GM CEO should learn from past Hill debacles – USA TODAY
When General Motors CEO Mary Barra takes her seat to testify before Congress this week about the automaker’s ignition switch recall crisis, she’d be wise to learn from the Capitol Hill mistakes of her predecessors.
Barra is set to testify before Congress on Tuesday and Wednesday, recalling images from the disastrous trip to Washington by the heads of Detroit’s automakers five years ago during the automotive crisis.
At that time, GM and Chrysler were begging for cash with the economy collapsing — and they were forced to stomach a barrage of searing rhetoric from members of Congress who were quick to slam the executives’ perceived arrogance and dwell on the companies’ mistakes. In the process, the members of Congress revealed their own deep lack of knowledge about the industry, all of it on display for the public.
The images of former GM CEO Rick Wagoner and former Chrysler CEO Bob Nardelli asking for bailouts and offering to work for a dollar — while Ford CEO Alan Mulally shunned government cash but kept his salary intact — became a defining moment in the auto industry’s darkest days.
For Barra, who became CEO in January, she must explain why GM took more than a decade to issue a recall of models with defective ignition switches that can turn a vehicle off while in motion, disabling its power steering and airbags.
Lesson No. 1 for Barra is simple: Be contrite. Admit your company has made mistakes and that people have died because of those mistakes. Recognize you are talking to the American people, not just lawmakers.
Barra, who said she only learned of the decade-old problem in December and the recall in January, has taken responsibility and issued apologies in interviews and public statements. Expect it to be part of her remarks before Congress, too.
“The auto industry has learned if you know something and try to cover it up, that’s the worst sin of all,” said David Cole, chairman emeritus of the Ann Arbor-based Center for Automotive Research. “Senior management knows you deal with a problem when you learn of it.”
Details of GM recalls
The company has already linked 31 crashes and 13 deaths to an ignition switch defect affecting 1.6 million small cars, including some Chevrolet Cobalts and Saturn Ions from the 2003 through 2007 model year.
“The public and the politicians are going to expect her to address that and expect to see some compassion,” said Matt Friedman, partner at Detroit area strategic communications firm Tanner Friedman.
On Friday the company added another 970,700 vehicles to its ignition switch recall because 5,000 of those vehicles in the 2008 through 2011 model-year may have had good switches replaced with bad ones. It marked the second time GM has expanded the recall.
Compounding the situation for GM is a fresh round of unrelated recalls that collectively threaten to distract from the string of new model hits and accolades from consumer groups and reviewers that the company has collected.
Late Friday, GM said it would recall nearly a half-million brand-new pickup trucks and SUVs. Earlier in the day, GM announced the recall of about 190,000 Chevrolet Cruze sedans for defects unrelated to the ignition switch issue.
Recalled pickups include the 2014 Chevrolet Silverado 1500 and GMC Sierra 1500 — GM’s best-selling vehicle line. Also being called in for repair are the 2015 Chevrolet Suburban, Chevy Tahoe, GMC Yukon and Yukon XL full-size SUVs with 6-speed transmissions. A problem with the transmission oil line could cause a fire. There have been three “incidents” reported and no injuries, GM said.
A new Chevy Cruze recall affects 2013-14 sedans equipped with the 1.4-liter turbocharged gasoline engine. The company said the vehicles need new right-front axle half shafts that “can fracture and separate without warning.”
STORY: GM recalls new pickups, SUVs
GM said the Cruze defect has affected at least “several dozen” vehicles, according to its own warranty data, but that it is not aware of any related crashes or injuries.
The additional recalls, just days before Barra’s trip to Washington, could provide her with evidence that GM is being more proactive in addressing quality concerns.
“I think it shows what the spotlight of public scrutiny and potential criminal penalties can do to enlighten General Motors,” said Joan Claybrook, a former NHTSA administrator and member of the board of directors of advocacy group Public Citizen which has been critical of GM. “It will show they are trying to be responsive. … It shows they are responding to public pressure.”
GM’s pending legal issues
Still, Barra has a legal problem that Wagoner, Nardelli and Mulally didn’t encounter.
GM is facing a flurry of lawsuits and investigations into the recall response, including a U.S. Justice Department probe that could lead to criminal penalties or civil fines approaching $1 billion.
She’ll have to avoid saying anything that could place GM in a precarious legal position.
Bankruptcy experts say the company’s legal shield against pre-bankruptcy liabilities could protect it from lawsuits, but that shield could dissolve if customers can prove that the company intentionally hid the defects while it was navigating Chapter 11 bankruptcy in summer 2009.
Barclays analysts have predicted that GM will resolve not to fight and decide instead to devote up to $1.5 billion to a settlement fund and another $1 billion to government fines.
Barra is arriving in Washington only a few months after the U.S. government sold its final GM stock, ending a controversial era that led critics to dub the company “Government Motors.”
Pressure is mounting for GM to reconsider its stance that the ignition switch vehicles can still be used safely as long as drivers remove all items from their keychains.
Sen. Richard Blumenthal, D-Conn., has been pressuring GM to instruct owners of the recalled small cars not to drive until they can be fixed — which may be as early as April and as late as October or later.
In a statement Friday, Blumenthal said: “To do the right thing voluntarily, GM should compensate all owners for injuries and damages, and tell them: Park your cars until they’re really, reliably repaired. For now, verify, and do not trust, these recalled cars,” Blumenthal said Friday in a statement.
Although political rhetoric attacking GM’s government ownership has largely subsided, it could bubble back to the surface during Barra’s testimony.
But Cole said he believes Barra won’t get caught in as many political crosshairs as her predecessors.
“This is not about an industry on the edge of a precipice and a defining moment that led to a lot of chaos,” he said. “There will certainly be politics in this but it is not the auto industry versus the world like it was five years ago.”
Instead, Cole predicted the focus of Tuesday’s hearing before a House committee and Wednesday’s hearing before a Senate committee will be to determine the origin of the problem, how it could have been detected and if anyone did anything wrong.
The lack of understanding of the complexity of the auto industry and technology in cars will still be a factor, Cole said.
“We have not done a good job of making sure people who make policy understand auto and manufacturing,” Cole said. They do not understand how hard it is to find a problem that happens infrequently, he added.
Automakers’ rocky congressional relationship
That lack of knowledge was on full display during the auto CEOs’ trip to Washington in late 2008, when the powerful quartet which also included then-UAW President Ron Gettelfinger, appeared before Senate and House committees seeking emergency financial assistance to simply meet payroll.
They were peppered with questions that showed some politicians did not realize the industry affects every town in every state that makes a part or has a car dealership, or that the loss of a major automaker would disrupt the supply chain and harm other automakers who use the same supplier.
What ensued was a clash of egos that left the high-powered auto executives deflated. The politicians decried CEO arrogance, even refusing at times to address the CEOs by their surnames.
Many legislators expressed the view that GM, Ford and Chrysler were architects of their own fate for mismanagement and failure to develop vehicles that could compete with foreign automakers on quality, cost and advanced fuel-efficient technologies. They also made it clear they thought the automakers lacked viable turnaround plans and would squander any aid they received. The companies were often compared, unfavorably, to their Japanese competitors.
A low point in the November 2008 hearings came when politicians learned the CEOs had arrived on their respective corporate jets seeking $25 billion.
“Couldn’t you all have downgraded to first class or jet-pooled or something to get here?” asked Michael Capuano, a Democrat from Massachusetts. When they returned for more hearings in December of that year, they drove.
Mary Barra is her own person
Barra will be flying commercial to Washington to testify, GM spokesman Greg Martin said.
Perhaps more important than her method of travel to D.C. is her demeanor when she gets there.
Cole said she should not have as much difficulty as the ex-CEOs. because she is not directly tied to the issue.
“What Mary will do is be Mary. She is not a skilled orator but is an honest and straightforward person,” Cole said. She will have been well-prepared and her personality and gender might diffuse some of the attacks, he said.
Barra will have to strike a balance between being apologetic while also assuring Washington that GM will fix its broken recall response process and that the company is no longer making huge quality blunders.
“The PR playbook — if it’s followed, where there’s candor and there’s transparency and there’s humanity, then I think there’s a chance they’ll move forward,” said Friedman. “One of the great qualities she seems to have is she’s very relatable. If that can carry through into the testimony, that could help.”
Contact Nathan Bomey at firstname.lastname@example.org or follow him on Twitter @NathanBomey.