significant Other posed an excellent question.
"Did somebody say, 'Let's set her (Mary Barra) up to be the fall person on this thing'?" he asked.
In fact, the GM problems arose long before Ms. Barra took her recent position.
Legislators got hold of a 2005 internal document in which GM managers decided against a recall to replace a faulty 90-cent ignition part, an action that would have prevented more than a few of the 13 deaths ascribed to the problem.
Ms. Barra took the reins at GM in January of this year.
Corporations compile audited financial reports at the end of every year; such filings are required to acknowledge potential liabilities if they are material. These statements are shared with the SEC and with shareholders. In addition, GM filed for bankruptcy in 2009 and was sold to another entity whose shareholders were its unions and the US government. Companies in bankruptcy are required to enumerate liabilities as part of their filings or face prosecution for bankruptcy fraud.
Long story short, this information should have been made public long ago.
So why is it coming up now, three months into Ms. Barra's presidency?
Surely GM's past corporate officers and board members read those financial documents. Large shareholders should have read them as well. So, for that matter, should have journalists covering the auto industry.
So what is it? Were the potential liabilities never reported on financial statements, or did a bunch of people who should have been paying attention drop the ball?
If I were a member of Congress, those are the questions I'd want answered.
Ms. Barra is making the usual CEO noises, saying she was unaware of the company's failure to act. She said the failure was "unacceptable" and that, today, GM has a brand new, totally different culture than it had in the bad old days.
Toyota
Just last week, Toyota agreed to pay $1.2 billion in criminal fines based on its handling of an unintended acceleration problem, in addition to recalling 8.1 million vehicles since 2009 over the alleged problem.
I say "alleged" because the problem boiled down to dealership misplacement of floor mats in two cars, causing five deaths, and a bunch of accidents caused by drivers who mistook the accelerator for the brake pedal.
The Toyota fine was for covering up information.
Eric Holder, the US Attorney General, held a press conference after the announcement. Here's some of what he said:
"Today, we can say for certain that Toyota intentionally concealed information and misled the public about safety issues behind these recalls. Put simply, Toyota's conduct was shameful."
It will be interesting to see what punishment the Justice Department exacts for what appears to be a much broader malfeasance by an American automaker, particularly one that was bailed out at government expense.
Note: Micheline Maynard, the renowned journalist on automotive issues, also has floated the notion in Forbes that Mary Barra may have been set up to take the fall at GM. Since most of my readers do not read Ms. Maynard's reports and since I came up with the idea at the same time, I'm going with it.
How many previous GM CEO's are now breathing easy in their retirement or new job knowing that Ms. Barra is taking the fall for them? Also, ridiculous that Toyota had to deal with the problems created by idiots.
ReplyDeleteJane,
ReplyDeleteHere's the "money quote", for me, from this TTAC blog post http://tinyurl.com/k73murf
"As for where Barra was during the 14 years it took for the recall to surface, Forbes wove her 34-year-long résumé with General Motors into the recall timeline. In short: Barra would have been made aware of the ignition switch problem as early as 2011, when then-CEO Dan Akerson made her head of global product development, yet it was only in December of 2013 — when the torch was passed from Akerson to Barra — when the new CEO was presented with an analysis of the issue linked to the Chevrolet Cobalt; the recall decision would be presented to Barra by product development chief Mark Reuss at the end of January 2014."
TTAC and other car blogs have had a number of posts on Barra and the recall. To me it seems she could not have been unaware of the problem.
Again, imho, the old GM deserved to go completely under. "Lifers" like Barra did not it serve GM, its employees, or the buying public well.
Plus I'm still burned that the Obama administration burned the bond holders and made the unions whole... I cannot fathom how he and his cronies have escaped jail time over just that one, of many, illegal acts. What a feckless society we've become...
Thanks, gnossos. Interesting article and website.
ReplyDeleteHere's another bit from TTAC's article:
"Meanwhile, Bloomberg reports the task force appointed by the Obama administration to manage GM's bankruptcy proceedings were not made aware of the out-of-spec ignition and subsequent reports linked to its failure. The task force spent more time focusing on what brands needed to be cut and how pensions and health care would be handled...."
On the one hand, it appears that GM was deceptive in its bankruptcy declarations; on the other, the government group wasn't particularly interested in potential contingent liabilities.