[Senate Hearing 113-715]
[From the U.S. Government Publishing Office]
S. Hrg. 113-715
EXAMINING ACCOUNTABILITY AND CORPORATE CULTURE IN WAKE OF THE GM
RECALLS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT SAFETY, AND INSURANCE
of the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JULY 17, 2014
__________
Printed for the use of the Committee on Commerce, Science, and Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
JOHN D. ROCKEFELLER IV, West Virginia, Chairman
BARBARA BOXER, California JOHN THUNE, South Dakota, Ranking
BILL NELSON, Florida ROGER F. WICKER, Mississippi
MARIA CANTWELL, Washington ROY BLUNT, Missouri
MARK PRYOR, Arkansas MARCO RUBIO, Florida
CLAIRE McCASKILL, Missouri KELLY AYOTTE, New Hampshire
AMY KLOBUCHAR, Minnesota DEAN HELLER, Nevada
MARK BEGICH, Alaska DAN COATS, Indiana
RICHARD BLUMENTHAL, Connecticut TIM SCOTT, South Carolina
BRIAN SCHATZ, Hawaii TED CRUZ, Texas
EDWARD MARKEY, Massachusetts DEB FISCHER, Nebraska
CORY BOOKER, New Jersey RON JOHNSON, Wisconsin
JOHN E. WALSH, Montana
Ellen L. Doneski, Staff Director
John Williams, General Counsel
David Schwietert, Republican Staff Director
Nick Rossi, Republican Deputy Staff Director
Rebecca Seidel, Republican General Counsel and Chief Investigator
------
SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT SAFETY,
AND INSURANCE
CLAIRE McCASKILL, Missouri, DEAN HELLER, Nevada, Ranking
Chairman Member
BARBARA BOXER, California ROY BLUNT, Missouri
MARK PRYOR, Arkansas KELLY AYOTTE, New Hampshire
AMY KLOBUCHAR, Minnesota DAN COATS, Indiana
RICHARD BLUMENTHAL, Connecticut TED CRUZ, Texas
BRIAN SCHATZ, Hawaii DEB FISCHER, Nebraska
CORY BOOKER, New Jersey
C O N T E N T S
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Page
Hearing held on July 17, 2014.................................... 1
Statement of Senator McCaskill................................... 1
Statement of Senator Heller...................................... 2
Statement of Senator Klobuchar................................... 18
Statement of Senator Blunt....................................... 20
Statement of Senator Blumenthal.................................. 21
Statement of Senator Thune....................................... 42
Statement of Senator Ayotte...................................... 46
Statement of Senator Markey...................................... 49
Statement of Senator Boxer....................................... 51
Letter dated July 8, 2014 to Hon. Chuck Schumer from Lee R.
Godown, Vice President, Global Government Relations,
General Motors Company..................................... 51
Letter dated June 26, 2014 to Hon. Chuck Schumer from Lee R.
Godown, Vice President, Global Government Relations,
General Motors Company..................................... 52
Article dated June 18, 2014 from Bloomberg Businessweek
entitled ``GM Recalls: How General Motors Silenced a
Whistle-blower.''.......................................... 53
Article dated July 15, 2014 from The New York Times entitled
``Documents Show General Motors Kept Silent on Fatal
Crashes''.................................................. 64
Witnesses
Hon. Tammy Baldwin, U.S. Senator from Wisconsin.................. 23
Kenneth R. Feinberg, Founder and Managing Partner, Feinberg Rozen
LLP............................................................ 3
Prepared statement........................................... 5
Michael P. Millikin, Executive Vice President and General
Counsel, General Motors Company................................ 25
Prepared statement........................................... 27
Mary T. Barra, Chief Executive Officer, General Motors Company... 28
Prepared statement........................................... 29
Rodney O'Neal, Chief Executive Officer and President, Delphi
Automotive PLC................................................. 30
Prepared statement........................................... 32
Anton R. Valukas, Chairman of the Firm, Jenner & Block LLP....... 33
Prepared statement........................................... 34
Appendix
Letter dated July 29, 2014 to Senator Edward J. Markey from
Rodney O'Neal, Chief Executive Officer and President, Delphi
Automotive PLC................................................. 89
Letter dated July 29, 2014 to Senator Richard Blumenthal from
Rodney O'Neal, Chief Executive Officer and President, Delphi... 107
EXAMINING ACCOUNTABILITY
AND CORPORATE CULTURE IN WAKE
OF THE GM RECALLS
----------
THURSDAY, JULY 17, 2014
U.S. Senate,
Subcommittee on Consumer Protection, Product
Safety, and Insurance,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:02 a.m. in
room 253, Russell Senate Office Building, Hon. Claire
McCaskill, Chairman of the Subcommittee, presiding.
OPENING STATEMENT OF HON. CLAIRE McCASKILL,
U.S. SENATOR FROM MISSOURI
Senator McCaskill. All right. This hearing will come to
order. Today we revisit the tragic management failures at
General Motors that killed people. First, I want to acknowledge
in my opening remarks that from my viewpoint the CEO of General
Motors, Mary Barra, has stepped up and, with courage and
conviction, has confronted head-on the problem and the
corporate culture that caused it. Some see the record number of
recalls at General Motors as a problem. I see it as a good
sign.
Second, I want to briefly say that I think I speak on
behalf of all Members of Congress who have asked very difficult
questions surrounding these tragic events that while we are
asking tough questions, we have great respect for the workers
of General Motors. I would like to take this moment to thank
the workers at General Motors. You are terrific, you build good
cars, and you are also the victims of outrageously incompetent
management. Management was the problem here, not the workers.
The Valukas Report I have spent some time with. I find it
thorough and damning. There was indifference, incompetence and
deceit among engineers in positions of important
responsibility. And second, it is very clear that the culture
of lawyering up and whack-a-mole to minimize liability in
individual lawsuits killed innocent customers of General
Motors.
I have many questions about the failures of the legal
department today. I am also interested today in hearing from
Mr. Feinberg, who has been asked to put together a plan to
compensate those who have suffered from these management
failures. He is here independently of the witnesses from
General Motors. He is appearing independently of the witnesses
of General Motors, and he will exert independence in his role
as he makes decisions about compensation to the many people who
have suffered, and I certainly thank him for being here today
in that regard.
But perhaps I am even more interested today in
understanding how, in the aftermath of this report, how in the
world in the aftermath of this report, did Michael Millikin
keep his job. I do not understand how the general counsel for a
litigation department that had this massive failure of
responsibility, how he would be allowed to continue in that
important leadership role in this company, and the questions I
ask today will be surrounding what he knew and why he didn't
know it and what kind of direction did he give a legal
department that would allow them to do nothing in the face of
the evidence they were confronting over years of litigation by
people who were trying to get the attention of General Motors
about the fatal defect in the product they were selling.
Senator Heller?
STATEMENT OF HON. DEAN HELLER,
U.S. SENATOR FROM NEVADA
Senator Heller. Chairman McCaskill, thank you, and I would
like to thank the witnesses who are here today for both
hearings, and also thank Chairman McCaskill for this second
hearing on General Motors.
Today, based on the findings of the Valukas Report, we can
confirm that this is, in fact, one of the darkest chapters in
the history of General Motors. An ignition switch supplied by
Delphi was approved by GM even though it failed to meet GM's
own standard specification for torque resistance. Due to these
failures, the ignition switch would slip from ``Run'' to
``Accessory'' with little more than a knee hitting the key or
the car driving over a bump. The car's power shut off while it
was being driven.
I have raced cars my entire life. I will tell you, even for
the most experienced drivers, there is nothing more terrifying
than a loss of power while moving at high speeds. I can only
imagine the sheer terror of the individual who was driving
these vehicles the moment the ignition slipped out of ``Run.''
What those drivers didn't know as their cars swerved across
lanes, hit walls, inclines, ravines and trees, was that the one
thing that could have saved their life, the airbag, was not
going to deploy because the power to the airbag itself was shut
off.
If--and this is a big if--after a few crashes General
Motors was able to understand the ignition switch problem, many
more lives could have been saved. But as the Valukas Report
points out, group after group, committee after committee within
GM failed to take action, or acted too slowly for over a
decade.
Two critical factors have been identified as reasons for
this. First, GM failed to understand how its cars were built.
Let me repeat that. GM failed to understand how its cars were
built. Incredibly, the official findings pin the blame for the
delay to recall this car on the fact that GM didn't understand
how its own car was built.
Second, the same engineer who approved the original
ignition switch changed the part in 2006 and did not inform any
person at GM and did not change the part number. People died
and millions more were put at risk because GM didn't understand
its own car, and one engineer cut corners and then changed the
torque on the part without telling anybody or, again, changing
the model number.
Fifty-four frontal impact crashes and more than a dozen
fatalities later, we find ourselves here this morning for our
second hearing on this issue. It is truly a dark chapter in the
history of General Motors. What we need to do today is to make
sure that the Valukas Report is the full story. Is the Valukas
Report accurate? Is it the definitive account of this matter,
or are there missing pieces?
The CEO of Delphi is with us today, and it's my hope that
he will help this subcommittee understand if there's additional
information that provides us with more of a complete picture. I
hope his testimony today will be forthcoming and not circle the
wagons.
We need to know what happened here, and Delphi has a
responsibility to the families and the survivors to provide a
complete picture. If Delphi knows more than the Valukas Report
identified or believes there are inaccuracies, now is the time
to make those known.
The Valukas Report offers a strong timeline of the issues,
but I have concerns that it may not paint the entire picture.
I'd like to explore whether Delphi was fully cooperative. In
the Valukas Report it states that Delphi had numerous documents
and other relevant material that they did not supply.
Madam Chairman, I appreciate that we're holding this
hearing. Nevadans and all Americans deserve to know that for
over a decade General Motors and Delphi failed to demonstrate a
basic level of corporate competence. There will be a discussion
regarding whether changes of laws are necessary. However, if GM
understood how their own cars worked and followed current legal
obligations to report defects to NHTSA in a timely manner,
lives would have been saved and we would not be here today.
Thank you, Chairman McCaskill.
Senator McCaskill. Thank you, Senator Heller.
Our first witness today is, in fact, and our first panel
consists entirely of Kenneth Feinberg and Ms. Barra, who are in
charge of the fund that will compensate many of the people who
have suffered tragically as a result of GM's failures, and we
look forward to your testimony, and thank you very much for
being here, Mr. Feinberg.
STATEMENT OF KENNETH R. FEINBERG, FOUNDER AND MANAGING PARTNER,
FEINBERG ROZEN LLP
Mr. Feinberg. Thank you. I want to thank the Chair for her
vigorous leadership in this matter. I want to thank all the
members of this subcommittee. I particularly want to thank
Senator Blumenthal and his staff. They provided some valuable,
constructive suggestions as to what this protocol should look
like. And indirectly, I must thank Senator Blunt, indirectly,
because Senator Blunt was critically important and very
instrumental in the design and administration of the 9/11
Victims Compensation Fund, which proved to be a precedent for
much of what is in this protocol, and I want to publicly thank
Senator Blunt for his work many years ago in the drafting of
the 9/11 Victim Compensation Fund.
I am accompanied by Ms. Camille Biros who over the last 35
years has worked at my side in the drafting, design, and
administration of the 9/11 Fund, the BP Oil Spill Fund, OneFund
Boston Marathon, the Virginia Tech Hokie Spirit Memorial Fund,
et cetera. She is also here to answer any questions that the
Committee might have about the administration of this program.
It's a bit premature to be talking about this program
because we do not begin receiving claims until August 1, a few
weeks from now. We are right on track. This protocol will form
the basis for the submission of claims. I thank lawyers around
the country for their input as to what this fund might look
like. I thank various non-profit foundations interested in
automotive safety for their input. And I also must say, in line
with what the Chair said, I thank General Motors. From the top
down, they have been very helpful and constructive in drafting
this protocol.
This compensation protocol, however, is entirely my
responsibility. I don't think there is anybody who provided us
input who is entirely satisfied with all aspects of the
protocol. The perfect is the enemy of the good, and we will
see, but I am optimistic that, as the Chair pointed out in her
introductory comments, we will compensate the innocent victims
of this tragedy. That's the purpose of the protocol, and I am
confident that it will succeed.
Now, we begin August 1. Claims can be submitted for the
next 5 months, through December 31. We will stay in active work
into 2015 processing claims that may come in late in the year.
We're not going to disappear on December 31. So we'll stick
around.
But there are some very interesting features of this
protocol, of this compensation program that I can highlight in
1 minute.
It is uncapped. We are authorized to pay as much money as
is required through the processing of eligible claims.
The bankruptcy of GM is no barrier to compensation. If
there were accidents that occurred before the bankruptcy, they
are as eligible as accidents that occurred after the
bankruptcy.
There are some people who already settled their claim years
ago with General Motors and signed a release that they won't
sue. They can come into this program. And if, under our
compensation rules, they are entitled to additional
compensation, they will be paid.
The contributory negligence of the driver--speeding, cell
phone texting while driving, intoxication--irrelevant. We are
not looking at the driver or the circumstances of the driver's
negligence. We are looking at the automobile and only at the
automobile to determine whether or not the defective ignition
switch was the proximate cause of the accident.
So you never know on these programs. We have our fingers
crossed. We are very cautiously optimistic. We build on the
success of past similar programs. I believe that beginning
August 1 we will be ready, as the Chair and others have
insisted, to begin receiving claims. We are finalizing the
documentation which we will deliver to the Subcommittee. But we
will be ready to receive claims. We will pay those claims
within 90 to 180 days after the claims are deemed substantially
complete.
And finally, we have a very pervasive notice program to
reach out to all eligible claimants, all those who think they
might be eligible. We are determined to reach every driver or
injured victim to make sure they know of this program, and we
are confident that the program will work as intended.
Thank you.
[The prepared statement of Mr. Feinberg follows:]
Prepared Statement of Kenneth R. Feinberg, Founder and Managing
Partner, Feinberg Rozen LLP
Distinguished Members of the Subcommittee:
We thank you for this opportunity to testify and explain the
important features and benefits of the ``GM Ignition Compensation
Claims Resolution Facility, FINAL PROTOCOL'' (a copy of which is
attached to my formal written remarks and which I respectfully request
be included in the final record of this hearing). I am accompanied at
the witness table by my colleague, Ms. Camille Biros, who has worked
with me in the administration of this Compensation Program, and all
other compensation programs going back to the 9/11 Victim Compensation
Fund, the BP Gulf Coast Claims Facility and other similar programs.
This Final Protocol, and our remarks here today, are designed to
explain the Program about to be put in place for the ``Compensation of
Certain Death and Physical Injury Claims Pertaining to the GM Ignition
Switch Recall.'' I will summarize my formal written testimony and we
will then be prepared to answer any questions posed by Members of the
Subcommittee.
We thank a number of individuals and entities for their assistance
and valuable input in our preparation of the Final Protocol. Although I
doubt that any of them are completely satisfied with the Protocol in
all particulars, they have contributed in very important ways in
guiding our thinking when it comes to the design of the Compensation
Program. Individual plaintiff lawyers, non-profit entities devoted to
automobile safety and GM officials themselves, have all made
constructive and valuable suggestions and recommendations concerning
the Program.
But we emphasize here today that the Final Protocol and resulting
Compensation Program are entirely and solely our responsibility. We,
and we alone, defend the terms and conditions of the Program discussed
here today. We stand behind the Program ready to defend it.
The most important features of this Compensation Program can be
summarized as follows:
The Program we have designed and will administer is totally
independent from GM. As the Protocol expressly spells out, any
final determinations concerning individual claims for
compensation, and the amount of such compensation, cannot be
challenged or appealed by GM. The decision we reach--exercising
our ``sole discretion''--is final and binding on GM.
The scope of the Compensation Program is limited to
individual deaths and physical injuries. Claims for economic
damage to the automobile itself, e.g., property damage or
diminished resale value of the automobile, are not included
within the scope of this Final Protocol.
The Compensation Program is purely voluntary; no individual
is required to participate in the Program.
There is no aggregate cap on the amount of compensation GM
will make available to eligible claimants pursuant to this
Compensation Program. Whatever the total amount of
compensation, GM has agreed to pay it.
The previous GM bankruptcy will not pose a legal barrier to
any claimant submitting a claim for death or physical injury
pursuant to this Program. Whether the unfortunate accident
occurred before or after the GM bankruptcy is irrelevant. The
claim will be considered on its own merits without regard to
any GM bankruptcy date.
Individual claimants who previously settled their claims
with GM before learning of the defective ignition switch
problem will be permitted to reopen their claims, and seek
additional compensation from this new Program if the calculated
amount under the Program exceeds the earlier settlement amount.
The contributory negligence of the driver, e.g.,
intoxication, speeding, cell phone use while driving, etc., is
completely irrelevant in the processing of individual claims
pursuant to this Protocol. We are focusing on the causal
connection between the defective ignition switch and the
accident; the conduct of the driver will not enter into our
deliberations in any way.
Nor is the Compensation Program limited to the driver of the
vehicle; passengers, pedestrians and occupants of other
vehicles involved in the accident are also eligible to file
individual claims.
An individual claimant must agree not to litigate against GM
only after such claimant learns whether the filed claim is
eligible and, if so, the amount of compensation. In effect, the
claimant receives a ``free preview'' of the claim before
deciding whether to forego the right to litigate in favor of
immediate compensation.
The Compensation Program will begin receiving individual claims in
just a few weeks, beginning August 1, 2014. Individual claimants will
have until the end of the year, December 31, 2014, to submit claims.
(We will continue our work into 2015 to complete the review and
determination of all claims which are timely filed by the deadline.)
Our goal is swift and certain compensation with minimal cost and
delay to the claimant. Once we deem the individual claim and
accompanying required documentation ``substantially complete,''
payments will be made within 90 days for the straightforward claim or
180 days for the more complex claim. (Compare this timeline with the
cost, delays and uncertainties of the courtroom.)
The earlier a claim is submitted beginning August 1, the quicker we
can process the claim and determine both eligibility and the amount of
compensation. And, as the Final Protocol makes clear, we will work
closely with the claimant to cure any deficiencies found in the
submitted claim. Our objective is to pay all eligible claimants as soon
as possible; we will work with the claimant to try and do so.
When it comes to eligibility to file a claim, there are three
important prerequisites:
The accident must involve an ``eligible vehicle,'' as
defined and listed on page 3 of the attached Final Protocol.
This constitutes the exclusive list of vehicles involved in
this Compensation Program. According to GM, these are the only
vehicles involved in the recall of 2.6 million automobiles in
which the circumstances surrounding the defective ignition
switch justify the creation of this unique Compensation
Program. Neither Ms. Biros nor I have any authority to expand
this list to other vehicles or other recalls. As with the 9/11
Victim Compensation Fund and the BP Gulf Coast Claims Facility
Program, our jurisdiction has been defined by others.
Individual claims are ineligible for compensation if the
facts and circumstances of the accident demonstrate the
deployment of any airbag and/or the deployment of seatbelt
pretensioners during the accident. This is because in such
situations automobile power continues to function and the
airbags and seatbelts work as designed; the ignition switch
remains in the ``on'' position and cannot be the cause of the
accident.
The ignition switch defect in an eligible vehicle must be
the ``proximate cause'' of the death or physical injury. This
is a standard of proof well known to all lawyers. Evidence of
this ``proximate cause'' link between ignition switch failure
and the accident might include, by way of example: an
examination of the automobile itself; a review of the ``black
box'' data providing contemporary evidence of such failure;
photographs of the accident scene; a contemporary police
accident report; contemporary witness statements; contemporary
insurance investigative reports and medical records; warranty
and maintenance records confirming mechanical problems with the
vehicle prior to the accident; and prior litigation
depositions, written interrogatories and other similar
information. We will work with individual claimants and their
lawyers in an effort to satisfy this familiar legal standard of
causation.
Once eligibility is determined, the Final Protocol recognizes three
categories of individual claims for compensation:
Individual Death Claims.
Catastrophic Physical Injury Claims involving quadriplegic
and paraplegic injury, double amputation, permanent brain
damage or pervasive burns.
Other Physical Injury Claims requiring overnight
hospitalization or outpatient medical treatment within 48 hours
of the automobile accident.
The calculation of compensation for the first two claim categories
listed above--death or catastrophic physical injury--will be made
either based upon standard national Federal agency valuation statistics
or the individual ``extraordinary circumstances'' of the claimant. The
choice is up to the claimant. These are the same two options which
guided us in the successful design and administration of the
9/11 Victim Compensation Fund.
When it comes to hospitalization of the less seriously physically
injured, the Final Protocol simply provides a flat amount of
compensation tied to the number of overnight stays in the hospital,
ranging from $20,000 (one night in the hospital) to $500,000 (at least
32 overnight stays). Hospitalization is an accurate reflection of
seriousness of physical injury. Alternatively, outpatient medical
treatment is also compensated up to $20,000. This flat amount ``rough
justice'' approach relies on such previous precedents as the One Fund
Boston marathon bombings compensation program and the Virginia Tech
Hokie Spirit Memorial Fund.
In either case, the Final Protocol requires hospitalization and/or
outpatient medical treatment within 48 hours of the accident.
The goal here is simple and straightforward--we want to concentrate
our immediate efforts in determining both eligibility and compensation
on behalf of those who have suffered the most grievous loss as a result
of the accident. There is no substitute for distributing compensation
as quickly and efficiently as possible. We have learned this from our
previous work in designing and administering compensation funds.
In order to avoid delay and inefficiency, it is important to
emphasize speed and similar compensation for similar physical injuries
which do not rise to the level of death or catastrophic injury. The
bulk of our time should be spent determining eligibility and
calculating individual damages tailored to those families who have lost
loved ones, or those victims who now confront life-altering
catastrophic physical injury. We must not be diverted in this task by
focusing on less serious physical injuries in which we would be asked
to evaluate extensive medical records and hospital reports.
As already indicated, both Ms. Biros and I will begin receiving
individual claim submissions on August 1, 2014. We have initiated a
comprehensive, pervasive notice campaign designed to notify all 2.6
million individuals subject to the relevant GM recall program. In
addition, we are reaching out and notifying all former owners of
eligible vehicles included in this Compensation Program in an effort to
determine whether they, too, may have been involved in an accident
involving such vehicles. Our goal is to encourage all eligible
claimants to file a claim pursuant to this Compensation Program as soon
as possible.
We cannot compensate eligible claimants unless they file a claim.
More information can be found about the Compensation Program by
telephoning Toll-Free 1-855-382-6463 (in the U.S. and Canada), and 01
800-111-2140 (in Mexico) or by accessing the Compensation Program
website at: http://www.gmignitioncompensation
.com/index.
This completes my formal testimony and we welcome questions from
the distinguished Members of this Subcommittee.
______
June 30, 2014
GM Ignition Compensation Claims Resolution Facility FINAL PROTOCOL for
Compensation of Certain Death and Physical Injury Claims Pertaining to
the GM Ignition Switch Recall
I. Purpose
General Motors LLC (``GM'') issued safety recalls identifying a
defect in the ignition switch of certain vehicles in which the ignition
switch may unintentionally move from the ``run'' position to the
``accessory'' or ``off'' position (``the Ignition Switch Defect'').
This Protocol outlines the eligibility and process requirements for
individual claimants to submit and settle claims alleging that the
Ignition Switch Defect caused a death or physical injury in an
automobile accident.
The effective date of the Final Protocol is August 1, 2014.
A. Role
GM asked Kenneth R. Feinberg to develop and design a Protocol for
the submission, evaluation, and settlement of death or physical injury
claims allegedly resulting from the Ignition Switch Defect. The
resulting Protocol creates a Claims Resolution Facility (``the
Facility'') under which the independent Administrator, Mr. Feinberg,
will process and evaluate claims to determine: a) whether the submitted
claim meets the eligibility requirements, and b) the compensation to be
paid for eligible claims as defined below.
GM has authorized the Facility to process only eligible claims
involving death or physical injury. No other claims for economic injury
or other allegations of damage are subject to this Protocol.
Participation in the Facility is completely voluntary and does not
affect any rights the claimant may have until and unless the claimant
accepts the compensation amount and signs a release.
B. Approach
The following non-exclusive principles apply to the operation of
this Protocol:
The Facility will evaluate claims submitted with the
required documentation in a prompt and fair manner.
Any documentation already submitted by individuals to GM in
support of death or physical injury claims allegedly resulting
from the Ignition Switch Defect will be transferred to the
Facility consistent with this Protocol.
GM has agreed that a substantially complete submission of an
individual claim pursuant to this Protocol will toll the
statute of limitations on any potential death or personal
injury claim that the claimant has related to the Ignition
Switch Defect (1) until the Facility renders a decision
rejecting the submitted claim or (2) until the claimant rejects
the Facility's offer to settle the claim or the settlement
offer becomes null and void.
Acceptance of payment from the Facility will require the
execution of a full release of liability, as discussed below.
The Facility is administered by Mr. Feinberg, a neutral fund
Administrator responsible for all decisions relating to the
administration, processing, and evaluation of claims submitted
to the Facility.
II. Eligibility Requirements
The only claimants that can submit claims to the Facility are: a)
the individual physically injured in the accident, or b) the Legal
Representative (as defined below) of the decedent or the individual
physically injured in the accident.
Claims submitted by insurance companies seeking reimbursement for
payments made to individual claimants are ineligible pursuant to this
Protocol.
The ``Legal Representative'' of the decedent or the individual
physically injured in the accident shall mean: (1) in the case of a
minor, a parent or legal guardian authorized under law to serve as a
minor's legal representative; (2) in the case of a decedent, the
spouse, descendant, relative or other person who is authorized by law
to serve as the decedent's legal representative; and (3) in the case of
an incompetent or legally incapacitated individual, a person who has
submitted proof to the Facility that such person has been duly
appointed in accordance with applicable law.
For a claimant to be eligible for compensation under the Protocol
(``Eligible Claimants''), the following eligibility requirements must
be met:
A. The individual on whose behalf the claim is filed must have been
the driver, a passenger, a pedestrian, or the occupant of
another vehicle, in an accident involving one of the following
categories of vehicles (``Eligible Vehicle''):
Production Part Vehicles (Ignition Switch Recall Repair was not
Performed Prior to the Accident)
Chevrolet Cobalt (Model Years 2005-2007)
Chevrolet HHR (Model Years 2006-2007)
Daewoo G2X (Model Year 2007)
Opel/Vauxhall GT (Model Year 2007)
Pontiac G4 (Model Years 2005-2006)
Pontiac G5 (Model Year 2007)
Pontiac Pursuit (Model Years 2005-2006)
Pontiac Solstice (Model Years 2006-2007)
Saturn Ion (Model Years 2003-2007)
Saturn Sky (Model Year 2007)
Service Part Vehicles (Ignition Switch was Replaced by a Dealer or
Independent Service Center with an Ignition Switch bearing Part Number
10392423)
Chevrolet Cobalt (Model Years 2008-2010)
Chevrolet HHR (Model Years 2008-2011)
Daewoo G2X (Model Years 2008-2009)
Opel/Vauxhall GT (Model Years 2008-2010)
Pontiac G5 (Model Years 2008-2010)
Pontiac Solstice (Model Years 2008-2010)
Saturn Sky (Model Years 2008-2010)
B. The accident must have occurred prior to December 31, 2014. In
addition:
1. If the accident involved an Eligible Production Part Vehicle,
the Ignition Switch Recall Repair \1\ was not performed
prior to the accident; or
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\1\ Ignition Switch Recall Repair is defined as a repair performed
by a dealer or independent service center to address the recall
condition set forth in National Highway Traffic and Safety
Administration Recalls 14V-047 and 14V-171.
2. If the accident involved an Eligible Service Part Vehicle, (a)
the vehicle's ignition switch was replaced by a dealer or
independent service center with an ignition switch bearing
Part Number 10392423 and (b) the accident occurred after
such replacement of the ignition switch and prior to the
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Ignition Switch Recall Repair.
C. Any individual claim submitted to the Facility shall be deemed
ineligible if the facts and circumstances of the accident
demonstrate the deployment of any airbag during the accident
and/or the deployment of seatbelt pretensioners during the
accident.
D. There are three categories of individual claims for physical
injury/death which may be submitted pursuant to this Protocol.
Claims for physical injury must provide contemporaneous
documentation of either overnight hospitalization or outpatient
medical treatment within 48 hours of the accident. The
following are the three categories:
1. Individual Death Claims
2. Category One Physical Injury Claims: claims involving
quadriplegic injury, paraplegic injury, double amputation,
permanent brain damage requiring continuous home medical
assistance, or pervasive burns encompassing a substantial
part of the body.
3. Category Two Physical Injury Claims: claims, other than
Category One Physical Injury Claims, that, within 48 hours
of the accident, require either overnight hospitalization
of one or more nights or, in extraordinary circumstances as
determined on a case by case basis by the Administrator,
outpatient medical treatment.
E. No claim shall be eligible unless, after reviewing all of the
information submitted as required herein, the Facility
determines, in its sole discretion, that the Ignition Switch
Defect in an Eligible Vehicle was the proximate cause of the
death or physical injury. The Facility will not take into
account any contributory negligence of the claimant in making
this determination.
III. Methodologies For Calculating Compensation
To determine the amount of compensation to be paid to Eligible
Claimants the Facility will use the following calculation
methodologies:
A. Individual Death Claims
Eligible Claimants submitting a death claim shall voluntarily elect
to receive compensation based on one of the following two tracks:
1. Track A--Presumptive Compensation
The Track A presumed methodology relies upon a combination of
the decedent's historical earnings and personal details with
assumptions of likely future events based upon multiple sources
of publicly available national data including the Bureau of
Labor Statistics and the Internal Revenue Service. Eligible
Claimants need not present detailed computations or analyses.
Instead, they only need to supply the Facility with the
following data:
decedent's historical earnings
decedent's employment benefits
decedent's age
age and status of members of the decedent's household who
are dependents of the decedent
This Track A presumed methodology ensures consistent economic
loss calculations for similarly situated victims (i.e., same
age, number of dependents and income level). Eligible Claimants
voluntarily choosing Track A will receive compensation within
90 days from the date that the Facility deems the submission of
the pertinent Claim Form and required supporting documentation
as ``substantially complete.'' In cases where a victim had
little or no earnings history, or in the case of calculating
the amount of compensation for minor children, the Facility
will calculate the economic loss by using the average income of
all wage earners in the U.S. for the year 2013.
2. Track B--Complete Economic Analysis
Track B entails a complete, comprehensive economic loss
analysis of the decedent's past, present and assumed future
income. The Facility will consider the financial history of the
decedent through incorporation of submitted individual income
data, including past, present and future earnings, wage growth,
work life expectancy, etc., as well as other case-specific
information and circumstances of the decedent that the claimant
believes the Facility should consider in determining the total
value of the claim. In determining the final Track B award, the
Facility will also consider information submitted by the
claimant regarding any extraordinary circumstances associated
with the claimant. In this manner, the Track B methodology
incorporates the individual circumstances of the decedent and
will require the submission of substantially more information
than for Track A. Eligible Claimants voluntarily choosing Track
B will receive compensation within 180 days from the date that
the Facility deems the submission of the pertinent Claim Form
and required supporting documentation ``substantially
complete.''
In addition to the economic loss compensation calculated
pursuant to Track A or Track B, each Eligible Claimant
submitting a death claim will receive the following uniform
amounts for non-economic loss (e.g., pain and suffering,
emotional distress, loss of consortium, etc.):
$1,000,000 for the death of the decedent, and
$ 300,000 for the surviving spouse, and
$ 300,000 for each surviving dependent of the decedent.
B. Individual Claims Involving a Category One Physical Injury
Economic loss compensation for individual claims involving a
Category One Physical Injury, as defined above, will be calculated in
the same way as Individual Death Claims under Track A or Track B, as
voluntarily selected by the Eligible Claimant.
Claims submitted pursuant to this Section will, in some cases, also
require the calculation of a long term life-care plan along with the
calculation of non-economic loss.
1. If the claimant chooses Track A (Presumptive Compensation), the
value of such a long term life-care plan will be presumed to be
the present value of the national average of such long term
life-care plans, which includes consideration of costs
associated with home assistance, therapy and transportation,
medical care, medications, equipment and supplies, home
modifications, etc. The amount of non-economic loss
compensation will be determined as an average fixed calculation
tied to the total cost of a proposed long term life-care plan
for an individual claimant.
2. If the claimant chooses Track B (Complete Economic Analysis), the
value of such a long term life-care plan will require the
submission of case-specific information corroborating the
individual circumstances of the claimant and the need for the
facility to take into account such circumstances, e.g., home
assistance, therapy and transportation, medical care,
medications, equipment and supplies, home modifications, etc.
The amount of non-economic loss compensation will be determined
by considering such case-specific factors as the nature and
extent of the injury, the lifestyle of the claimant and the
total cost of a proposed long term life-care plan for the
individual claimant.
The Facility will also provide non-economic loss compensation for
Eligible Claimants submitting a Category One Physical Injury Claim
where no long term life-care plan is required. Because the physical
injuries are so vastly different, and have significantly different long
term effects, the Facility will evaluate each individual Category One
Physical Injury Claim to determine the extent and nature of the injury
in order to establish non-economic loss.
C. Category Two Physical Injury Claims--Hospitalization of One or More
Nights or Outpatient Medical Treatment
Eligible Claimants who were physically injured and hospitalized
within 48 hours of the accident for one or more nights as a result of
the accident will receive the following compensation (encompassing both
economic loss and non-economic loss):
Hospitalization of no less than 32 overnights: $500,000.00
Hospitalization of 24 to 31 overnights: $385,000.00
Hospitalization of 16 to 23 overnights: $260,000.00
Hospitalization of 8 to 15 overnights: $170,000.00
Hospitalization of 2 to 7 overnights: $70,000.00
Hospitalization of 1 overnight: $ 20,000.00
Such hospitalization need not be on consecutive days and may be
cumulative if such subsequent hospitalization is documented to be the
result of the accident.
Eligible Claimants who were physically injured, but were not
hospitalized overnight because of extraordinary circumstances, will
receive up to a maximum of $20,000 for medical treatment resulting from
the accident, if such treatment commenced within 48 hours of the
accident. (This compensation encompasses both economic loss and non-
economic loss.) Any subsequent overnight hospitalization of such
Eligible Claimant for physical injuries as a result of the accident
will be compensated according to the number of nights of
hospitalization as outlined above for a Category Two Hospitalization
claim. However, the total compensation will not exceed the maximum
allocated amount of each hospitalization category shown above.
IV. Documentation Requirements
All individuals submitting a claim pursuant to this Protocol must
submit a completed Claim Form as provided by the Facility. Each
claimant must submit the documentation requested on the Claim Form, or
other similar information sufficient both to substantiate and determine
Protocol requirements, including eligibility requirements, and to allow
the Facility to review, process, and evaluate the submitted claim.
If the claim is being presented by an attorney or a Legal
Representative, then the attorney or Legal Representative will be
responsible for submitting the necessary documentation relating to the
represented decedent, minor, or incompetent or legally incapacitated
individual. Legal Representatives must supply proof of representative
capacity--such as a power of attorney, guardianship, appointment as
guardian or attorney ad litem, custodial parent, or the equivalent--as
is required to establish authority to act in a representative capacity
under the law of the resident state of the decedent, minor, or
incompetent or legally incapacitated individual.
The proof requirements for Eligible Claimants as defined above are
as follows:
A. All Claims
An official police report contemporaneous with the accident
date, if available, including any attachments, photos, or
supplemental reports.
Vehicle computer data captured by the vehicle's Event Data
Recorder and the Sensing and Diagnostic Module (``EDR''/
``SDM''), if available.
Information (preferably a Vehicle Identification Number
(VIN), if available) confirming that the vehicle involved in
the accident is an Eligible Vehicle.
Any other corroborating documentation deemed relevant by the
Facility.
B. Individual Death Claims
An official death certificate.
Documentation and proof requirements for past and future
loss of income and earnings pursuant to Track A or B as
appropriate, as well as any other non-economic loss
documentation evidencing extraordinary circumstances pursuant
to Track B.
Other pertinent financial information, and information and
documentation regarding the decedent's Legal Representative,
will be required with the filing of the Claim Form.
Any other corroborating documentation deemed relevant by the
Facility.
C. Category One Physical Injury Claims
Contemporaneous pertinent medical records describing the
nature of the serious physical injury and documenting
hospitalization within 48 hours of the accident, including
information concerning any total or partial disability of the
claimant.
Documentation and proof requirements for past and future
loss of income and earnings pursuant to Track A or B as
appropriate, as well as any other non-economic loss
documentation evidencing extraordinary circumstances pursuant
to Track B.
Other pertinent financial information may be required with
the filing of the Claim Form.
A proposed long term life-care plan, if appropriate.
Any other corroborating documentation deemed relevant by the
Facility.
D. Category Two Physical Injury Claims
Hospitalization: A contemporaneous hospital record that
confirms the following:
The date of hospitalization within 48 hours of the
accident.
The date of discharge from the hospital.
The nature of the injury; and
That the injury was sustained as a result of the
automobile accident.
Other Outpatient Medical Treatment: A contemporaneous
medical record that confirms the following:
The date of the outpatient medical treatment within 48
hours of the accident.
The nature of the injury and medical treatment; and
That the injury was sustained as a result of the
automobile accident.
In addition, claimants submitting documentation of
outpatient medical treatment shall also provide a description
of the extraordinary circumstances resulting in such outpatient
medical treatment rather than hospitalization.
Any other corroborating documentation deemed relevant by the
Facility.
Specific documentation and proof requirements will be defined on
the Claim Form. Additional documentation may be required, e.g.,
pertinent hospital and insurance records, etc.
V. Filing for Compensation
A. Equal Access and Fair Adjudications in the Claims Process
All claimants will be treated with respect, dignity, and fairness,
without regard to race, color, sexual orientation, national origin,
religion, gender, or disability. The Facility will manage the process
so that all claimants can equally access the Facility's claim
submission process so that claims will be adjudicated fairly.
Individuals with disabilities will be given the opportunity to
effectively communicate their claims and to request special process
accommodations to the Facility. Accommodations will be made for
individuals with language barriers to ensure that they will have
meaningful access to the process and to the Facility.
B. Process and Procedures
Eligible Claimants should file a pertinent Claim Form for: (1)
individual death claims, (2) individual claims involving a Category One
Physical Injury, or (3) individual claims involving a Category Two
Physical Injury. A single Claim Form should be submitted for each
Eligible Claimant.
This Protocol and pertinent Claim Forms will be available to all
interested parties beginning on August 1, 2014, the effective date of
this Protocol. The Claim Form should be completed and submitted to the
Facility (along with all required supporting documentation) postmarked
no later than December 31, 2014. Questions regarding the completion of
the Claim Form should be sent via e-mail to the Facility. (Contact
information will be provided on the Claim Form and on the Facility's
website.) The Facility will maintain and make available to claimants a
list of Frequently Asked Questions and responses. Claim Forms may be
obtained and submitted in any one of the following ways:
1. Via the Internet: Claimants may submit a claim online by visiting
the Facility website at www.GMIgnitionCompensation.com.
Claimants will be instructed to follow simple steps for
completing a claim.
2. Via U.S. Mail: Claimants may visit the Facility website and
download a copy of the Claim Form or call the Facility's toll-
free line to request a copy. Claimants will mail the completed
Claim Forms via U.S. Mail to:
GM Ignition Compensation Claims Resolution Facility
PO Box 10091
Dublin, OH 43017-6691
In order for the claim to be eligible for payment, all claimants
must consent to participate in the Facility and agree to be bound by
its terms, but shall not release any legal rights until an award is
determined, the claimant is notified, and the claimant accepts the
award and executes a binding Release. The Facility will work directly
with all claimants as reasonably requested to make sure that all claims
are submitted by the December 31, 2014 deadline.
A Claim Form filed for a decedent will require the spouse's
signature if the decedent was married at the time of death, if the
Legal Representative is a person other than the spouse, and if the
spouse is still alive and competent. In cases where the decedent was
not married, or where the spouse is no longer alive or competent, and
where the Legal Representative is a person other than the personal
representative legally responsible for administering the decedent's
estate, the personal representative of the decedent's estate must sign
the Claim Form. The decedent's Legal Representative will be responsible
for submitting a Proposed Distribution Plan to the Facility along with
the Claim Form, showing how any compensation from the Facility would be
allocated among the decedent's heirs, beneficiaries, and legatees
consistent with the law of the decedent's State of domicile, or with
any applicable ruling made by a court of competent jurisdiction. The
Legal Representative is responsible for ensuring that the decedent's
heirs, beneficiaries, and legatees are notified of the filing of the
claim and receive a copy of the Proposed Distribution Plan. All of the
decedent's heirs, beneficiaries and legatees must consent to
participate in the Facility and agree to be bound by its terms. Before
receiving any compensation from the Facility, the Legal Representative
of the decedent, as well as all of the decedent's heirs, beneficiaries,
and legatees, must sign a full release of all past and future claims
against any potentially liable parties relating to the Ignition Switch
Defect.
A Legal Representative filing a Claim Form for a minor child will
be required to obtain the signatures of all living parents, or of the
minor's legal guardian(s) if neither parent is living. A Legal
Representative filing a claim on behalf of an incompetent or legally
incapacitated individual will be required, along with proof of the
Legal Representative's authority, to obtain the signature(s) of all
other legally appointed representative(s) of the individual as may
exist.
The Facility cannot provide tax advice to those receiving payments
pursuant to this Protocol. The Facility recommends consultation with a
tax advisor concerning any questions regarding tax liability for
payments pursuant to this Protocol.
C. Due Process Procedures and the Right to be Heard
Individual claimants or GM may request a face-to-face personal
meeting (or telephone meeting) with the Administrator prior to his
making a determination pertaining to only an Individual Death Claim or
Category One Physical Injury Claim. Both the individual claimant and GM
reserve the right to submit to the Facility any information deemed
relevant to the Administrator's evaluation and determination of any
such Individual Death Claim or Category One Physical Injury Claim
before the final processing and determination of the claim. Meetings
will be scheduled at mutually convenient times and locations. Such a
requested meeting will not serve to alter the eligibility, process, or
documentation requirements or any allocation amounts set forth in this
Protocol. Requests to meet with the Administrator should be sent by e-
mail to the Facility. (Contact information to be provided on the Claim
Form and on the Facility website.)
D. Incomplete or Deficient Claims
If a claimant submits an incomplete or deficient claim, e.g., the
claimant failed to include required documentation or failed to sign the
Claim Form, a deficiency notification will be sent to the claimant and
a representative of the Facility will informally work with the claimant
in an effort to cure any such deficiencies.
E. Notification of Facility Decision
The Facility will send the claimant the following in writing:
1. The Facility's decision regarding the claim, including the reason
for any denial of the claim.
2. The settlement amount offered pursuant to this Protocol to settle
the claim; and
3. A Release to be signed by the claimant if the claimant accepts
the offered settlement.
Settlement offers pursuant to this Protocol shall be valid for 90
days, after which they are null and void.
F. Payment
Payments will be issued by the Facility following the final
processing of an Eligible Claimant's Claim Form and any requested due
process hearing. The Facility will authorize the payment, by check or
electronic bank wire, to each Eligible Claimant. Checks will be sent to
claimants by the Facility via courier service.
VI. Privacy
Information submitted by a claimant to the Facility will be used
and disclosed only for the following purposes:
1. Processing the claimant's claim for compensation.
2. Legitimate business use associated with administering the
Facility, including the prevention of fraud; and/or
3. Law, regulation or judicial process.
VII. Quality Control and Procedures to Prevent and Detect Fraud
A. Verification Procedures
For the purpose of detecting and preventing the payment of
fraudulent claims, and for the purpose of accurate and appropriate
payments to claimants, the Facility will implement procedures to:
1. Verify and authenticate claims.
2. Analyze claim submissions to detect inconsistencies,
irregularities, and duplication.
3. Ensure the quality control of claims review procedures.
B. Quality Control
The Facility shall institute all necessary measures designed to
evaluate the accuracy of submissions and the accuracy of payments.
C. False or Fraudulent Claims
Each claimant will sign the Claim Form at the time of submission,
stating that he or she certifies that the information provided in the
Claim Form is true and accurate to the best of his or her knowledge,
and that he or she understands that false statements or claims made in
connection with such submission may result in fines, imprisonment, and/
or any other remedy available by law. Suspicious claims will be
forwarded to federal, state, and local law enforcement agencies for
possible investigation and prosecution. Claims filed via the Internet
will require an electronic signature which shall be equally as binding
upon the claimant as a physical signature.
VIII. Release, Offsets and Liens
A. Release
In order for the claim to be eligible for payment, all claimants
must consent to participate in the Facility and agree to be bound by
its terms. No such Agreement will be enforceable until the claimant is
made aware of the settlement amount. Until a Final Release is executed,
each individual claimant retains all rights under the law, including
proceeding with, or continuing with, litigation during the processing
of the claim. Such litigation shall be immediately dismissed by
agreement of the parties if the claimant elects to accept the award and
execute the appropriate Release.
By submitting a claim under this Protocol, a claimant is seeking to
resolve all claims against all responsible parties relating to the
Ignition Switch Defect in an Eligible Vehicle. If a claimant chooses to
accept a final payment pursuant to this Protocol, the claimant will be
required to sign a full release of all past and future claims against
any party relating to the Ignition Switch Defect in the Eligible
Vehicle. The release will waive any rights the claimant or his/her
heirs, descendants, legatees and beneficiaries may have against General
Motors or any potentially responsible party to assert any claims
relating to the Ignition Switch Defect, to file an individual legal
action relating to the Ignition Switch Defect, or to participate in any
legal action associated with the Ignition Switch Defect.
B. Offsets
In determining all payments pursuant to this Protocol, the Facility
will take into account and offset any prior payments made by GM or
General Motors Corporation to individual claimants in connection with
claims encompassed by this Protocol.
C. Medical Liens
In determining all payments pursuant to this Protocol, the Facility
will take into account any outstanding medical liens, if any, currently
owed by the claimant. The Facility will retain the services of a Lien
Resolution Administrator to serve as an agent for the benefit of the
settling claimants and to identify, resolve and satisfy, in accordance
with Federal law, all settling claimant repayment obligations related
to payments associated with this Facility including, but not limited
to, Medicare parts A and B, Medicaid and commercial or private health
care liens.
Senator McCaskill. Thank you so much, Mr. Feinberg.
A couple of questions.
When they hired you to administer this compensation
program, did General Motors lay out any limitations on the
program's scope? And if so, what were the limitations they laid
out?
Mr. Feinberg. The only limitation they really laid out was
the limitation that only certain eligible vehicles are subject
to this program. As the Chair knows, in BP there were
limitations to my jurisdiction. In 9/11, as then-Congressman
Blunt and others drafted that legislation, there were
limitations. The only limitation in this program that GM
insisted on were that only the eligible vehicles listed in page
3 of the compensation protocol are eligible for consideration.
Senator McCaskill. Did you suggest any classes or coverage
that should be included that General Motors rejected?
Mr. Feinberg. No.
Senator McCaskill. OK.
Mr. Feinberg. I'm not an automotive engineer. I asked
General Motors what are the vehicles, what is the definition of
an eligible vehicle that could give rise to a valid claim, and
this was their response, which is reflected expressly in the
protocol.
Senator McCaskill. So if the airbags didn't deploy but
should have, if there's any evidence that the seat belt
pretensioners worked as designed, under your protocol the
victim is not eligible?
Mr. Feinberg. That's right. The victim is not eligible if
the power was on and the airbag did deploy. If the airbag
deployed and the seat belts were working, then a fortiori the
likelihood that the ignition switch could have been in the off
position causing the accident is not possible. So we concluded,
and I concluded, that airbag deployment renders the claim
ineligible. Airbag non-deployment or a claim in which the
victim or his family or her family say we don't know whether
the airbag deployed or not, eligible. File the claim and we'll
work with the claimant in that regard.
Senator McCaskill. So, let me make sure I understand. If
the airbag did not deploy, you are eligible if you are in one
of the cars on the list.
Mr. Feinberg. Exactly.
Senator McCaskill. Regardless of the seat belt.
Mr. Feinberg. Exactly.
Senator McCaskill. OK. So the total decision here is what
car it is and whether or not the airbags deployed.
Mr. Feinberg. And/or whether the seat belts deployed. It's
the same issue. If the seat belts deployed, the power is on. It
couldn't have been the ignition switch.
Senator McCaskill. I'm confused what you mean by ``seat
belt deployed.'' I mean, are you talking about whether a seat
belt is on? Would you explain that for the record, Ms. Barra?
Mr. Feinberg. Ms. Barra?
Ms. Biros. It's not the seat belts, per se. It's the
pretensioners, which are electrically controlled, our
understanding is. So if they were operational, then it's
unlikely that the cause of the accident was the ignition
switch.
Senator McCaskill. Oh. So what you're saying is if the
pretensioners are working, that is an indication that there was
not a shutdown of the electrical system or the power system
that would have prevented the airbags from deploying.
Ms. Biros. That's correct.
Senator McCaskill. What if you have a situation where the
airbag, there is a frontal crash and the airbag doesn't deploy,
and then seconds later there is a rear crash and the airbag
does deploy?
Mr. Feinberg. File the claim. If there's a frontal crash
and the airbag didn't deploy, we want to look into that claim.
Senator McCaskill. OK. All right. So you are open to
looking at each situation. So that would be a situation where
the airbag did deploy but not until the second crash. So I want
to make sure that everyone's clear that even if your airbag did
deploy, it could depend on the facts of your case.
Mr. Feinberg. That's an interesting hypothetical for law
school. But, I mean, I'd like to take a look at that claim.
Senator McCaskill. I think there is one.
Mr. Feinberg. Well, I'd like to take a look at it.
Senator McCaskill. Because this is the issue. This switch
goes off and on easily, right? It slides to off easily. It
slides back, because there's not appropriate torque in it. So
things that bump it move it. So just as easily as a riding off
the road could bump it and it could go off, a frontal crash
could move it from off to on; correct?
Mr. Feinberg. We looked at that problem. I think
theoretically you are correct. I have two answers to your
hypothetical. First, it is highly unlikely that that
circumstance that you just posited occurs. I guess it could.
It's highly unlikely.
Second, what I want to avoid with this program is being
inundated by thousands of claims where the airbag deployed,
making it extremely unlikely that it was the ignition switch
causing delay in getting money out the door to the vast number
of claimants which clearly can demonstrate airbag non-
deployment through police reports, photographs, et cetera.
The whole key to this program, as you and others have
pointed out, is getting money out the door as fast as possible
to eligible claimants. That's why the airbag deployment
provision in the protocol is designed, frankly, to discourage
thousands of people from filing a claim when in the
overwhelming number of cases, I mean overwhelming number of
cases, airbag non-deployment is a certain step in the direction
of finding eligibility.
Senator McCaskill. Right. Well, I have questions about the
amount of money that you have to spend, and also about punitive
damages, but I have a feeling my colleagues will handle those
questions before we finish all the questions on this panel. So
I will leave those questions to my colleagues and turn it over
to Senator Heller.
Senator Heller. Thank you, Madam Chairman.
And again, thanks for being here.
I don't know that it's premature to have this discussion
because I think this is the perfect time to have this
discussion before this program moves forward. I want to go back
to what the Chairman was asking you.
So you're saying that there's no scenario where the key
could have gone from Run to Accessory, have an accident occur,
and still have the airbag deploy?
Mr. Feinberg. That's right.
Senator Heller. No scenario?
Mr. Feinberg. There may be--Senator McCaskill raises a
hypothetical situation, but it's not the type of situation that
is at all likely that would justify drafting a compensation
program that would invite anybody where the airbag deployed to
file a claim.
Senator Heller. So it took 10 years to figure out what the
problem was, and you're telling me that that scenario can't
happen.
Mr. Feinberg. It's so rare that you don't want to
discourage claims from being filed by the overwhelming cases
where airbag non-deployment is a major step in the direction of
finding eligibility.
Senator Heller. You said that you're going to compensate
all innocent victims. Let me give you a scenario, since this is
preliminary.
Suppose I'm driving a Cobalt and the airbag doesn't deploy
and the key goes from Run to Accessory, and I walk away
unscathed but I destroy the car. Am I compensated?
Mr. Feinberg. That's a litigation matter. You're not
compensated under a protocol that's limited to death and
physical injury. You may very well be compensated, and I think
there are thousands of lawsuits pending on economic damage to
the car, diminished value of the car, but that's not the scope
of this death and physical injury program.
Senator Heller. Well, why would you stop there? Isn't a
loss a loss?
Mr. Feinberg. A loss is a loss. From the very beginning, in
my conversations with both lawyers representing injured and
deceased victims, it was always understood that this program,
like 9/11 and like OneFund Boston, is limited to death and
physical injury. I'm not saying those folks don't have a valid
claim. They just don't come to this program.
Senator Heller. Is there a way to appeal that decision?
Mr. Feinberg. Which decision is that?
Senator Heller. That a loss isn't a loss in this case.
Mr. Feinberg. In the courts I assume there is.
Senator Heller. But can they appeal to GM?
Mr. Feinberg. I guess they can appeal it to GM as well.
Senator Heller. I want to ask about your compensation. I
don't know if you have performance indicators on moving forward
on what you and your staff will be based on your pay. I think
it's important that there is transparency of your compensation,
and I think knowing here that you're being compensated by GM, I
think transparency is important.
Will you or your staff be paid based on number of claims
made or the number of claims processed or anything of that
nature?
Mr. Feinberg. Absolutely not.
Senator Heller. Let me talk to you a little bit about BP,
because I know that previous administrations of the BP Oil
Spill Victim Compensation Fund did receive some criticism from
some of the stakeholders, that you were working for the oil
company's interest instead of being independent.
Mr. Feinberg. I'll say.
[Laughter.]
Senator Heller. How do we know that you'll be independent
in this case and be accountable to the victims?
Mr. Feinberg. First of all, as with BP, you'll recall,
Senator, when that criticism came my way I asked for Attorney
General Michael Mukasey of the Bush Administration to review my
whole compensation, the whole way that we went about being
paid, my independence, and he wrote an opinion letter which I
made available making it very clear that I was independent and
doing the type of work that I was asked to do.
Second, the only real way that you blunt criticism that is
sure to come about my compensation, the only way, is how fast
you get money out the door to eligible claimants in a generous
way so that they can see that the conduct of this program and
the professed independence is backed up by the way these claims
are being processed.
I will say again, until these claims begin to come in and
people see how they're being processed and how they're being
found eligible, I'll always confront that criticism, and that's
the way you have to address it.
Senator Heller. OK.
All right, I'm fine. Thank you, Madam Chairman.
Senator McCaskill. Senator Klobuchar.
STATEMENT OF HON. AMY KLOBUCHAR,
U.S. SENATOR FROM MINNESOTA
Senator Klobuchar. Thank you very much, Chairman McCaskill.
Thank you for holding this hearing.
Thank you, both of you, for being here.
The investigation into the General Motors ignition switch
defect issue paints a picture of a company that for years
showed indifference in the face of mounting evidence of risk
and of danger, and I believe there are still questions to be
answered.
A key point for victims, Mr. Feinberg, and one of the
reasons we're having the hearing today are questions about how
the fund will work and how the claims will work.
I also greatly appreciate the fact that Ms. Barra, the new
GM CEO, has stepped up and taken this on, head on, not only
with the recalls but also with setting up this fund and working
with the victims.
Something very bad happened here, and we all know that. And
as you know, Mr. Feinberg, only the results and history will
judge whether there is true justice for these victims, and I'm
glad that the Chairman held this hearing so quickly after our
last one so we can continue to be informed and ask questions.
In my case, I've got a victim, a very young woman named
Natasha Weigel, and she is from Albert Lea, Minnesota. She was
only 19 years old. She died when her car went barreling at 71
miles per hour into a grove of trees. She was a hockey goalie.
She had a lovely little note she wrote to her dad right before
she died about how she always knew he had her back and he was
there. And I know all they want now is to make sure that GM has
their back.
So my first question really is about these young victims.
Since many of these cars involve younger drivers--they like the
Saturn. I'm a Saturn driver. I still have a 15-year-old Saturn,
so I can relate to this. And the Chevy Cobalt, that was the
kind of car that she was killed in, the Chevy Cobalt.
Could you ensure, Mr. Feinberg, that there will be fair
compensation for these younger victims when it's often harder
to assess what their earnings potential will be?
Mr. Feinberg. Absolutely. Like 9/11, where many young
people died on the planes, at the World Trade Center, at the
Pentagon, here even younger people, we will make sure that
compensation is generous and it is adequate and it is
appropriate, and the protocol lays out in some detail how we
will go about estimating compensation for younger non-wage
earners who were in school or had not yet begun a professional
or an employment career.
We also lay out rules that allow any younger victim or
anybody who has died in the crash or who was terribly
physically injured to come in and see us, and we will develop a
tailored compensation program, what I call ``Track B,'' that
reflects the unique circumstances of those younger people, and
we'll be glad to do that under the rules of the protocol.
Senator Klobuchar. And do you anticipate a lower
participation rate for younger people just because of the fact
you hadn't seen this in the past?
Mr. Feinberg. No.
Senator Klobuchar. OK. Concerns have been raised by some
safety groups about the documentation required, that it may be
too burdensome. Some say it may be very difficult to prove that
years ago an ignition switch failure caused a crash. How do you
respond to those concerns?
Mr. Feinberg. First of all, it's a lot less burdensome and
a lot quicker than if they go to court and have to prove their
claim, I'll tell you that. Second, there is a provision in this
protocol that makes absolutely clear that if anybody files a
deficient claim, they can't find the documentation, we will
work--this was a point Senator Blumenthal asked about--we will
work with that claimant to try and cure that deficiency.
There are various ways, a menu of options as to
documentation--a contemporary police report, the car, the black
box in the car, insurance reports, warranty and maintenance
reports. We'll work with the claimant. Photographs. Perhaps one
of the best examples of corroboration, citing Senator
McCaskill's example, is a photograph showing a front-end
collision and no airbag deployment. Now, that case, I must say,
is well along the way to eligibility.
So we'll work with the claimant to make sure that even
though some of these claims are very old, the accidents
occurred over a decade ago, we'll try to reconstruct that
documentation.
Senator Klobuchar. Along that point, one last question.
Under the terms of the 2009 bankruptcy, GM is technically free
from liability for injuries and deaths that occurred pre-
bankruptcy. Can you assure the plaintiffs that they will have
equal opportunity to compensation regardless of whether and
when GM went through bankruptcy?
Mr. Feinberg. Yes, that is absolutely assured, and GM has
acquiesced in that recommendation.
Senator Klobuchar. Thank you very much.
Senator McCaskill. Senator Ayotte?
Oh, she's not here.
Senator Blunt?
STATEMENT OF HON. ROY BLUNT,
U.S. SENATOR FROM MISSOURI
Senator Blunt. Thank you, Chairman.
The Chairman and I, obviously she mentioned in her first
comments, we have a number of GM employees in our state. We are
grateful for those employees and the work that they do and are
concerned about anything that reflects on their products, their
future opportunities, their ability to make the good living
that they make with the hard work that they do. So looking at
this is important to us. It's important to the country.
Mr. Feinberg, I appreciate your comments. Certainly, when
we set up the model after 9/11, the idea is the one you
continue to pursue, which is victims are not subject to which
judge they're assigned to, that you don't have cases handled
one way somewhere and one way somewhere else. They still have
the legal option if they want to take it. But if they want the
assurance that these cases are going to be handled in a way
that has a structure, they have that from you.
Now, in that structure, as I understand it, when it comes
time to do a settlement, you have the ultimate authority on
what that settlement would be. Am I right on that?
Mr. Feinberg. That is correct. The program is, as you just
pointed out, entirely voluntary. No one has to come into this
program. And if they do come into the program, we will
determine their eligibility, and, if they're eligible the
amount of compensation. And only, as with 9/11, as you know,
only after they know what it is they will receive, how generous
it is, only then do they agree to waive going to court in order
to receive this money. And there is no appeal from my
determination, and GM cannot reject our final determination.
They have agreed in advance to abide by any final decision that
is made.
Senator Blunt. And am I right in believing that GM, then,
has no input on what your final determination on an individual
case would be?
Mr. Feinberg. They can, just like the claimant, they can
provide whatever information they want in advance of my
determination to complete the record. But once I have that
record--I've heard from the claimant, I've heard if GM has
anything they want to add--once we make that determination,
they have no say, they have no right to appeal, they have no
right to second guess. They are bound by that determination
that we make.
Senator Blunt. And at what point do you think you'll begin
to deal with some of these individual cases?
Mr. Feinberg. August 1 the claims start to come in, and
under the protocol, once the claim is deemed substantially
complete, once we have the documentation, then within 90 days
we will begin to process the claims, authorize payments, and
invite the claimant to accept that compensation.
Senator Blunt. And you said earlier you were grateful to GM
in helping draft the protocol in addition to determining
eligible vehicles. Was there anything that they added to that
protocol or helped with in that protocol?
Mr. Feinberg. Yes. I asked GM and plaintiff lawyers and
non-profit foundations about the entire protocol. What do you
think about the dollar levels? What do you think about the
process, the procedures? And I must say that General Motors,
from the CEO to Mr. Millikin and down the line, extremely
cooperative, constructive, wanting to do the right thing. I
have only appreciation for General Motors in assisting Ms.
Biros and myself in the actual drafting of the protocol. I
doubt anybody likes all of it except Ms. Barra and myself. But
they provided us some very valuable input, and I'm very
grateful to them.
Senator Blunt. Well, thank you for your leadership on this
and so many other funds like this, and I wish you well and
certainly everybody involved well as you move forward with
trying to deal with these claims in the best possible way. In
terms of the company, better late than never. But for those
people who were dramatically impacted and who have losses that
they'll never recover from, as Senator Klobuchar was talking
about, that note from a daughter to her father is a sad last
and only thing to have of those last moments of that young
girl's life.
So we're going to be very interested as you work your way
through this, and I think the company made a good choice, and I
look forward to watching as this progresses.
Mr. Feinberg. Thank you, sir.
Senator McCaskill. Senator Blumenthal?
STATEMENT OF HON. RICHARD BLUMENTHAL,
U.S. SENATOR FROM CONNECTICUT
Senator Blumenthal. Thank you, Madam Chairman. I want to
thank you for having this hearing, which I think is very
important.
I thank Mr. Feinberg for your work, very challenging work
in this area. I have only 5 minutes here, but you've spent many
more than 5 minutes, in fact more than 5 hours talking to me
and my staff, and I appreciate your openness and hope that we
can continue to work on many of these very profoundly important
details. But the devil here is in the details and in the
discretion that you will have.
I want to ask you about one area of what I hope is within
your discretion. On June 30 of this year, when you announced
the details of your compensation protocol, GM announced the
recall of more than 8 million cars that had ignition defects,
defective ignition switches. The company acknowledged those
defective ignition switches beyond the models involved in your
compensation fund so far caused at least three deaths and
numerous injuries.
Added to the list of the Chevrolet Cobalt and the Saturn
Ion, among others, we now have multiple other models of
Chevrolet, Oldsmobile, Pontiac cars. GM has now recalled more
than 14 million cars in 2014. Many of the reasons for these
recalls are defects in the same part, the ignition switch, that
killed people and injured many in the matter that you are
providing your compensation fund.
I happen to believe that the compensation fund has to be
expanded. I believe strongly that your fund must be extended to
include those victims of deaths, injuries and damage in those
other recalls. Would you agree with me?
Mr. Feinberg. I can't agree or disagree. I have no
jurisdiction, Senator, and I can be very clear on this. Just as
with these other compensation programs, where policymakers tell
me ``in drafting your protocol this is what is eligible,'' I
have no authority to go beyond the list of automobiles listed
in this compensation protocol.
Senator Blumenthal. Would you recommend to GM that it
expand or extend the fund?
Mr. Feinberg. That is entirely up to GM. I'm not an
automotive engineer. All I can say, Senator, is that when GM
asked me to create a fund and for Ms. Biros and myself to
administer that fund, they made it very clear that the only
models where this problem and the context of the problem gave
rise to this special compensation are these models. As with 9/
11 and with BP, I must abide by that delegation of authority.
Senator Blumenthal. Let me move, then, to another topic. I
can tell you about instances where the airbags deployed and the
crashes resulted from this defective ignition switch. The
hypothetical scenario that we've been discussing here is a real
fact. I've talked to people who drove those cars. They stalled,
and they were able to turn them on, and I can present to you
specific instances of crashes. Will you consider them and make
refunds?
Mr. Feinberg. I want to see those claims. I've talked in
the last three or 4 months to automotive engineers, to lawyers,
to GM officials. I think it is such an unlikely possibility----
Senator Blumenthal. If GM----
Mr. Feinberg. But if it is----
Senator Blumenthal. You're willing to see that claim.
Mr. Feinberg. I would.
Senator Blumenthal. Let me just close with this thought,
and I'm inspired to raise it by the observation made by
Chairman McCaskill about the lawyering here. You know, lawyers
typically are supposed to be the corporate conscience. They're
supposed to be the ones who make sure that corporations comply
with the law in spirit and letter.
Here, the lawyers for GM actually enabled cover-up,
concealment, deceit, and even fraud. And I believe, although we
use the word ``alleged'' as lawyers all the time, that the
criminal investigation now under way by the Department of
Justice will find culpability on the part of those lawyers.
Would you agree with me, as someone who has been a member
of this profession and done it with great distinction for a
long time, that the lawyers here failed the public and failed
GM?
Mr. Feinberg. I agree that the lawyers work in the public
interest, or should. I don't know enough about the underlying
circumstances that give rise to this to make an official, on-
the-record decision about the lawyers in this case. I just
don't know the answer to that question.
Senator Blumenthal. Thank you, Madam Chairman.
Thank you, Mr. Feinberg.
Senator McCaskill. Senator Baldwin, welcome.
Senator Baldwin is here as a special guest of this
committee today, and we welcome you and welcome your questions.
STATEMENT OF HON. TAMMY BALDWIN,
U.S. SENATOR FROM WISCONSIN
Senator Baldwin. Thank you, Chairman McCaskill and Ranking
Member Heller, for allowing me to join you today. I am not a
member of the Commerce Committee, but I have had discussions
with family members, and let me just share by way of an opening
statement that on the night of October 24, 2006, three
girlfriends--Natasha Weigel, who you heard about earlier from
Senator Klobuchar, Amy Rademaker and Megan Kerns--were
returning from a trip to a Walmart in St. Croix County,
Wisconsin. St. Croix County is one of the border counties
between Wisconsin and Minnesota.
They were heading east on Highway N in a 2005 Chevy Cobalt
that suddenly lost power. The steering wheel locked and the car
careened into a telephone pole. The airbags never deployed.
The accident killed Natasha and Amy and left Megan
seriously injured.
As you heard from Senator Klobuchar, Natasha was a goalie
on her hockey team. Her parents could count on one hand the
number of times they'd seen her in a dress. The tomboy also had
an artistic side that impressed her art teachers with her
drawing and her parents with her poetry.
The first thing that comes to mind when Amy Rademaker's
parents, teachers and friends remember her is her laugh. It was
infectious, and once she got going, her whole class couldn't
help but join in. She loved playing with her nieces and nephews
and dreamed of one day opening a day care to work with kids
professionally.
Officer Keith Young, a member of Wisconsin's State Patrol
Technical Reconstruction Unit, was one of the first officers to
arrive on the scene that night. A 20-year accident construction
veteran, Officer Young was able to correctly identify the cause
of the crash, that the ignition had been turned from the Run to
the Accessory position, shutting off the car's engine and
disabling the airbags.
Officer Young sent his report to the National Highway
Traffic Safety Administration, NHTSA, and subsequently to GM.
Despite the careful analysis, neither NHTSA nor GM took action.
For the parents of these Wisconsin girls, this hearing, of
course, is of little solace. Nothing we do here today can
repair the damage that has been done. The best we can do is
work to ensure that no other family has to endure what they
have. So I again thank the Chair and Ranking Member for
allowing me to join this.
Mr. Feinberg, for you I have only one very simple question,
I hope. One of the victims in the October 2006 accident was
sitting in the back seat of the Cobalt. Her family expressed
concerns to my staff in preparation for this hearing that GM
did not consider this victim one of the official 13 victims
because there is no back seat airbag that could have then
failed to deploy.
Mr. Feinberg, can you shed some light on if the back seat
passengers will be included in this compensation program?
Mr. Feinberg. The answer is absolutely yes, not only the
back seat passenger. Pedestrians are included, occupants of a
second vehicle that collide with the defective vehicle, all
included. All can file a claim. Based on your summary, it
sounds like a very eligible claim. Whether you're the driver, a
passenger, a pedestrian, or the occupant of another vehicle,
all eligible to file under this program.
Senator Baldwin. Thank you.
Senator McCaskill. Thank you, Senator Baldwin.
I just have one question, and then we need to move on to
the other panel because we have a series of votes coming up at
midday.
Mr. Feinberg, there are no punitive damages in this, and
this is a very difficult and gut-wrenching decision for
lawyers. So I want to make sure I understand this procedurally.
If, for example, a victim from Missouri is 81 years old,
obviously her damages in terms of compensatory are going to be
smaller because she was near the end of her life. Her case is
such that I think factually there would be a strong case for
punitive damages. If she files a claim and gets an award from
you, is she then obligated to take that award, or can she leave
it on the table and allow her attorneys the opportunity to
litigate the issue as to whether or not her claim can still be
heard because of misrepresentations that were made in
bankruptcy around the GM bankruptcy filing?
Mr. Feinberg. If I understand your question, the
compensation will remain on the table for 90 days, during which
time the claimant can decide whether to accept that
compensation, release her right to litigate for punitive
damages, or decide, nope, I think I'm going to go the
litigation route and try and get not only compensatory damages
but punitive damages as well. That is entirely the option of
the claimant.
Senator McCaskill. It's really a difficult, gut-wrenching
choice for a lawyer, though, which I know you appreciate based
on your background, because typically the bar to overcome a
bankruptcy decision as to what claims are discharged is
difficult to overcome because you have to show that there was
fraud, and that's a high bar in the law. On the other hand, it
seems hollow, I think, to many of these victims' families that
just because their loved one was at a certain age or at a
certain income level, General Motors will really never feel the
brunt of what punitive damages are designed to do, and that is
to penalize a corporation for exactly the kind of conduct that
was present at General Motors. I'm sure you acknowledge this is
a very difficult decision for these families.
Mr. Feinberg. I do acknowledge that. Now, of course, you
and I can agree that if a claimant decides that 100 percent
compensation leaves open the question of a punitive damage
verdict against GM, there will certainly be some lawyers and
some claimants who will opt to seek punitive damages. So it's
not as if a claimant who comes into this fund and decides to
accept full compensation, it's not as if there is no option for
somebody else to go and seek those punitive damages. I think
one way or the other, your hypothetical is true, Senator.
Somebody is certainly going to go after GM for punitive
damages. It just under the hypothetical wouldn't be this
claimant----
Senator McCaskill. I understand.
Mr. Feinberg.--who decides I want 100 percent of this money
right now.
Senator McCaskill. I understand, and I just wish that we
could leave this open longer so there would be time for that
issue to be litigated so that lawyers are making their advice
based on what decisions the court had made in regard to this
fact pattern.
Mr. Feinberg. You know how long that would be. If there is
going to be litigation over punitive damages, you're talking
about years and years of uncertainty in that regard.
Senator McCaskill. I do understand that.
Thank you, Mr. Feinberg.
Mr. Feinberg. Thank you very much.
Senator McCaskill. I think the name tags are in the wrong
place. We will move the name tags. If you all want to sit where
you would like to sit, we'll make sure the name tags get in the
right spot.
Thank you. If you could take your seats as quickly as
possible. We are under a time constraint here, which I know you
hate to hear.
We will begin the second panel of this hearing.
I want to make sure that the members of the Committee know
and the public knows we will have another follow-up hearing
dealing with NHTSA. The reason NHTSA is not on this panel today
is because we are planning a hearing. We have to look at the
reauthorization of the National Highway Traffic Safety
Administration, and we want to look at the highway proposals in
the coming weeks. So we will cover NHTSA at that time.
Thank you all for being here very much, and we'll begin
with your testimony, Mr. Millikin.
STATEMENT OF MICHAEL P. MILLIKIN, EXECUTIVE VICE PRESIDENT AND
GENERAL COUNSEL, GENERAL MOTORS COMPANY
Mr. Millikin. Chairman McCaskill, Ranking Member Heller,
and members of the Committee, before I begin, I want to say to
those who lost loved ones and to those who were injured, I am
deeply sorry. I know we as a company and I personally have a
responsibility to make sure this never happens again.
I am the General Counsel of General Motors Company. I have
worked for GM for 37 years. Prior to that, I was an Assistant
U.S. Attorney, and before that I clerked for the Honorable
Vincent J. Brennan of the Michigan Court of Appeals.
As you are aware, the investigation conducted by Anton
Valukas revealed the failures behind the ignition switch
recall, including failures on the legal staff. When Ms. Barra
testified before this committee on April 2, a number of you,
including you, Chairman McCaskill, raised serious and important
questions about the performance of the legal staff and our
responsibility in this tragedy. As General Counsel, I am
ultimately responsible for the legal affairs of the company,
and I'm here today to answer your questions.
I first learned about the Cobalt ignition switch defect
during the first week of February of this year. I immediately
took action. I wish I had known about it earlier because I know
I would have taken action earlier if I did. We had lawyers at
General Motors who did not do their jobs, didn't do what was
expected of them, and those lawyers are no longer with the
company. I have taken and will continue to take steps to make
sure something like this never happens again.
The Valukas Report contains detailed recommendations for
how the legal staff can improve and serve an even greater role
in meeting GM's commitment to safety. I am assuring the
implementation of each and every recommendation, and I have
made and will continue to make other changes to help improve.
I have, for example, directed that before any settlement or
trial of a case involving a fatality or serious bodily injury,
that the case be brought to me for my personal review with a
focus on open engineering issues. I have reorganized the legal
staff to foster sharing of information and the identification
of emerging trends, including elevating a senior attorney to be
the Chief Legal Advisor to Jeff Boyer, Vice President of Global
Safety, with a direct reporting line to me and an indirect
reporting line to Mark Reuss, Executive Vice President of
Global Product Development.
I have supplemented existing legal resources with attorneys
from two outside law firms to make sure that we have the proper
level of engagement. I've also appointed a well-respected
outside law firm to conduct a zero-based review of our
litigation practices. Finally, I've met with the entire U.S.
legal staff to discuss the Valukas Report's findings and to set
high expectations for the staff going forward.
These changes and others will result in greater
transparency and information flow on issues of safety within
the legal staff, as well as between the legal staff and the
company generally, and I'm committed to make sure that I and
GM's senior management team have a full line of sight into all
safety-related matters.
GM's legal staff is comprised of hard-working, dedicated
professionals of the highest integrity. They strive daily to
help Global GM achieve its business objectives in a lawful and
ethical manner. They have expressed sincere and deep
disappointment and regret because of the actions and inactions
of some individuals within the company, including some on the
legal staff, who failed the company and our customers.
The GM legal staff is dedicated to helping GM become the
leader in automotive safety. We now have to correct our
mistakes, and we are. But this is only the beginning. All of us
at GM are committed to setting a new industry standard for
safety, quality, and excellence.
We must do better. We will do better. I am personally
committed to this.
Thank you.
[The prepared statement of Mr. Millikin follows:]
Prepared Statement of Michael P. Millikin, Executive Vice President and
General Counsel, General Motors Company
Chairman McCaskill and Ranking Member Heller, members of the
Committee. . .
Before I begin, I want to say to those who lost loved ones and to
those who were injured--I am deeply sorry. I know we as a company, and
I personally, have a responsibility to make sure this never happens
again.
I am the General Counsel of General Motors Company. I have worked
for GM for 37 years. Prior to that, I was an Assistant United States
Attorney, and I clerked for the Honorable Vincent J. Brennan of the
Michigan Court of Appeals.
As you are aware, the investigation conducted by Anton Valukas
revealed the failures behind the ignition switch recall, including
those of the Legal Staff.
When Ms. Barra testified before this Committee on April 2, a number
of you, including Chairman McCaskill, raised serious and important
questions about the performance of the Legal Staff and our
responsibility in this tragedy. As general counsel, I am ultimately
responsible for the legal affairs of the company. I am here today to
answer these questions.
I first learned about the Cobalt ignition switch defect during the
first week of February of this year. I immediately took action. Had I
learned about it earlier, I would have taken action earlier.
We had lawyers at GM who didn't do their jobs; didn't do what was
expected of them. Those lawyers are no longer with the company.
I have taken, and will continue to take steps to make sure
something like this never happens again.
The Valukas Report contains detailed recommendations for how the
Legal Staff can improve and serve an even greater role in meeting GM's
commitment to safety. I am assuring the implementation of each and
every recommendation, and I have made and will continue to make other
changes to help us improve.
I have, for example:
1. Directed that before any settlement or trial of a case involving
a fatality or serious bodily injury, the case be brought to me
for review, with a focus on any open engineering issues;
2. Reorganized the Legal Staff to foster sharing of information and
the identification of emerging trends, including elevating a
senior attorney to be the Chief Legal Advisor to Jeff Boyer,
Vice President of Global Vehicle Safety, with a direct
reporting line to me, and a dotted reporting line to Mark
Reuss, Executive Vice President of Global Product Development;
3. Supplemented existing legal resources with attorneys from two
outside law firms to assure the proper level of engagement;
4. Appointed a well-respected outside law firm to conduct a zero-
based review of GM's litigation practices; and
5. Met with the entire U.S. Legal Staff to discuss the Valukas
Report's findings and to set high expectations going forward.
These changes and others will result in greater transparency and
information flow on issues of safety within the Legal Staff, as well as
between the Legal Staff and the company generally. And, I am committed
to making sure I, and GM's senior management team, have full line of
sight into all safety related matters.
GM's Legal Staff is comprised of hardworking, dedicated
professionals of the highest integrity. They strive daily to help
global GM achieve its business objectives in a lawful and ethical
manner.
They have expressed sincere and deep disappointment, and regret,
because of the actions--and inactions--of some individuals within the
company, including those on the Legal Staff; who failed the company.
The GM Legal Staff is dedicated to helping GM become the leader in
automotive safety.
We now have to correct our mistakes. And, we are. But this is only
the beginning. All of us at GM are committed to setting a new industry
standard for safety, quality, and excellence. We must do better. We
will do better. I am personally committed to this.
Thank you.
Senator McCaskill. Thank you.
Ms. Barra?
STATEMENT OF MARY T. BARRA, CHIEF EXECUTIVE OFFICER, GENERAL
MOTORS COMPANY
Ms. Barra. Chairman McCaskill, Ranking Member Heller, and
members of the Committee, when I first appeared before you, we
were in the earliest stages of the ignition switch recall. I
promised you we would get answers and be fully transparent in
what we've learned. I also said I would not wait to make
changes. Today, our work to fully understand and fix the
mistakes that led to the ignition switch recall are well under
way. As a result, we are building a stronger company that
places customers and their safety at the center of every aspect
of our business.
In a town hall meeting before thousands of General Motors
employees and several thousand more around the world via
satellite, we accepted responsibility for what went wrong. I
told the men and women of GM that our actions would be guided
by two clear principles. First, we would do everything in our
power to make sure this never happens again, and we will do
right for those who were harmed. It is on this very important
point that I want to begin.
I want to recognize the families who lost loved ones and
those who have suffered physical injury because of these
mistakes. To each of them, I extend my and our GM employees'
sympathy. We will not forget them nor the special
responsibility we have to them. We are committed to treating
each of them with compassion, decency, and fairness. That is
why Ken Feinberg will independently administer a compensation
program.
Mr. Feinberg has talked about his compensation program. It
is, however, worth noting that he has complete and sole
discretion over all compensation awards to eligible victims.
And this is very important--there is no cap on this program.
As I stated earlier, we want to do all that we can to make
sure this does not happen again. We created this compensation
program as an exceptional response to a unique set of mistakes
that were made over an extended period of time. The Valukas
Report was only a start, and many changes were in motion even
before we received the findings of the report. I will use the
report's findings and recommendations to attack and remove the
information silos wherever we find them, and to create an
organization that is accountable and focused on customers. I am
committed to acting on all of the recommendations contained in
the report.
Actions we have already taken include elevating safety
decisionmaking to the highest levels of the company. I have
created a new position, Vice President of Global Safety. He has
full access to me. We removed 15 employees from the company,
some for misconduct and incompetence, others because they
didn't take responsibility or act with a sense of urgency.
We've instituted a ``Speak Up For Safety'' program to encourage
and recognize employees that bring potential safety issues
forward quickly. And we've added over 35 investigators to
identify and address issues much more quickly when they relate
to safety.
We've aligned the legal staff to help assure greater
transparency and information sharing among the staff and across
all business units around the globe.
And most importantly, we created the Product Integrity
Organization, which brings a complete systems engineering
approach to the safety or our vehicles.
Overall, we are dramatically enhancing our approach to
safety. You can see it in the aggressive stance we are taking
on recalls with the redoubling of our efforts. We are bringing
greater rigor, discipline and urgency to our analysis and
decisionmaking. We are mining every source of data available to
us, from the factory floor, warranty information, customer
calls, legal claims, and social media. We are not waiting to
see if a trend develops or updating spreadsheets. We want our
customers to know when we identify an issue that could possibly
affect their safety, we will act quickly.
Yes, we've recalled a large volume of past models, a result
of our exhaustive review coming out of the ignition switch
recall. But we've also conducted 12 recalls of less than 1,000
vehicles and four of less than 100 this year. This demonstrates
how quickly we are reacting when we see a potential issue.
I also know that the recent efforts and the current
frequency of recalls have garnered considerable attention, but
placing the highest value on our customers' safety is what our
employees want to be known for. We want to stand as the company
that is setting the new industry standard for safety.
Our employees will not forget what led to the ignition
switch recall, but they also don't want to be defined by it.
After my town hall, I could hear it in their voices, I could
read it in their messages--they are all in to make this a
better company. I believe in them, and together we have been
working hard over the last few months to address the underlying
issues that caused this problem in the first place. Since that
town hall, I have been inundated with calls and e-mails from
employees telling me they are more motivated than ever to make
GM the best possible company for our customers.
This is our mission, and it won't happen overnight, but I
can tell you we are holding each other accountable to do
exactly that. We are 100 percent committed.
I appreciate the opportunity to be here today, and I
welcome your questions.
[The prepared statement of Ms. Barra follows:]
Prepared Statement of Mary T. Barra, Chief Executive Officer,
General Motors Company
Chairman McCaskill and Ranking Member Heller, members of the
Committee. . .
When I first appeared before you, we were in the earliest stages of
the ignition switch recall. I promised you we would get answers and be
fully transparent in what we learn. I also said that I would not wait
to make changes.
Today, our work to fully understand and fix the mistakes that led
to the ignition switch recall is well underway. As a result, we are
building a stronger company that places customers and their safety at
the center of every aspect of our business.
In a town hall meeting before thousands of GM employees--and
several thousand more around the world via satellite--we accepted
responsibility for what went wrong. I told the men and women of GM that
our actions will be guided by two clear principles: We will do
everything within our power to make sure this never happens again. And,
we will do the right thing for those who were harmed.
It is on this very important point that I want to begin.
I want to recognize the families who lost loved ones and those who
have suffered physical injury because of these mistakes. To each of
them, I extend our deepest sympathies. We will not forget them, nor the
special responsibility we have to them. We are committed to treating
each of them with compassion, decency and fairness. That is why Ken
Feinberg will independently administer a compensation plan.
Mr. Feinberg will talk more about his compensation program. It is,
however, worth noting that he has complete and sole discretion over all
compensation awards to eligible victims. And this is important--there
is no cap on that fund.
As I stated earlier, we will do all we can to make certain that
this does not happen again. We created this compensation program as an
exceptional response to a unique set of mistakes that were made over an
extended period of time.
The Valukas Report was only a start, and many changes were in
motion even before we received the findings of the report. I will use
the report's findings and recommendations to attack and remove
information silos wherever we find them and to create an organization
that is accountable and focused on the customer. I am committed to
acting on all of the recommendations contained in the report.
Actions that we have already taken and about which you have no
doubt heard already include:
We elevated safety decision-making to the highest levels of
the company. I created a new position, Vice President of Global
Safety. He has full access to me.
We removed fifteen employees from the company . . . some for
misconduct or incompetence, others because they didn't take
responsibility or act with a sense of urgency.
We instituted the Speak Up for Safety program to encourage
and recognize employees to report potential safety issues
quickly.
We added 35 safety investigators to identify and address
issues much more quickly.
We aligned the legal staff to help assure greater
transparency and information sharing among that staff and other
business units across GM.
Overall, we are dramatically enhancing our approach to safety. You
can see it in the aggressive stance we are taking on recalls with the
redoubling of our efforts.
We are bringing greater rigor, discipline and urgency to our
analysis and decision making. We are mining every source of data
available to us from the factory floor to warranty claims to customer
calls and social media. We're not waiting to see if trends develop or
updating spreadsheets. We want our customers to know that if we
identify an issue that could possibly affect their safety, we will act
quickly.
Yes, we've recalled large volumes of past models--a result of our
exhaustive review coming out of the ignition switch recall. But, we
also conducted 12 recalls of less than 1,000 vehicles and 4 recalls of
less than 100 this year. In this way, we are keeping the vehicle
populations small and limiting the risk and inconvenience to fewer
customers. This demonstrates how quickly we are reacting when we become
aware of an issue.
I also know these recent efforts and the current frequency of
recalls have garnered considerable attention. But placing the highest
value on our customers' safety is what our employees want to be known
for. We want to stand as the company that is setting the new industry
standard for safety.
Our employees will not forget what led to the ignition switch
recall--but they do not want to be defined by it. After my town hall, I
could hear it in their voices and read it in their messages--they are
``all in'' to make this a better company.
I believe in them, and together, we have been working hard over the
last few months to address the underlying issues that caused this
problem in the first place. Since that town hall meeting, I have been
inundated with calls and e-mails from employees telling me that they
are more motivated than ever to make GM the best possible company for
customers.
This is our mission. It won't happen overnight but we are holding
each other accountable to do exactly that.
Thank you again for having me here today. I welcome your questions.
Senator McCaskill. Thank you, Ms. Barra.
Mr. O'Neal, thank you for being here.
STATEMENT OF RODNEY O'NEAL, CHIEF EXECUTIVE OFFICER AND
PRESIDENT, DELPHI AUTOMOTIVE PLC
Mr. O'Neal. Thank you. Chairman McCaskill, Ranking Member
Heller, and members of the Subcommittee, thank you for inviting
me here today to testify. My name is Rodney O'Neal, and I am
the Chief Executive Officer and President of Delphi Automotive.
First and foremost, on behalf of Delphi, I want to express
our profound sympathies to the victims and their families.
People were hurt and lives were lost. We must work together to
avoid tragedies of this nature going forward, and this
subcommittee's work is an important part of that effort.
So, members of the Subcommittee, I appreciate this
opportunity to address the important issues that you are
considering. We fully support your efforts.
I would like to discuss today three main points: first,
Delphi's efforts to provide replacement parts and support
General Motors in connection with the recall; second, our
cooperation with the Subcommittee and other governmental
bodies, as well as GM; and third, the review and reinforcement
of Delphi's key product engineering safety policies and
procedures.
With regard to my first point, I'd like to provide some
information pertaining to Delphi's production of replacement
parts for General Motors. The vehicles that were recalled went
out of production several years ago. As a result, it has been a
monumental task to build over 2 million switches in a matter of
months. We've ordered new tooling, we've installed three new
production lines, and we've trained additional workers. At this
time, we've shipped over 1 million new switches, and we're on
track to deliver more than 2 million switches by the end of
August. We've done all of this so that consumers can have their
vehicles repaired by General Motors as quickly as possible.
My second point is that Delphi fully supports this
Subcommittee's efforts, as well as those of the House Energy
and Commerce Committee and other governmental bodies. Our
support has included conducting an exhaustive review and
providing relevant documents and meeting multiple times with
staffs of this subcommittee and Federal agencies. In addition,
we have cooperated with General Motors in the recall and its
investigation, and our cooperation includes entering into a
reciprocal document sharing agreement, and we have provided
relevant documents in accordance with that agreement.
Lastly, we have conducted a thorough review of our current
policies and procedures related to product safety which we
believe are robust and which we are continuously working to
improve. For example and at my direction, we have reinforced to
our global engineering team the importance of raising safety
concerns so that they can be handled properly. We have
strengthened our procedures to ensure that safety concerns are
communicated across all relevant functions within our company,
and that includes reports to our senior management and to our
customers. We are committed to acting upon all such concerns in
a timely manner.
The industry has created a new standard to focus on how
these complex safety systems work together instead of looking
at safety on a part-by-part basis. We support this new
standard, and given what we've learned from these tragedies,
this new standard should be very helpful going forward.
My written statement provides additional details, and I
will be pleased to address any questions you may have. Again,
thank you for this opportunity to testify today.
[The prepared statement of Mr. O'Neal follows:]
Prepared Statement of Rodney O'Neal, Chief Executive Officer and
President, Delphi Automotive
Chairman McCaskill, Ranking Member Heller and Members of the
Subcommittee:
Thank you for inviting me to testify today.
My name is Rodney O'Neal. I am the Chief Executive Officer and
President of Delphi Automotive, a global auto parts manufacturer, which
was formed in 2009 and acquired some of the businesses of the former
Delphi Corporation. For convenience, throughout my statement and oral
testimony I may not distinguish between the company I now head and the
companies that made the ignition switch at issue. Although these
distinctions have important legal significance, I do not believe they
are germane to the primary focus of this Subcommittee's inquiries.
First and foremost, on behalf of Delphi, I want to express our
profound sympathies for the victims of the accidents that led to this
Subcommittee's investigation. People were hurt, and lives were lost. We
must work together to ensure that tragedies like this do not happen
again, and this Subcommittee's work is an important part of that
effort.
Members of the Subcommittee:
I appreciate this opportunity to address the important issues that
you are considering. Delphi fully supports your efforts.
I would like to discuss three main points:
First, Delphi's efforts to provide replacement parts and
support General Motors in connection with the recall.
Second, our cooperation with this Subcommittee and other
governmental bodies.
Third, the review and reinforcement of Delphi's key product
engineering safety policies and procedures.
With regard to my first point, I would like to provide some
information regarding Delphi's production of replacement parts for GM.
The vehicles that were recalled went out of production several years
ago. As a result, it is a monumental task to build over two million
ignition switches in a matter of months.
We ordered new tooling;
We installed three new production lines (for a total of four
lines); and
We trained additional workers.
At this time, we have shipped over one million new switches, and we
are on track to deliver more than two million switches by the end of
August.
We have done all of this so that GM can repair its customers'
vehicles as quickly as possible.
In addition, we have cooperated with GM in all aspects of the
recall and its investigation. Our cooperation includes entering into a
reciprocal document sharing agreement, and we have provided relevant
documentation in accordance with that agreement.
My second point is that Delphi fully supports this Subcommittee's
efforts, as well as those of the House Energy and Commerce Committee,
and other governmental bodies. Our support has included:
Conducting an exhaustive review and providing relevant
documents.
Meeting multiple times with this Subcommittee's staff and
other governmental bodies.
My third point relates to our product safety policies and
procedures. We have conducted a thorough review of our current policies
and procedures. We believe they are robust, but we are always working
to continuously improve them. For example:
Delphi's Chief Technology Officer has personally reinforced
with our global engineering team the importance of promptly
raising concerns so that they can be handled.
We have strengthened our procedures to ensure that safety
concerns we discover during the development or manufacture of
our products are immediately communicated across all relevant
functions within our company, including to our senior
management team, and to our customers, and that all such
concerns are acted upon in a timely manner.
We are also embracing a new industry standard that relates
to vehicle system safety.
We have also confirmed that we have strong document retention
policies in place, and our critical engineering documents are now
stored digitally.
In addition to the main points I have covered, I would like to
describe our involvement with the cars that have been recalled, and
more broadly, our role in the automotive industry.
Today's automobiles are extremely complex, technologically advanced
machines. They typically consist of more than 30,000 different parts
that are produced and assembled by many different suppliers and the
vehicle maker.
Sometimes Delphi supplies individual parts. At other times, we
provide sub-assemblies or complete systems. For the vehicles that are
the focus of this hearing, GM relied upon several suppliers for an
ignition system. Our only contribution was the switch. Delphi did not
supply the key or the lock cylinder (the part that actually holds the
key). Delphi did not supply the steering column or determine where the
lock cylinder would be located.
As vehicles and their systems are put together, each of us has a
distinct role to play, with our own clear responsibilities. It is
highly important that the Subcommittee understand that there is always
a company, be it the system integrator or the vehicle manufacturer that
has responsibility for ensuring that complete systems work together
properly. In this case, that was not Delphi.
There has been a lot of discussion regarding the specifications for
the switch. Allow me to provide some information about that issue. GM's
initial parameters called for a switch that turned smoothly. This was
very important to GM. Requirements for the effort required to turn the
switch, or torque, were also included. These requirements were
originally described as a ``target'' and contemplated that the feel of
the switch, which relates to the effort required to turn it, would be
subject to GM's approval.
As GM acknowledges, before production started, GM knowingly
approved a final design that included less torque than the original
target. In our view, that approval established the final specification.
Delphi then began producing the switch that GM approved and wanted.
At GM's direction, in approximately January 2006, Delphi submitted
a revised ignition switch with several changes that we understood were
intended to address warranty concerns. These changes included a
different spring that produced higher resistive torque--the same spring
as was included in Delphi's original drawings for the part. In April
2006, this change was approved by GM engineer Ray DeGiorgio.
Thank you for this opportunity to testify today. I will be pleased
to address any questions you may have.
Senator McCaskill. Thank you, Mr. O'Neal.
Mr. Valukas?
STATEMENT OF ANTON R. VALUKAS, CHAIRMAN OF THE FIRM, JENNER &
BLOCK LLP
Mr. Valukas. Thank you. Chairman McCaskill, Ranking Member
Heller, and members of the Committee, thank you for asking me
here today to testify about the Cobalt ignition issues.
In March of this year, General Motors Board asked me to
determine why it took so long to recall the Cobalt and other
vehicles that contained the faulty ignition switch. My explicit
mandate from the Board was to provide an unvarnished report as
to how and why this occurred, pursue the facts wherever they
took us, and to put those facts into a report. That's the
report which we submitted to the Board.
General Motors Board also directed me to make
recommendations drawn from the facts to help ensure that this
did not occur again.
Jenner & Block, my law firm, was given unfettered access to
General Motors witnesses and to their documents. We interviewed
more than 230 witnesses. We, in fact, conducted over 350 total
interviews. Some of those interviews lasted over 2 days. We
collected more than 41 million documents, all in an effort to
find out why the Cobalt recall was delayed for so many years.
In that research in terms of the investigation, we looked
at every CEO, we looked at all of the engineers. We used search
terms of the sort which would produce documents of any kind
which might relate to this issue. So no one was exempt from
that review.
I will not summarize the report; you have it. I will,
however, note that among the issues we specifically examined
are the issues that are the topic of this hearing,
accountability and corporate culture. We asked questions of
dozens of witnesses, from top executives to line engineers,
about these topics. We examined the decisionmaking processes
that related to the ignition switch issues and whether there
were broad cultural issues which may have contributed to the
delayed recall.
The story of the Cobalt is one of a series of individual
and organizational failures that led to devastating
consequences. Throughout the decade it took General Motors to
recall the Cobalt, there was a lack of accountability, a lack
of urgency, and a failure of the company personnel charged with
ensuring the safety of the company's vehicles to understand how
General Motors vehicles were manufactured.
In our report we reviewed these failures, including
cultural issues that may have contributed to this problem. At
General Motors Board's request, we provided recommendations to
help ensure that this problem would never occur again.
I'm happy to take your questions. Thank you.
[The prepared statement of Mr. Valukas follows:]
Prepared Statement of Anton R. Valukas, Chairman of the Firm,
Jenner & Block LLP
Chairman McCaskill, Ranking Member Heller, and Members of the
Committee:
Thank you for having me here to testify about my report on the
Cobalt ignition switch.
In March of this year GM asked me to determine why it took so long
to recall the Cobalt and other vehicles that contained the faulty
ignition switch. I approached this task in much the same way that I did
in conducting my review of the Lehman Brothers matter, albeit on a much
more expedited timetable. My job was to find the facts as to how and
why this occurred and set forth those facts in a report to the GM
Board. I have conducted similar internal investigations for many other
companies, boards, and board committees.
Jenner & Block was given unfettered access to GM witnesses and
documents and was asked for an unvarnished account. We interviewed more
than 230 witnesses and collected more than 41 million documents. We
obtained and reviewed forensically imaged hard drives, including those
belonging to top executives. We searched server-based e-mails and
shared drives, electronic databases, and hundreds of boxes of hard-copy
documents, all in an effort to identify any documents that would bear
on our assignment to find out why the Cobalt recall was delayed for so
many years. If we discover any new information that materially affects
our report, we will supplement our findings to the Board.
In our report, we did not simply repeat what any individual GM
employee told us. We tested those assertions against the extensive
documentary record we gathered and against the statements of other
witnesses.
I will not summarize the report in any detail--it speaks for
itself. I will, however, highlight a few broad conclusions that tie
directly to our recommendations.
GM personnel approved the use of an ignition switch in the
Cobalt and other cars that was far below GM's own
specification. This was done by a single engineer and was not
known by those who were investigating the Cobalt from the time
of the approval until 2013.
From the time it first went into production, the Cobalt (and
the Ion before it) had problems because the ignition switch
could too easily be turned to Accessory, resulting in a moving
stall including the loss of power steering and power brakes. GM
engineers were fully aware of this problem but did not consider
it a safety issue. That conclusion was the wrong one--
amazingly, the engineers investigating the Cobalt in 2004 and
2005 did not understand that, when the key turned to Accessory,
the airbags would fail to deploy.
Because GM personnel failed to understand the
potential hazard caused by the ignition switch, GM
engineers debated through various committees whether any of
the potential fixes were cost-effective. This focus on cost
was driven by the failure to understand that a safety
defect was at issue and the consequences of that defect.
In 2006, the engineer who authorized the below-specification
switch in the first place increased the torque in the ignition
switch by authorizing a change to the switch. He approved a
change to the switch, but did not change the part number,
thereby concealing the change and leading to years of confusion
among investigators about why, if the ignition switch was
mechanically the same in all model years, accident data was so
markedly different before and after Model Year 2008.
GM personnel began recognizing the problem of non-deployment
of airbags in the Cobalt as far back as 2007, but failed to
take advantage of all the resources at their disposal--
including information in GM's own databases--to understand that
the non-deployment was related to the known problem of the
ignition switch. Others--outside GM--made this connection as
early as 2007. But, as fatalities and injuries mounted in cases
in which airbags did not deploy in Cobalts, GM personnel
displayed no sense of urgency in determining the cause.
By 2011, GM personnel knew that there was a pattern of non-
deployments in Cobalts and that the ignition switch might be to
blame. GM's outside counsel warned GM that it might be liable
for punitive damages for failing to deal with the problem for
so many years.
But, once again, GM personnel failed to display any
sense of urgency. The non-deployment investigation
languished, even as it became more and more clear that the
ignition switch was the problem.
And the investigation was further delayed when the
engineer who originally approved the faulty switch told GM
safety engineers that he had never changed the switch,
when, in truth, he had.
By 2013, the investigation had not progressed, and it was
only when an outside expert hired by a plaintiff's lawyer took
the switches apart and compared them that GM personnel finally
understood that the switch had been changed. Even then,
however, GM took another 10 months to recall the Cobalt.
The story of the Cobalt is one of a series of individual and
organizational failures that led to devastating consequences.
Throughout the decade that it took GM to recall the Cobalt, there was a
lack of accountability, a lack of urgency, and a failure of company
personnel charged with ensuring the safety of the company's vehicles to
understand how GM's own cars were designed. We found failures
throughout the company--including individual errors, poor management,
byzantine committee structures, lack of training, and inadequate
policies.
In our report, we review these failures, including cultural issues
that may have contributed to this problem, and we provide
recommendations to ensure that it never occurs again.
I understand that while this report answers many questions, it
leaves open others:
Government officials (and perhaps judges and juries) will
assess the credibility of witnesses and whether there was civil
or criminal culpability;
GM will have to make decisions about how to ensure that this
never happens again;
Others, whether courts or Mr. Feinberg, will make decisions
about which specific accidents were caused by the Cobalt's
faulty ignition switch.
Our role was to find the facts as to why this recall took far too
long. I believe we have done so.
Senator McCaskill. Thank you very much, Mr. Valukas.
I want to say for the Committee that many members of this
committee have worked very hard in preparation for this
hearing, and it would be terrific if we could get two rounds of
questions in. So I'm going to ask everyone to try, beginning
with me, to be very respectful of the 5-minute time period--if
I say it out loud, then maybe I will be better--so that we can
try to get two rounds of questions in before we have to leave
for votes. OK?
Mr. Millikin, I want to spend my time on my first round
with you. I want to make sure everybody understands what
punitive damages are.
Mr. Millikin. Pardon?
Senator McCaskill. What punitive damages are. For lawyers,
that is a blinking red light. I'm sure Mr. Valukas and you, Mr.
Millikin, will confirm that punitive damages in our system are
designed to punish corporations or people for conduct that is
outrageous and egregious. It is a method by which justice can
be done, by punishing bad behavior.
A pattern was emerging at General Motors for almost a
decade about these cars. There was some confusion because of
deceit on the part of at least one engineer. But in October
2010, your lawyers--this wasn't a plaintiff's lawyer that was
out there making a frivolous lawsuit. Your lawyers that you
hired said you are possibly subject to punitive damages over
the way you have handled this problem in this automobile. That
was in October 2010, and I believe you were General Counsel
then; correct?
Mr. Millikin. That is correct.
Senator McCaskill. Again, in July 2011, your lawyers told
you that there is a potential for punitive damages because of
this factual scenario. You were also General Counsel then;
correct?
Mr. Millikin. That is correct.
Senator McCaskill. And at that point in time, Lucy Clark
Dougherty, in July 2011, she was General Counsel for North
America; correct? I believe she began in that position in March
2011.
Mr. Millikin. I'm thinking it was in 2012, but I could be
wrong.
Senator McCaskill. Well, my document says it was March of
2011.
Mr. Millikin. I'll take your word for that.
Senator McCaskill. Then in April 2012, another one of your
outside lawyers warns your department that you were subject to
punitive damages, which could be millions of dollars with a
corporation the size of General Motors. At that point in time,
you were General Counsel?
Mr. Millikin. That is correct.
Senator McCaskill. And Lucy Clark Dougherty was, in fact,
Counsel for North America.
Mr. Millikin. That is correct.
Senator McCaskill. And again, in April 2013, almost the
same time that you had the bombshell dropped on you in the
deposition where DeGiorgio was confronted with a basic
engineering task that had been done showing the switches had
been switched out, had been changed, the part had been changed,
once again you were warned about punitive damages.
Mr. Millikin. As a company, that is correct.
Senator McCaskill. OK. So you have a legal obligation as
General Counsel to report material events and liabilities to
the Securities and Exchange Commission. Did you ever do that
about this issue?
Mr. Millikin. On the issue of punitive damages?
Senator McCaskill. On the issue of this product defect and
the problems surrounding it, have you ever reported it to the
SEC?
Mr. Millikin. Not up until the time that this became known
had we made any disclosures to the SEC.
Senator McCaskill. The time that you knew it, not your
legal department.
Mr. Millikin. Yes.
Senator McCaskill. Your legal department knew it.
Mr. Millikin. No, no. I'm talking about from the time I
knew forward, I'm excluding that. Before that, no, we had not.
Senator McCaskill. OK. So at the time you recalled, you
told the SEC.
Mr. Millikin. Subsequent to that we may have made a filing
with the SEC about the ignition switch recall. That is correct.
Senator McCaskill. OK. And what about the legal obligation
to inform the Board of Directors? Were they aware that your
lawyers were telling you this car was going to cause you
punitive damages?
Mr. Millikin. They were not.
Senator McCaskill. And what about financial reserves? Were
you entering into the books the financial reserves necessary to
cover this liability, which is your obligation as the General
Counsel?
Mr. Millikin. We were not entering any reserves to cover
punitive damages. No, we were not.
Senator McCaskill. OK. So I don't get how you and Lucy
Clark Dougherty still have your jobs.
Can you explain that to me, Ms. Barra? I think you've done
a lot of good work since you took over. I think you've handled
this, as I said in my opening statement, with courage and
conviction, have stepped forward. I cannot for the life of me--
this is either gross negligence or gross incompetence on the
part of a lawyer, the notion that he can say ``I didn't know.''
Ms. Barra. Senator McCaskill, I respectfully disagree. As
you know, I have made the promise to fix what happened in the
company to make sure that we are dedicated to safety, that
we're dedicated to excellence. We are well on our way. We've
made significant change. To do that, I need the right team, and
Mike Millikin is a man of incredibly high integrity. He has
tremendous global experience as it relates to the legal
profession. He's the person I need on this team.
He had a system in place. Unfortunately in this instance,
it wasn't brought to his attention frankly by people who
brought many other issues forward.
He is a man of high integrity and he is the right person--
--
Senator McCaskill. So there wasn't a system in place that
your lawyer is telling you you're subject to punitive damages
didn't get to your desk? How is that not incompetent? How can
you not have a system in place that you are at least--Lucy
Clark Dougherty has a way of telling you we now have our
lawyers telling us four different times within a couple of
years on something you hadn't even talked about recalling
punitive damages. How do you have a system in place that
doesn't account for that?
Ms. Barra. We had very senior lawyers who had this
information and didn't bring it forward who are no longer with
this company.
Senator McCaskill. Well, Deborah Nowak-Vanderhoef is still
with the company, and she had the knowledge.
Ms. Barra. As we went through the details of the Valukas
Report very carefully, and I would say when in doubt we reached
further to take action, there are many lawyers that are no
longer with the company.
Senator McCaskill. I think there has been a blind spot
here, I really do. My time is up. I think the failure of his
legal department is stunning, and the notion--I mean, you look
around government. When something like this happens, you know
what? Secretary Shinseki didn't know about those problems with
scheduling. Nobody told him. He's gone.
Senator Heller?
Senator Heller. Madam Chair, thank you.
I want to thank our witnesses for being here today and for
taking the tough questions.
Mr. O'Neal, thank you for being here also. You weren't here
at the last hearing, so you kind of complete the circle here.
If you don't mind, I'd like to ask you just a couple of
questions regarding your products and I don't have a lot of
time. So the shorter the answers, the better.
The complaints, as they started piling up in the mid-2000s
on your product, did Delphi conduct any internal investigation
to determine whether your part was at fault?
Mr. O'Neal. We were not aware of this situation in terms of
deaths until February of this year, 2014.
Senator Heller. So you're saying obviously not----
Mr. O'Neal. Obviously not.
Senator Heller.--if you didn't know until February of this
year. Was there any reason to believe that anyone in your
company may have known?
Mr. O'Neal. No. In the exhaustive review that we've done of
our documents and in talking with individuals, it was clear the
Delphi team, in working with the General Motors team in this
particular situation, was very concerned about customer
satisfaction, warranty costs and quality issues, no safety
issues.
Senator Heller. OK. Is there a possibility that any
individual in your company just simply didn't take it to the
top?
Mr. O'Neal. We looked deep----
Senator Heller. Similar situations in GM----
Mr. O'Neal. We looked very, very hard, and there's no
evidence of that because it's quite clear the mindset was based
on information that they were given. They were working on
quality issues, not safety issues.
Senator Heller. Did anyone ever raise concerns about
keeping the number the same with this part, or was that a
decision just to unanimously follow GM?
Mr. O'Neal. Standard protocol in our industry is that the
original equipment manufacturer, the car manufacturer, in this
case General Motors, they determine the part number, and they
control that part number. So if that part number is ever to
change, the car manufacturer would dictate that change and we
would automatically upgrade it.
Senator Heller. Do you feel that Delphi shoulders any
responsibility here?
Mr. O'Neal. Well, let me explain, I think, some very
important information, and I think it would lead to a
discussion of an answer for you.
We had a product that we worked with General Motors to
develop, and that was the switch, and that switch started with
a certain set of requirements, and often in development,
working with the customer and General Motors in this case,
those requirements can become more stringent, they can become
less, or they can stay the same. In this particular case, they
were made less stringent in order to meet I think what Mr.
Valukas said in his report, a switch feel, a tactile feel of a
very European style switch in terms of when you turned it, and
hence the lower torque. That was ultimately approved by General
Motors, and that part met the requirements that were dictated.
So that part then met with other parts and became part of a
subsystem called the ignition assembly.
Senator Heller. I hate to interrupt you, but I don't have a
lot of time. Do you feel Delphi acted responsibly?
Mr. O'Neal. Yes. Our product met the requirements of the
customer.
Senator Heller. So, no responsibility.
Mr. O'Neal. No.
Senator Heller. None.
Mr. Valukas, I understand there was a sharing agreement
with Delphi that wasn't as forthcoming as you would have liked
it to have been. Do you think the limited information that you
received from Delphi and their employees prevented you from
providing a complete report?
Mr. Valukas. No. I believe at this point, having had the
chance, with the extra 6 weeks or the month that's involved
here in looking at what we have in the way of materials so far,
I think our report is complete. I'm comfortable that in this
aspect, the Delphi aspect of it, that we have that information.
Senator Heller. Is there anything that we don't know that's
relevant?
Mr. Valukas. No. I promised and committed to an earlier
committee that if we found something different, I told the
Board of Directors, and they directed me if there was anything
factually that we learned that would in any way alter the
report or add to it in any significant way, that we would
supplement the report, and I would make that commitment to this
committee. But right now, I believe that everything that we
could know about this issue we put forth in that report or in a
supplemental letter.
Senator Heller. Do you feel that Delphi shoulders any
responsibility?
Mr. Valukas. I'm sorry. Say that again?
Senator Heller. Do you feel that Delphi shoulders any
responsibility for the 13 deaths?
Mr. Valukas. That's a legal--I can tell you this. I can
tell you that GM, General Motors approved the switch knowing
that it was below torque values, and that was an approval that
Mr. DeGiorgio gave to Delphi, and Delphi manufactured the
switch in accordance with that approval.
Senator Heller. Ms. Barra, do you believe that Delphi
shoulders any responsibility for the 13 deaths?
Ms. Barra. We're the OEM. We're the company that's
responsible to integrate the parts into the vehicle, so
integration of parts is our responsibility.
Senator Heller. Thank you.
Senator McCaskill. Thank you very much. Thank you, Senator
Heller.
Senator Klobuchar?
Senator Klobuchar. Thank you very much, Madam Chairwoman.
Thank you, all of you.
I spoke earlier about Natasha Weigel, who grew up in Albert
Lea, Minnesota. The car goes barreling--the car she's a
passenger in--at 70 miles per hour in Wisconsin into a grove of
trees, and this story isn't just tragic because Senator Baldwin
and I have constituents and because the facts are tragic. It
also turns out to be an important part of Mr. Valukas' report
in terms of what happened here.
In this case, a Wisconsin State Trooper named Keith Young
conducted an investigation himself after the crash and clearly
made the link between the defective ignition switch and the
failure of the airbag to deploy. Trooper Young's report cracked
the code that seemed to have evaded GM's engineers and lawyers
for years. He wrote in this report--and this report was in GM's
legal department, filed as of February 2007--he wrote, ``The
two front seat airbags did not deploy. It appears the ignition
switch had somehow been turned from the Run position to
Accessory prior to the collision with the trees.''
Mr. Valukas, did you interview people about this report,
and did you figure out why no engineers had read it in GM?
Mr. Valukas. What happened with this report was that the
report--and I believe correctly analyzed the situation back as
far as 2007--was collected by GM as part of ESIS, which is
their claims administrator, put into what is called a rumor
file, and then at some point it was accessed by a paralegal.
Dwayne Davidson then sent it to NHTSA as part of the TREAD
responses.
At no point--and we had this forensically reviewed by
outside experts. At no point was that report accessed by anyone
in GM Legal between then and March or so of 2014 when this
investigation was undertaken. So during that period of time it
was in those files, that rumor file, and no one at GM looked at
it, other than back in 2007 when they sent a copy to----
Senator Klobuchar. So this is like an official State
Trooper report. I know it's in a rumor file, but it seems to me
it's somewhat official. And then I think there was also an
Indiana University study. They were commissioned by NHTSA to
look at this crash as well. Was that also in the rumor file?
Mr. Valukas. No. That was actually--they actually did not
even have that. Even though that was publicly available in
2012, GM did not gather that public information. That wasn't
something they had until 2012 when an outside expert for a
plaintiff's lawyer made it available as part of their report.
Senator Klobuchar. And, Mr. Millikin, back to Trooper
Young's report, how could it be that you guys had this for
seven years, you're trying to figure out why, you're starting
to see all these airbag non-deployment cases, that no one saw
this report and looked at it?
Mr. Millikin. I think what you're seeing is an example of
exactly what Mr. Valukas' report identified, and that is
absolutely poor information flow. The file that this document
was in was one that was not one that was searchable by the
normal terms that people would use when looking for documents,
it's my understanding from the Valukas Report, and we're doing
what we can to make sure that we don't have this on a going-
forward basis. This is a tragedy that cannot happen again, and
I'm dedicated to making sure that we make the changes we need
to make to assure that.
Senator Klobuchar. Ms. Barra, I said earlier with the first
panel here that I do appreciate that you have come forward and
out front and set up this compensation fund. As I said, we're
not going to know if justice is done until we see what the
outcomes are. And I also appreciate the work that's been done
on the recalls as an owner of a GM car.
And one of the things that Mr. Valukas wrote in his report,
he said that although everyone had responsibility to fix the
problem, nobody took responsibility. He said a top executive
described it as the ``GM nod, when everyone nods in agreement
to a proposed plan of action''--I've been in meetings when this
happens--``but then leaves the room and does nothing.''
What concrete steps have you taken to implement, to get rid
of what we call the ``GM nod,'' and how do you ensure that you
move from this culture of sort of diffused responsibility to
defined responsibility?
Ms. Barra. Well, first I'd like to say in my career at
General Motors I've never accepted the GM nod, and frankly I've
called people out on it because it's not appropriate. I mean,
we make a very complex product, and it's important that all
voices are heard.
The way that you change culture is by demonstrating the
behavior, making sure people understand what your expectations
are, and calling them out when they don't. I've been
demonstrating that. I will tell you our leadership team, my
direct leadership team is 100 percent committed to that, and
I've talked openly about it. When I talk to all employees
globally, on June 5, after I read the Valukas Report, which I
found deeply troubling, I told them that, and I told them that
behavior was unacceptable, we weren't going to tolerate it.
But the true change will be by behaviors, and I'm intent on
making sure the right behaviors continue going forward.
Senator Klobuchar. Thank you.
Senator McCaskill. We have a custom in this committee that
when the Chairman or the Ranking Member show up, they get to
cut in line. So I'm going to abide by that, what I think is an
absolutely appropriate custom, and recognize Senator Thune for
his questioning.
STATEMENT OF HON. JOHN THUNE,
U.S. SENATOR FROM SOUTH DAKOTA
Senator Thune. That makes you really popular here, Madam
Chairman.
[Laughter.]
Senator Thune. I do appreciate it, and I thank you, and I
thank both you and Senator Heller for holding this hearing and
staying on these issues. It's really important that we examine
the developments following this recall issue, and I know you've
been working very hard on this issue, and I know we all share
the desire to get the answers and ensure that this doesn't
happen again.
GM has admitted via a consent order that it failed to
report this safety-related defect to NHTSA in a timely manner,
and the internal report prepared by Mr. Valukas called GM's
delay in addressing the ignition switch defect a failure of
accountability, of oversight, of urgency, and of engineering.
As we all know, these delays cost lives, and I know I express
my deepest sympathies to those who were injured or lost loved
ones in car accidents involving the GM vehicles that have now
been recalled.
I'd like to direct this question to Ms. Barra. I welcome
the very public steps that you've taken thus far to address the
needed changes within GM, some of which you've discussed in
your written testimony. But I'm also reminded of statements
that your immediate predecessor, Mr. Akerson, also discussed in
his efforts to create a culture of accountability at GM
following the company's bankruptcy and Federal bailout.
Mr. Valukas uncovered many troubling findings regarding a
lack of accountability and urgency among GM employees and
senior managers. My question is, in your view, are these
vestiges of the past or a sign that a cultural change is yet to
take hold at GM?
Ms. Barra. I think when you look at culture change, it
happens over a long period of time, and it's by leadership
actions. I would say Mr. Akerson did extensive work to make
sure he drove accountability and drove the right behavior, but
I think we're on a continuum of making that cultural change. I
would frankly say we're accelerating that now with the work and
the very open and transparent way that we're dealing with this
issue and the way we're sharing it with employees, and they
want to change. They want to make sure we have the right
systems and processes in place.
But I would say Mr. Akerson started on that journey, and
we're continuing and accelerating it.
Senator Thune. How do you plan to measure that change?
Ms. Barra. I think on a couple of fronts. One, on the very
real part, from a safety perspective, we've already broken down
the silos and we are mining data. We're using some of the
latest data analytic techniques to make sure information comes
from across the company. We've engaged employees, and they are
participating in our Speak Up for Safety program.
But I would also say we do a Workplace of Choice survey
every 18 months, and we've seen improvements in that. That will
be another key, very objective way that we'll look to make sure
we're driving the right openness.
But I can tell you, I get hundreds of e-mails from our
employees on a weekly/monthly basis, and they're engaged, and
that to me is the best sign because it's actions, not words,
that are going to change the behaviors.
Senator Thune. What role do you think the Board of
Directors has in changing the culture?
Ms. Barra. I think the role of the Board is to very clearly
state their expectations of how the company should operate; and
me as the CEO, it is my job to make sure we're living up to
their expectations across the company with my leadership team.
Senator Thune. I'd like to direct a question to Mr. O'Neal,
and this is based on the Valukas Report. The ignition switch
that your company developed appears to have been plagued with
both electrical and mechanical problems, problems that weren't
limited to the switch having a lower torque specification. In
addition, a GM document from 2001 released by the House Energy
and Commerce Committee mentions quite a bit of frustration on
the part of GM in dealing with these Delphi switches due to
electrical failures and Delphi's inability to deliver parts on
time for testing purposes.
Taken together, this evidence would seem to indicate the
problems with the Delphi switch were greater than we were
initially led to believe. Now that these ignition switch issues
have come to light, have you gone back and reviewed these
concerns and determined what Delphi will do differently in the
future?
Mr. O'Neal. We did go back and look extensively at all of
the documentation, and we found nothing that was abnormal in
terms of the product development and ultimately how the
problems were addressed that you sometimes run into as you move
from development to production, et cetera. As I said, our
product met the requirements. It entered an ignition assembly
system that had other products. Our part met its requirement.
I'm assuming the other products met their requirements. But
when they come together, they form a system, and as Ms. Barra
said earlier, it's someone else's job to make sure--in this
case it was the OE to make sure that those products worked in
total harmony when they come together.
So we've gone back and understood our role in that. I think
the new industry standard of how safety systems interact from a
safety perspective versus by part we have totally embraced, and
we will work diligently with General Motors over this issue.
Senator Thune. In 2006, GM authorized a change to the
ignition switch but didn't change the part number. As a
supplier, is it a common practice for Delphi to allow a
manufacturer to change a part but not change the part number?
Mr. O'Neal. In 2013 we had about 120,000 changes,
engineering changes, and only about 40 percent of those
actually had a part number change. So it's quite normal not to
change the part number.
Senator Thune. Do other manufacturers do the same thing?
Mr. O'Neal. Yes.
Senator Thune. Madam Chair, my time has expired.
Senator McCaskill. Thank you.
Senator Thune. Thank you.
Senator McCaskill. Thank you very much.
Senator Blunt?
Senator Blunt. Thank you, Madam Chairman.
Mr. Valukas, in your report, when did the legal team know
about this problem?
Mr. Valukas. When did they first learn of the fact that
they had airbag deployment issues?
Senator Blunt. Yes.
Mr. Valukas. I think you could go back--if you go back to
their investigators, it would have been probably in the range
of 2007 that it was called to their attention in a NHTSA
meeting, one of the individuals involved there, and there
became an inquiry about that by the investigator who was
assigned to the GM legal team.
Senator Blunt. And when did they know about the ignition
switch problem?
Mr. Valukas. The ignition switch problem developed over a
period of time, and I would say that the first time that I can
recall that this matter was being called to their attention in
some way, which is not to say they related the two, may have
been as early as 2009/2010.
Senator Blunt. And, Mr. Millikin, how long have you been
the Chief Counsel?
Mr. Millikin. Since the middle of 2009.
Senator Blunt. And when did you first find out? Were you at
the company before that?
Mr. Millikin. I've been with the company, sir, for 37
years.
Senator Blunt. So you ran the legal side of the company
before that?
Mr. Millikin. Yes, sir, before I knew about the ignition
defect.
Senator Blunt. And when did you first find out about these
two problems?
Mr. Millikin. I first found out about the ignition switch
recall situation involving non-deployment of airbags first week
of February of this year.
Senator Blunt. How is that possible that nobody would have
told you before the first week of February of this year?
Mr. Millikin. My information on that is based largely on
the Valukas Report and then talking to other lawyers who had
had some involvement in it. But, frankly, there was a long
time, as the Valukas Report indicates, where there wasn't a
connection made between the ignition switch problem and the
non-deployment of airbags. In terms of my taking a look at the
results of the Valukas Report, I think it all came together for
the lawyers at the time of the Melton deposition in 2013, and
from that point on there was enough information inside the
legal staff for people to have taken action and to have caused
the engineering organization to take action.
They didn't. That was tragic. If they had brought it to my
attention at that time, I certainly would have made sure that
they would have done something. But they----
Senator Blunt. OK. Give me those dates again? From the time
you think they had enough information to take action until the
time you found out was from when to when?
Mr. Millikin. I'm basing it on the date of the DeGiorgio
deposition. I believe that was in April 2013.
Senator Blunt. And you didn't know until----
Mr. Millikin. February 2014.
Senator Blunt. I'm going to ask Mr. Valukas this as well,
but would this kind of problem be allowed to happen again? What
have you done to prevent that same exact set of circumstances
from occurring again?
Mr. Millikin. I've done a number of things. The one I think
is most designed to make sure it doesn't happen again is before
any case can be settled or taken to trial, if it involves a
fatality or a serious bodily injury, that has to come to me
regardless of the amount of the settlement proposal, and I want
it brought to me with a full explanation of the case, with a
focus on any open engineering issues so that I have an
opportunity to cause open engineering issues to be addressed if
they're not being properly addressed.
Senator Blunt. And is there any way to trigger this before
you have a serious bodily injury or fatality or a lawsuit that
results from those two things?
Mr. Millikin. There are other things that I've done to make
sure that there's a flow of information upwards inside the
organization that would also be bringing to my attention cases
on a more regular basis than they were brought to my attention
before.
Senator Blunt. Mr. Valukas, is it your view that the
changes that have been made would prevent what happened from
ever happening again?
Mr. Valukas. I believe, based on what I know is taking
place, I think the answer is yes. I think that one of the
things that's happened here is with the flow of information,
what you are able to identify, which they didn't, were the
trends quickly enough so that the engineering department, to
the extent the engineering department wasn't acting on it and
going back to a comment that had been made earlier, the legal
department would be in a position to push that and force that
to take place.
Senator Blunt. And have employees been let go because of
this?
Mr. Valukas. That you'll have to address to----
Senator Blunt. Mr. Millikin, have employees been let go
because of this?
Mr. Millikin. Yes, they have.
Senator Blunt. And are any of them challenging their
dismissal?
Mr. Millikin. They are not.
Senator Blunt. One last question, Ms. Barra. You all are
selling lots of cars, also recalling lots of cars. I think 25
million is the number in the last 12 months. Why would there
still be so many recalls? And I'm not suggesting that's
necessarily a bad thing, but this is a high number. Why is that
number so high?
Ms. Barra. Well, when we learned what happened with the
ignition switch recall, we immediately went back, redoubled our
efforts. We went and looked at a number of places, were there
any open NHTSA investigations. We tackled all of those. We went
back extensively and looked at information that we had to see
if we could more quickly put together any trends. We also,
then, as it relates to every safety item that Mr. DeGiorgio had
responsibility for, we looked and assessed every single one of
those. In some cases there's not even any field information to
suggest there is an issue. But as we did our systems
engineering analysis, if we saw simply by, for instance, adding
an insert into a key we could make the system more robust, we
did that.
So we are intent on being a company known for our safety,
and this was an important step, and we'll continue to look for
those items to make sure we have a company that is dedicated to
the safety of our vehicles.
Senator Blunt. Mr. Millikin, I thought of one final
question in the line I was asking you. Were those employees who
were dismissed, were any of those employees given retirement
benefits or salary that they had not previously earned? It's
called ``packaging out.''
Mr. Millikin. Yes, they were.
Senator Blunt. That might explain why they're not
challenging their dismissal.
That's all I have, Chairman.
Senator McCaskill. Thank you, Senator Blunt.
Senator Ayotte?
STATEMENT OF HON. KELLY AYOTTE,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Ayotte. Thank you, Madam Chairman.
I want to ask Mr. Millikin, you've been General Counsel, as
I understand it, since July of 2009. Is that right?
Mr. Millikin. July 20 of 2009, that's correct.
Senator Ayotte. And before that, though, you had a long
legal career at GM.
Mr. Millikin. That's correct.
Senator Ayotte. So how is it that--one thing that deeply
troubles me is the important regulator for GM is NHTSA;
correct?
Mr. Millikin. That is correct.
Senator Ayotte. And as I understand it, GM's response in a
number of complaints regarding this matter--but this is a
pattern that extends beyond this matter--was in terms of
inquiries made by NHTSA about problems with the Chevy Cobalt
and this specific issue. Really, the answers were attorney-
client privilege. The answers to NHTSA were things like ``we
had not assessed the case,'' ``GM opts not to respond.'' And I
guess I have a question for you as general counsel. Are NHTSA
complaints brought to your attention and the response of the
company to NHTSA complaints?
Mr. Millikin. Since I've been General Counsel, on multiple
occasions the lawyers that report to me, and some that don't
report to me on a consistent basis, have brought safety
concerns to my attention. If you go back and take a look--if I
go back and take a look at some of my e-mails over the last
couple of years, it has been on frequent occasions they've
brought it to my attention, including some of the lawyers we
had to let go. So there was a clear understanding in terms of
my expectation of the kinds of issues that needed to be brought
to my attention. For some reason, that did not happen here, and
that's very troubling to me, and that's why I'm doing the
things that I'm doing to make sure that on a going-forward
basis those kinds of information lapses do not reoccur.
Senator Ayotte. So let me understand it. Not only were you
not notified according to your testimony about the potential
for punitive damages as the legal officer for GM, and that that
potential for punitive damages you didn't notify to
authorities, but also in terms of what I understand were
complaints that were brought forward to NHTSA about this
matter, you were not informed about those either?
Mr. Millikin. Well, the reports that you're referring to I
think are the reports that were mentioned in a newspaper
yesterday. I went back and took a look at when those reports
were given to NHTSA. Most of them were given to NHTSA at a time
when I was not general counsel. One of them was, but----
Senator Ayotte. Wasn't there one in 2009 that was, in fact,
post-2009 involving a December 2009 crash?
Mr. Millikin. I'm saying there was one that was when I was
General Counsel. That was, I believe, something that occurred
in 2010. That did not come to my attention. That is correct.
Senator Ayotte. So that was not brought to your attention.
Mr. Millikin. That is correct.
Senator Ayotte. And what was the company's response to that
complaint to NHTSA?
Mr. Millikin. Well, I don't remember what the company's
response to that specific complaint was. I do know that, if I'm
remembering this one correctly, the initial thought based on
the investigation that was done by the engineering organization
was that it was a power----
Senator Ayotte. Well, let me be clear about what I
understand the company's response to be.
Mr. Millikin. OK.
Senator Ayotte. Which was a response that it was attorney-
client privilege, that there was a refusal to answer the
regulatory agency in that regard. And I've got to tell you,
it's actually shocking to me that you would be general counsel
in this regard and not be the recipient of NHTSA complaints and
what the company would respond with regard to NHTSA. That is
obviously an important regulatory agency for you in terms of
public safety, and that you wouldn't have known. But also I see
a consistent pattern of GM answering, refusing to answer NHTSA.
Let me just say that I'm looking forward also to hearing
from NHTSA because I think there were some serious lapses of
responsibility by the regulatory agency because, as a
regulatory agency, they should have refused to accept your
answers, meaning GM's answers of not answering, of asserting
attorney-client privilege, of I think refusing under
circumstances where as a regulatory agency I don't know how you
could accept that and be able to say to the public that you're
going to protect people's safety.
But I don't understand how you, given not only the pattern
we see with the punitive damage issue, how the NHTSA complaints
wouldn't have come to your attention either in this one based
on a 2009 crash where, as I understand it, a young woman was
killed, was quite shocking that you wouldn't have understood
that. It's interesting that you would hold this position and
you wouldn't get this critical information from a regulator.
Senator McCaskill. Senator Blumenthal.
Senator Blumenthal. Thank you, Madam Chairman.
Thank you, Ms. Barra, for being here again. I am sure that
you're familiar with this ad which has appeared in many
newspapers around the country. It says, ``The key to safety,''
and then it essentially tells the reader that the key to safety
is removing weight from the keychain until the car is repaired.
There have been egregious delays in deliveries of those parts
to dealers who want to repair these cars.
The key to safety, in my view, is taking these cars off the
road, not taking keys off the chain. So I hope that you will
work with Mr. O'Neal, who is right next to you, in accelerating
delivery of these parts so dealers and drivers can be sure that
these cars are repaired and made safe.
And I also hope that you will expand the compensation fund
to vehicles that were in crashes as a result of defective
ignition switches beyond the 2.6 million that have been
recalled already, including the millions more that GM
acknowledges caused at least three deaths and many injuries.
There is no way, in my view, to distinguish the injuries,
deaths and harm resulting from those crashes as opposed to the
ones that are the subject of this hearing.
So I hope you will consider extending the fund. I'm glad
there is no cap to it, but both fairness, equity, and
accountability argue powerfully for covering all of those
crashes, all the victims who were involved in cars defective
because of exactly the same part.
And I want to make a suggestion, with all due respect. If
GM is really serious about changing its culture and imposing a
new era of truth-telling and accountability, the place to start
is with your legal department. You well know, lawyers are
responsible for being the conscience of the company, for
ensuring compliance with the law in spirit as well as letter.
In this instance, the lawyers enabled purposeful concealment
and cover-up, possible criminal action that is the subject
right now of an investigation.
I know that you have a responsibility to choose your own
team, but my view is the team has to change. Right now, the
buck stops at an empty desk.
I know, Mr. Millikin, you say you wish you had done
differently. Will you agree to recommend to Ms. Barra that GM
unseal all of those settlements involving presumably millions
of dollars, unseal the secret settlements that could have saved
lives if they hadn't been kept secret from the beginning? Will
you make that recommendation?
Mr. Millikin. No, I will not, but those settlement
documents are with responsible government agencies who can look
at them.
Senator Blumenthal. Will you agree--well, they haven't been
unsealed. They haven't been made public. Will you agree to
waive the immunity shield, the absolute barrier to people suing
GM in court because of the shield that was granted during a
bankruptcy proceeding that, in fact, involved potentially fraud
by GM on the courts and the United States taxpayers that bailed
it out?
Mr. Millikin. We have done that already, Senator.
Senator Blumenthal. You would allow lawsuits against the
company or pre-2009----
Mr. Millikin. We've done that in connection with the
Feinberg protocol, Senator.
Senator Blumenthal. Yes, but that's only for settlements.
What if somebody goes to court to sue GM?
Mr. Millikin. Other than the Feinberg protocol, we are
going to----
Senator Blumenthal. Would you agree to waive that shield?
Mr. Millikin. We will not.
Senator Blumenthal. You know, I have a couple of other
questions. For example, will you agree to make public all of
the documents made available to Mr. Valukas?
Mr. Millikin. We will not.
Senator Blumenthal. Would you agree to enable all those 15
people who have been discharged and who are under
confidentiality agreements not to talk about what they did at
the company, enable them to overcome those gag orders?
Mr. Millikin. Senator, the people who were let go, the
agreements that they have enable them to go talk to any
regulatory agency that they feel they need to, or to answer any
questions that come from any governmental body with respect----
Senator Blumenthal. What about the public? What about
reporters? What about your drivers and customers? If they go to
those 15 people, will they be free to answer those questions?
Mr. Millikin. I'd have to take a look at the agreements to
make sure I know the answer to that.
Senator Blumenthal. Will you waive any confidentiality
requirements under those agreements that they have been
rewarded by those additional payments to agree to?
Mr. Millikin. I'd have to take a look at the agreements
themselves before I would be able to answer that question
honestly, Senator.
Senator Blumenthal. I hope that you will come back to this
panel with different answers. If not, I would respectfully
suggest that this company is not well served by your
continuing.
Thank you, Madam Chairman.
Senator McCaskill. Senator Markey?
STATEMENT OF HON. EDWARD MARKEY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Markey. Thank you, Madam Chair.
According to Mr. Valukas' report, in 2004 GM and the
Transportation Department had a meeting in which the attendees
inexplicably agreed that cars stalled by themselves and that
this was not necessarily a safety problem. Do any of you
disagree that many members of the public would probably have
rejected this conclusion if they had known about it?
Let the record show that no one disagreed.
Mr. Valukas' report describes warnings of accidents that GM
was aware of involving their vehicles, but some of these
warnings and reports were not publicly disclosed or acted on.
Do any of you disagree that if the public knew about these
reports of cars stalling on their own at the time, it is
possible that some of the deaths and injuries caused by this
defect could have been avoided? Does anyone disagree with that?
Mr. Millikin. No.
Senator Markey. Let the record reflect that.
In 2007, NHTSA asked for and received a document from GM
related to the death of two Wisconsin teenagers. That document
was first made public by me at our May 7 hearing, and it is
referenced repeatedly in Mr. Valukas' report and included a
report by the Wisconsin State Patrol Academy that said that the
ignition switch defect prevented the airbags from deploying. It
also found other examples of the same problem happening in
other cars and identified a 2005 GM warning to dealers about
the issue. In short, it correctly identified the safety defect
at that time. Do any of you disagree that if the public had
been told about this document and warned about its conclusions
at that time, it is possible that some of the deaths and
injuries caused by this defect could have been avoided?
Let the record show that none of the witnesses disagreed.
In 2006 and 2007, NHTSA, the National Highway Traffic
Safety Administration, received investigative reports from its
contractors related to two fatal crashes involving GM Cobalts.
Both of these reports described airbags that did not deploy in
cars because ignition switches had turned off. Do any of you
disagree that if NHTSA had reviewed these reports and informed
the public about the safety defect, it is possible that some of
the deaths and injuries caused by the defect could have been
avoided?
Again, let the record make it clear that none of the
witnesses disagree.
So, Ms. Barra, I have introduced legislation, along with
Senator Blumenthal, that calls for important steps to provide
more information to the public sooner. The best way of ensuring
that this does not happen again is to ensure that there is
transparency in the future. I know that you are working hard to
change GM's safety culture, but you can't change other
companies and you can't give me the confidence that NHTSA will
take more aggressive action in the future.
That is why the bill that we have introduced requiring the
public availability of documents automakers receive that first
alert them to fatalities that could be attributable to safety
defects is so important. We need more information to be
publicly disclosed by automakers in the early warning reporting
system. I want the public to be able to access this kind of
information in time for it to provide real early warnings.
Does GM support the legislation?
Ms. Barra. Senator Markey, first of all, you and I agree
completely on the need to make sure we are doing everything we
can from a safety perspective. And as I've met with you, and I
know my staff has worked closely with your representatives, we
support efforts to make the NHTSA website more accessible and
useful. We also have suggested that a national VIN database be
added and added to the bill. We think that would be very useful
to make sure we can quickly get to people when we know that
there's a safety defect.
We also support efforts to make reports on fatality and
early warning data more available to the public as long as the
right provisions are there to protect privacy and to protect
confidential information from an overall perspective, and we
are more than willing to continue to work with you and your
office on any legislation that advances the safety agenda.
Senator Markey. I thank you, Ms. Barra, and I think that's
going to go a long way if that legislation becomes law, and it
should because that's the surest way of ensuring this will not
happen again.
And I thank you, Madam Chair, and I thank you for your
focus on NHTSA as well, because I don't think we can conclude
this entire process until NHTSA is----
Senator McCaskill. That's absolutely correct.
Senator Markey. I thank you for----
Senator McCaskill. Thank you, Senator Markey.
Senator Boxer?
STATEMENT OF HON. BARBARA BOXER,
U.S. SENATOR FROM CALIFORNIA
Senator Boxer. Thank you.
Ms. Barra, after months of negotiations, Senators Schumer,
McCaskill and I thank you for your support of the Raechel and
Jacqueline Houck Rental Car Safety Act.
I ask unanimous consent to put GM's letter into the record,
and I will work with you to convince the other automakers to
follow that lead. Is it all right that we put that into the
record?
Senator McCaskill. Without objection, it will go in the
record.
[The information referred to follows:]
General Motors Company
Washington, DC, July 8, 2014
Hon. Chuck Schumer,
322 Hart Senate Office Building,
Washington, DC.
Dear Senator Schumer:
On behalf of General Motors, I would like to thank you, as well as
the cosponsors, for reviewing our proposed changes to S. 921 as
described in my June 26, 2014, letter to you (herewith again attached).
With these changes made to the Committee--reported text of S. 921,
``The Raechel and Jacqueline Houck Safe Rental Car Act of 2013,'' such
a revised bill will have the support of General Motors.
Let me offer our appreciation to you, as well as to your staff for
their professionalism, as we worked through this process.
Sincerely,
Lee R. Godown,
Vice President,
Global Government Relations.
Attachment
______
General Motors Company
Washington, DC, June 26, 2014
Hon. Chuck Schumer,
322 Hart Senate Office Building,
Washington, DC.
Dear Senator Schumer:
Thank you for meeting with me, our CEO Ms. Mary Barra, and for the
continuing cooperation of your staff in an effort to find common ground
on the provisions of S. 921, The Raechel and Jacqueline Houck Safe
Rental Car Act of 2013.
As you know, under existing law auto manufacturers have the ability
to defend against loss of use claims by rental car companies, because
rental car companies have the ability to manage the way they repair
their fleets subject to safety recalls or other safety related notices.
While we think that the rental companies will continue to have that
ability as a practical matter (because of the size and diversification
of their fleets) if S. 921 passes as currently drafted, our defense as
a manufacturer might be degraded, since the rental companies would be
able to point to the absolute statutory grounding of vehicles as the
basis for claims of loss of use--even in the absence of a showing of
actual ``damages.''
Our primary concern with the current language of S. 921 is that the
new requirements for rental companies to repair recalled vehicles could
increase manufacturers' liability under state laws for the losses
suffered by the rental car companies as a result of having to ground
recalled cars before they can be repaired. In discussion with your
staff, it became apparent that you never intended to change the status
quo with regard to loss of use, and believe that the issue would be
best addressed in the contracts between the manufacturers and the
rental companies.
As part of discussions I have had with your staff, and the staffs
of the cosponsors of S. 921, I would like to suggest the below language
as an amendment to the current provisions of the legislation.
After section 8 (of S.921), insert the following:
SEC. 9. RULE OF CONSTRUCTION.
Nothing in this Act or the amendments made by this Act shall--
--
(1) be construed to create or increase any liability, including
for loss of use, for a manufacturer as result of having
manufactured or imported a motor vehicle subject to a
notification of defect or noncompliance under subsection (b) or
(c) of section 30118 of title 49, United States Code; or
(2) supersede or otherwise affect the contractual obligations,
if any, between such a manufacturer and a rental company (as
defined in section 30102(a) of title 49, United States Code, as
amended by section 2).
If this change in S. 921 can be accomplished and addressed, General
Motors stands ready to support such a revised bill.
I would like to add that, in discussions with your staff, I have
raised the possibility of mandating that rental car companies be
obliged to report their repair completion rates monthly or quarterly to
the National Highway Transportation Administration (NHTSA)--the goal
being to prompt the companies to repair their vehicles in a timely
fashion, and to make this completion rate more transparent and public.
We support this requirement.
Lastly, our auto dealer partners (NADA) have expressed a concern
that the NHTSA rulemaking authority in section 9 of the legislation is
too broad. Section 9 states: The Secretary of Transportation may
promulgate rules, as appropriate, to implement this Act and the
amendments made by this Act. I understand through your staff that you
are willing to delete this section of the legislation, and we support
this deletion.
Sincerely,
Lee R. Godown,
Vice President,
Global Government Relations.
Senator Boxer. Thank you.
A month ago, Bloomberg Businessweek published an article
entitled ``GM Recalls: How GM Silenced a Whistleblower.'' Have
you seen that article?
Ms. Barra. Yes, I have.
Senator Boxer. OK. I ask unanimous consent to place it in
the record.
Senator McCaskill. Without objection.
[The information referred to follows:]
Bloomberg Businessweek--June 18, 2014
GM Recalls: How General Motors Silenced a Whistle-Blower
By Tim Higgins and Nick Summers
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Photograph by St. Croix County Sheriffs Office/AP Photo
In 2006 the wreck of a 2005 Cobalt killed two and injured one
It was close to 3 a.m. on June 6 when Courtland Kelley burst into
his bedroom, startling his wife awake. General Motors (GM), Kelley's
employer for more than 30 years, had just released the results of an
investigation into how a flawed ignition switch in the Chevrolet Cobalt
could easily slip into the ``off'' position--cutting power, stalling
the engine, and disabling airbags just when they're needed most. The
part has been linked to at least 13 deaths and 54 crashes. GM Chief
Executive Officer Mary Barra, summoned before Congress in April to
answer for the crisis, repeatedly declined to answer lawmakers'
questions before she had the company's inquest in hand. Now it was out,
and Kelley had stayed up to read all 325 pages on a laptop on the back
porch of his rural home about 90 miles northwest of Detroit.
The ``Valukas Report,'' named for former U.S. Attorney Anton
Valukas, who assembled it at GM's request from interviews with 230
witnesses and 41 million documents, blamed a culture of complacency for
the more than decade-long delay before the company recalled millions of
faulty vehicles. It described employees passing the buck and committees
falling back on the ``GM nod''--when everyone in a meeting agrees that
something should happen, and no one actually does it. On page 93, a GM
safety inspector named Steven Oakley is quoted telling investigators
that he was too afraid to insist on safety concerns with the Cobalt
after seeing his predecessor ``pushed out of the job for doing just
that.'' Reading the passage, Kelley felt like he'd been punched in the
gut. The predecessor Oakley was talking about was Kelley.
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Kelley had sued GM in 2003, alleging that the company had dragged
its feet addressing dangers in its cars and trucks. Even though he
lost, Kelley thought that by blowing the whistle he'd done the right
thing and paved the way for other GMers to speak up. Now he saw that
he'd had the opposite impact: His loss, and the way his career had
stalled afterward, taught others at the company to stay quiet.
``He stood in the doorway of our bedroom with a stunned look on his
face,'' Beth Kelley, his wife of 23 years, says. ``Maybe we're just
extremely naive, but we really thought that since this all happened,
that something good would come out of it.'' Kelley declined to comment
for this article, but his allegations are laid out in court records and
depositions. A number of friends and family did speak for the record.
Kelley had been the head of a nationwide GM inspection program and
then the quality manager for the Cobalt's predecessor, the Cavalier. He
found flaws and reported them, over and over, and repeatedly found his
colleagues' and supervisors' responses wanting. He thought they were
more concerned with maintaining their bureaucracies and avoiding
expensive recalls than with stopping the sale of dangerous cars.
Eventually, Kelley threatened to take his concerns to the National
Highway Traffic Safety Administration. Frustrated with the limited
scope of a recall of sport-utility vehicles in 2002, he sued GM under a
Michigan whistle-blower law. GM denied wrongdoing, and the case was
dismissed on procedural grounds. Kelley's career went into hibernation;
he was sent to work in another part of the company, and GM kept
producing its cars.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Selling for around $16,000, Cobalts were popular with teenagers.
The first death linked to its switch came in July 2005, when a Maryland
16-year-old, Amber Marie Rose, crashed her red '05 into a tree. The
airbag did not deploy. Although reports streamed into GM about moving
stalls and disabled airbags for years, the company waited until Feb.
13, 2014, to issue a recall.
Now GM professes contrition, promises change, and has ousted 15
individuals for misconduct or incompetence. Announcing the Valukas
findings to an audience of employees on June 5, Barra called the report
``extremely thorough, brutally tough, and deeply troubling.'' It
describes a corporate bureaucracy fatally indifferent to mounting
evidence its cars were killing people. ``Group after group and
committee after committee within GM that reviewed the issue failed to
take action or acted too slowly,'' Valukas writes. ``Although everyone
had responsibility to fix the problem, nobody took responsibility.''
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Photographs by National Highway Traffic Safety Administration/The
New York Times/Redux; St Croix Sheriff/Reuters
As bad as that sounds, Kelley's story shows that the situation was
worse--that GM's problems went beyond diffuse inaction. Management
wasn't just distracted or confused; speaking up was actively
discouraged, and workers saw that pointing out safety flaws could
derail their careers. When a GM employee did blow the whistle, the
Nation's largest automaker shut him down.
Kelley is mild-mannered and 52, with a full head of white hair that
makes him look older. His friends, who know him as Court, joke that
they should make bracelets reading ``WWCD?''--or ``What would Court
do?''--a la the popular Christian accessory. ``He's just one of those
people that you can trust what he says,'' his wife says. ``I don't have
any doubt in his decisions.''
Kelley is third-generation GM. His father and grandfather worked
for the company. A prized possession is a ring his grandfather was
given commemorating his participation in the famed Sit-Down Strike of
1936-37. In his driveway is a black Pontiac Fiero sports car that
Kelley and his teenage son, Ryan, fixed up.
In 1983, Kelley started at GM as a technician fresh out of
community college. By 1988 he was working on what would become the
company's Global Delivery Survey, an audit of GM cars at rail yards
across the country--a spot check of vehicles on the last leg of their
journey to dealerships. Originally meant to find minor noises and
rattles, the program had begun to turn up more serious safety concerns.
The creator of the effort, Bill McAleer, considered Kelley his protege
and someone who shared his alarm at the problems they found over the
next decade--such as tie rods in danger of falling off.
``I've done all I can. I wanted more vehicles recalled. They
shot me down.''
``Bill and I looked at each other in amazement,'' Kelley later
recalled in a deposition, ``that that kind of thing was happening,
where the bolts on the front suspension fell out as we drove over the
track. I thought that GM alarm bells would go off.''
They didn't. McAleer, who thought no one at GM was taking his
criticisms seriously, was taken off the audit; he sued the company
seeking whistle-blower protection. GM denied the allegations, and a
judge dismissed the case. With McAleer gone, Kelley grew even more
concerned about the problems he was seeing, he said in a June 2000
deposition from McAleer's lawsuit. He indicated that the audit was
picking up an average of two to three ``significant safety defects''
each month. In May of that year, Kelley told lawyers, the audit found
three problems, including a vehicle in Flint, Mich., with its antilock
brakes improperly attached and a vehicle in Lansing with a fuel leak.
McAleer's lawsuit claimed that as much as 1 percent of all vehicles
manufactured by GM during the 1999 model year could be defective, or
more than 30,000 North American cars and trucks.
Kelley said he approached his direct supervisor, George Kingston,
who in 2000 was director of quality for North American operations,
about his growing concerns. ``I would go to George and tell him this,
but it didn't seem to surprise him or provoke him to take new action,''
Kelley said in his deposition. ``He seemed to take it more seriously
when I told him that I could no longer sit by and I may have to
personally go to the Federal Government.'' The response? ``He
cringed,'' Kelley said, ``and said that he would prefer that I don't do
that.'' Kelley gave Kingston 60 days to act but in the end didn't alert
regulators. Kingston did not respond to a request for comment.
In September 2000, Kelley would later allege in court filings,
Kingston instructed Kelley not to give McAleer, still a GM employee at
the time, any data on serious defects that the audit program turned up.
``Kingston indicated that he just returned from a meeting in which
depositions taken in the McAleer litigation and questions being posed
to GM by the media about litigation had been discussed,'' Kelley's
lawsuit said. Kingston told Kelley ``that high-level GM staff and the
company's general counsel were involved in the teleconference and that
these individuals were irate.'' Kingston allegedly told Kelley that he
was concerned that ``higher-ranking executives might want to make
things difficult'' for Kelley--perhaps banishing him to the ``second
shift at Hamtramck,'' a plant on the outskirts of Detroit.
While his troubles at work intensified, Kelley's home life
blossomed. He and his wife were raising two children, and they
purchased a white two-story home on a tree-lined street in sleepy
Owosso, Mich. Kelley remained loyal to his employer. As he saw it, he
was agitating not to harm the company or enrich himself but to save
it--and because it was the right thing to do. Neighbor Fred Van
Alstine, a doctor whose father worked in a GM factory, remembers
talking with Kelley around this time and inadvertently slighting the
automaker. He recalls Kelley taking offense and saying, ``I'm proud to
be at GM.''
One day in November 2001, Kelley came across a problem that would
forever change him. Making inspections at a rail yard in Tampa, he
found a Chevrolet TrailBlazer SUV leaking fuel. Kelley discovered that
the fuel line had disconnected at the filter. ``They told me as they
were driving it off the train, the vehicle quit,'' Kelley recalled in a
September 2003 deposition. ``Fuel began spraying.'' The next day, he
began getting similar reports from around the country. He began pushing
not only his supervisor but product investigators and GM's legal
department to act.
Kelley thought it was just a matter of time before someone was
injured or killed. ``I became aware of police reports, police stating
that they thought the person would have been severely injured had a
spark occurred and ignited the fuel,'' Kelley said in a deposition. ``I
became aware of fire departments being involved because of the severity
of the fuel leaks.'' Despite his concerns, he said, colleagues resisted
contacting the government. During a Nov. 27, 2001, conference call with
GM engineers, Kelley wrote in his notes, ``No NHTSA contact yet.''
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
``At this point, I knew it was big enough that--where we could not,
in my opinion, not report it,'' Kelley said in a deposition. ``I heard
them have many discussions about not wanting to notify the government,
not putting voice mails out to dealers, because the government could
get them.''
By December, Kelley thought he knew what was causing the problem:
The TrailBlazer's fuel-line quick-connect fasteners weren't the proper
size. He had photos of nine vehicles with leaking fuel. That month, he
clashed with a product investigator named C.J. Martin who had turned up
fewer ``serious quality incidents'' in her own probe, according to
Kelley's deposition testimony.
Kelley pushed Martin on the issue, he testified. ``She became
concerned that I was overly aggressive on how to fix the problem,''
Kelley said. ``Her response to me was, `Well, what do you want us to
do, recall all the cars?' `If that's what needs to be done,' I said,
`yes, that's what we should do.' She said that would be way too
expensive.''
Martin, who retired from GM in early 2002, says she vaguely
remembers Kelley but disputes his claim that she resisted a recall. ``I
didn't have that power nor that ability,'' she says. She also disputes
the notion that safety recalls were influenced by costs. ``We were
never allowed to show cost of an item in regard to making a decision
for a safety recall--ever,'' she says. That a recall was conducted in
April after being flagged in November suggests to Martin that GM acted
quickly, she says. ``That's extremely fast. If there was something that
told us that there was anything related to safety, I can tell you that
team in that period of time was extremely aggressive,'' she says.
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Photographs by James Fassinger/Corbis; J. Scott Applewhite/AP Photo
As 2002 began, Kelley's crusade ``gained significant momentum as a
result of a vehicle line executive having experienced a ruptured fuel
line on his own company vehicle while driving on the interstate,''
according to his lawsuit. On April 30, 2002, GM sent the NHTSA a letter
saying it was recalling 60,044 Chevrolet TrailBlazers, GMC Envoys, and
Oldsmobile Bravadas, according to government records. Kelley felt
vindicated--a moment of satisfaction that would prove fleeting.
Like his predecessor McAleer, Kelley was taken off the quality
audit in 2002. He was transferred to a role as brand quality manager
for the Chevrolet Cavalier and Pontiac Sunfire, compact cars that
preceded the Cobalt. He was given an employee named Steven Oakley,
who'd worked for GM since 1990, to handle the Sunfire. They were the
middlemen between dealers, who wanted to talk about problems with cars,
and engineers, who would work with factories to address those issues--
and it was in this role that Kelley began hearing that the TrailBlazer
recall had not gone far enough. Dealers complained that SUVs not
covered by the recall were still leaking fuel. Kelley contacted one of
GM's field product investigators, employees who look into possible
recall issues, and weeks later contacted him again. He got a listless
response. `` `I've done all I can,' '' Kelley testified that the
investigator told him. `` `I wanted more vehicles recalled. They shot
me down.' ''
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Kelley decided to escalate his campaign. In a June 17, 2002, memo
addressed to his boss's boss, Keith McKenzie, director of car brand
quality, Kelley was direct. ``It is my belief that General Motors is
violating the law by not properly dealing with safety issues that are
persistent and ongoing,'' Kelley wrote. ``I have spent several years
trying to work through the system at General Motors to address these
concerns with a goal of protecting our customers and stockholders.''
McKenzie could not be reached for comment.
McKenzie stonewalled, according to Kelley. Instead of dealing with
the complaint, he said, McKenzie warned him about another GM employee
who had raised safety-related complaints and how it had derailed his
career, the court filings show. Kelley agreed to tone down his memo,
resubmitting a version that said GM was ``not properly dealing with
certain safety issues.'' He again gave the company 60 days to address
them or he'd go to ``the proper law enforcement agencies.''
GM, in a court filing, said McKenzie reacted immediately to the
memo, alerting his supervisor, who was ``relieved but also extremely
upset at [Kelley's] method of communication.'' Sixty-three days later,
GM expanded the TrailBlazer recall by 76,000 vehicles. Four days after
that, Kelley said he was called into a meeting with McKenzie and Ron
Porter, a GM lawyer, ``in response to his letter of June 21.'' Kelley
was told he shouldn't concern himself with defects on models other than
the Cavalier. McKenzie told him vehicles had already been recalled and
that more would be included in ``direct response'' to his concerns.
It was a mixed victory: Kelley got unsafe trucks off the road, but
he was transferred that fall to another role, described in his
testimony as ``special assignment.'' It was a GM version of purgatory.
He had no job responsibilities, he claimed. In his new role, Kelley
testified, he was instructed not to get involved with fuel-line
connectors and instead was told to ``come up with charts, predict
warranty for the vehicle, but not find every problem that GM might
have.''
At home in Owosso, Kelley wrestled with taking his concerns public.
After putting their kids to bed, Kelley and his wife would sit at their
kitchen table and talk late into the night. Beth Kelley says she didn't
know then that GM retirees were telling her husband he might as well
leave the company--that nobody goes against GM and survives. ``He would
say, `What do you think I should do?' and, `Do you want to do this?' ''
she says now. ``If he felt strongly enough that people could
potentially die from the safety issue, then I didn't have any doubt in
my mind that we needed to do it.'' On Jan. 9, 2003, he filed suit
against GM.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Kelley's allegations--which predated the ignition switch problems--
made a small splash; Beth remembers the news crawling across CNN's
ticker. What little momentum there was faded as the challenges of
fighting the Nation's largest automaker became apparent. GM argued for
a judge to dismiss the case because Kelley did not have standing as a
whistle-blower--the law required such a person to prove he had suffered
for his actions, and Kelley still had a job with the company and was
getting the same pay and benefits.
During a deposition, GM's outside lawyer, Peter Kellett, pressed
Kelley to admit that raising concerns about trucks wasn't part of his
job description, as an inspector of cars.
``My job assignment as a GM employee is to make sure that our
customers are safe in any way I can. That's my understanding,'' Kelley
said.
GM: ``But was it your specific understanding that you were charged
with responsibility for monitoring information relating to vehicles
other than the [small cars]?''
Kelley: ``I felt morally responsible--''
GM: ``That's not what I asked you.''
Kelley: ``--to fix a problem that I found in a vehicle.''
GM: ``Was it part of your job description?''
Kelley: ``No.''
Kelley's lawsuit didn't get far. Court records show that his
attorney didn't appear at a hearing in April 2004, and the case was
closed without a response from his lawyer. A later motion to reconsider
was denied. Kelley's lawyer, Rose Goff, became sick around this time,
eventually dying of cancer. The Kelleys, who had spent more than
$20,000 on legal fees, received a payment covering most of the cost
from their lawyer's insurance company because of the handling of the
case, Beth says.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Courtesy Beth Kelley/Courtland Kelley
Courtland Kelley sank into depression. His dark brown hair turned
snow-white in the span of a year. Van Alstine, the neighbor, who is
also Kelley's doctor, looked at his friend one day with astonishment.
``I clearly saw him age drastically,'' Van Alstine says. ``You just
knew he was under a tremendous amount of stress. . . . It shook him to
the core.'' Kelley couldn't sleep at night, waking in cold sweats and
experiencing chest pains and panic attacks, friends and records say.
His wife encouraged him to leave GM. He stayed for his family, she
says. ``He would always say, `You know, if I stay this amount of time,
I'll get my retirement,' '' she says.
``Where else in that job market over the last 10 or 15 years is a
person going to go?'' says Van Alstine.
At GM, Kelley has been floating from position to position, says
McAleer, who was laid off from GM in 2004 and keeps in close contact.
``He still has a job--he doesn't have a career,'' he says. ``He has no
possibility of a promotion.''
As Kelley's lawsuit petered out in 2004, GM was replacing the
Cavalier with the Cobalt. Models produced from 2005 to 2007 contained
the ignition switch that could easily slip out of the ``on'' position
at the touch of a driver's knee or simply from bumps in the road.
Airbags failed to deploy in dozens of accidents. Amy Breen, 42, an Ohio
preschool teacher, was killed in a 2007 crash, even though she was
wearing her seat belt. Marie Sachse, 81, died when her Saturn Ion,
which used the Cobalt's ignition switch, left the road and struck a
tree in Missouri in 2009. In June 2013, Dany Dubuc-Marquis, 23, of
Quebec, lost control of his Cobalt and was pronounced dead at the
scene. At GM, the mounting evidence caused little alarm. ``Throughout
the entire 11-year odyssey, there was no demonstrated sense of urgency,
right to the very end,'' Valukas, the former U.S. attorney, wrote in
his report.
It is impossible to know what might have happened differently if
Kelley had remained an inspector of GM's small cars as it moved from
Cavalier to Cobalt. He was replaced by his employee, Oakley, who in
March 2005 reviewed a memo from a GM engineer on the Cobalt ignition.
Interviewed three times by Valukas's team, Oakley told investigators
that he felt pressure to describe something as a convenience issue
rather than a safety problem, and cited Kelley's ordeal. GM declined to
make Oakley available for comment.
Yet in one indirect way, Oakley tried to rouse concern. In a draft
of a service bulletin to dealers, he included the term ``stall,'' a
``hot'' word known to attract attention. Had it actually gone out to
car sellers, Federal regulators would have most likely seen it. But as
they had with Kelley three years before, GM's product investigators
tamped down the response, striking the language. It was one of the many
occasions in which GM engineers failed to link the ignition switch
position and disabled airbags, Valukas concluded. ``From beginning to
end, the story of the Cobalt is one of numerous failures leading to
tragic results for many,'' he wrote.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Photograph by Patsy Lynch/Rex Features/AP Photo
With the report out, CEO Barra was set to return to the House for
more questions on June 18. While she has described the Valukas inquiry
as thorough, she has also attempted to limit its implications. ``In
this case with these vehicles, we didn't do our job,'' Barra said in
the June 5 employee town hall. ``What the Valukas investigation
uncovered--in this situation--is a pattern of incompetence and
neglect.'' Lawmakers may want to ask her whether the account of
Courtland Kelley suggests the company's problems go deeper.
On June 16, GM recalled an additional 3.16 million U.S. vehicles,
across seven models, bringing the total recalled this year in North
America to 20 million. ``This latest recall raises even more questions
about just how pervasive safety problems are at GM,'' said Fred Upton
(R-Mich.), chairman of the House Energy and Commerce Committee, in a
statement. ``This is not just a Cobalt problem.''
In response to questions from Bloomberg Businessweek, GM issued a
statement on June 17: ``We are going to reexamine Mr. Kelley's
employment claims as well as the safety concerns that he has, and
that's part of our redoubled effort to ensure customer safety.''
A week after her appalled husband woke her up in the middle of the
night, Beth Kelley is sitting in her tidy kitchen, as her son, who's
changed his mind about becoming an engineer after watching his father's
tribulations, hovers nearby. Is she surprised that more whistle-blowers
didn't emerge at GM?
She laughs. ``I'm surprised there aren't more people who stand up
for what they believe,'' she says. ``But am I surprised that they
wouldn't go against General Motors? I suppose not.''
Senator Boxer. Courtland Kelley, a third-generation loyal
GM employee and inspector since 1983, sought to protect both GM
and the public by bringing safety concerns to light. Instead of
praise and gratitude, his concerns were met with retribution
and inaction by GM. Mr. Kelley approached his supervisor and
then his supervisor's supervisor because he couldn't get any
help. He approached them about safety defects he noticed that
weren't even part of his line. He even sued GM just to get them
to notice. His warnings were ignored; his case was dismissed.
To silence him, he was transferred to a job with no job
responsibilities. He calls it a GM version of purgatory.
On page 93 of the Valukas Report, Court Kelley's successor
is quoted telling investigators he was too afraid to raise
safety concerns with the Cobalt after seeing Court ``pushed out
of the job for doing just that.'' Even last year, just last
year, a 2013 survey of GM employees showed that the employees
are reluctant to report misconduct they observe, some fearing
retaliation.
Now, this is terrible. People died because of this. So I'm
asking you, Ms. Barra, have you met with all the employees?
Have you been in a room with all the employees? Have you told
them that you value honesty, integrity and whistleblowing and
how they will be protected by the company?
Ms. Barra. Senator Boxer, I absolutely have. On June 5 I
had an employee meeting. Thousands were live in the room as I
talked to them and shared the results of the Valukas Report,
which I personally found very disturbing and troubling, and
that also was broadcast globally. All employees had the
opportunity.
Senator Boxer. Good.
Ms. Barra. We have since--I have communicated through many
other forms, written and our webpage.
Senator Boxer. Good. I'll stop you here and say
congratulations. And could you send this committee, please,
your speech, and also part of the policy of the company? I'm
sure you have all these rules and policies. We have them in our
offices. Would you send that to us?
Ms. Barra. Absolutely.
Senator Boxer. Because I think that's really important.
Ms. Barra. Sure.
Senator Boxer. Now, I'm going to pick up on where Senator
Ayotte was going with this article in The New York Times.
I ask unanimous consent to place it in the record.
Senator McCaskill. Without objection.
[The information referred to follows:]
The article can be found at: http://www.nytimes.com/2014/07/16/
business/documents-show-general-motors-kept-silent-on-fatal-
crashes.html?_r=0
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Boxer. ``Documents Showed GM Kept Silent on Fatal
Crashes.'' I think this is extremely disturbing because, as
Senator Ayotte pointed out, these inquiries were called ``Death
Inquiries,'' and what you're saying, Mr. Millikin, even the one
that was issued under your watch, you never saw it. Is that
correct?
Mr. Millikin. That is correct, Senator.
Senator Boxer. You never saw the death inquiry from NHTSA,
who regulates the auto industry and safety. You never saw it.
Mr. Millikin. That is correct.
Senator Boxer. So who is the top person who saw that?
Mr. Millikin. Pardon me?
Senator Boxer. Who is the top person in your department who
saw that inquiry?
Mr. Millikin. I do not know who the top person was who saw
that, Senator.
Senator Boxer. Mr. Valukas, did you ask about this issue in
your report?
Mr. Valukas. No, we did not ask about that. No, we did not
ask about that issue.
Senator Boxer. Thank you. You should have.
I consider it a cover-up when a manufacturer does not
respond fully and accurately to NHTSA about what it knows about
deaths in its vehicles. This wasn't some casual memo. And I
agree, we should ask NHTSA back, of course. But NHTSA did its
job in sending an initial inquiry, and I am shocked and stunned
that at least on one occasion--did it even go to your shop,
this inquiry? Where did these inquiries go to, the NHTSA
inquiries, death inquiries? Where do they go?
Mr. Millikin. Senator, when I saw the article yesterday, it
was all news to me. We have caused a review to be done so that
the information can be learned and brought forward.
Senator Boxer. OK. So you don't know where the inquiry
went. You don't even know who answered it.
Mr. Millikin. Well, it goes to that department in
engineering----
Senator Boxer. What department?
Mr. Millikin. I think it's called--I don't know the name of
it. It is in the organization--Product Investigations.
Thank you, Mary.
Senator Boxer. And that is not--you don't supervise them.
Mr. Millikin. I do not.
Senator Boxer. So, Ms. Barra, who answered--who wrote all
those answers there?
Ms. Barra. My understanding is that those would have been
done by an organization that's part of the engineering
function, and that's called Product Investigations. But,
Senator Boxer, what I can tell you is now that would not
happen. We----
Senator Boxer. Wait. Before you tell me that, I'm not done
yet looking at this. You just can't say now is now and forget
the past, because people died. So you want to move on to the
new GM, and God bless you, you're doing a good job, but we are
not going to stop. We have to find out what happened.
So then it went to this office of--give me the name of the
office.
Ms. Barra. Product Investigations.
Senator Boxer. OK. And what we know from The New York
Times, unless there's reason to doubt their investigative
reporting, is that the answers, one answer was ``GM opts not to
respond.'' Swell answer. Boy, I wish I could talk that way to
my constituents when they want to know how I'm going to vote.
Then you had other answers. Well, we can't answer it
because it's attorney-client privilege. In another case, a
similar kind of answer, we haven't assessed the cause.
So because I believe it is a cover-up, and because in the
new GM you are firing people, who have you looked at in this
issue, and who signed off on these non-answers, and have you
fired them?
Ms. Barra. I believe I have.
Senator Boxer. OK. Can you give us the names of the people
and how many people, just to me?
Ms. Barra. I would provide that later, please?
Senator Boxer. Yes, that's absolutely fine.
So now, when an inquiry comes from NHTSA, which department
is responsible for reviewing those NHTSA inquiries?
Ms. Barra. It would go to Jeff Boyer, who is our Vice
President of Global Vehicle Safety, along with his team. I will
tell you that there will be no answers as you've stated.
Senator Boxer. Good.
Ms. Barra. We are working very productively. We want to
understand any time there is a fatality or a serious injury, or
an injury, or even an issue that happened that didn't
necessarily cause an injury because that's even better that we
can stop it. That's how we're approaching it now.
Senator Boxer. So you've given it to a Vice President now.
Is that what you said?
Ms. Barra. Yes, we did, a Vice President.
Senator Boxer. And he will also inform you of these NHTSA
inquiries, I trust?
Ms. Barra. I believe he will because I will make sure of
it, because he and I meet on a regular basis. He calls me 24/7.
Senator Boxer. When you say ``I believe he will,'' I would
love to hear you say it is his responsibility to take NHTSA
death inquiries to me. Can you make that statement?
Ms. Barra. Senator Boxer, I will assure you the moment I
leave this I will call Jeff Boyer and it will be his
responsibility to bring those to me.
Senator Boxer. Thank you. I'm grateful for that. Thank you.
Senator McCaskill. Senator Baldwin?
Let me give everyone--several members have asked me about
the opportunity to ask more questions. So here's what I'm
planning on doing right now, just so everyone knows. I'm going
to allow Senator Baldwin to do her questioning, then everyone
will have finished their first round. There may be a senator
that shows up that hadn't questioned in the first round. Then
we will adjourn at about 12:15 to 12:20 for around 20 to 25
minutes to allow all of us to go down and vote. We have three
things we have to vote on. We will come back, but you don't
need to panic because there's another hearing in this room at 2
o'clock, so there is an end in sight. We will not be here all
day.
We will come back and use the time that we have after our
votes to allow members to ask a second round of questions. So
you all know and so all the members know and so that the staffs
that are here can tell members that we will come back
immediately after the third vote and probably do another half-
hour to 45 minutes.
Senator Baldwin?
Senator Baldwin. Thank you.
For those on the panel of witnesses, thank you, and I'll
explain quickly. I'm not a member of the Commerce Committee,
but I am here as a guest because one of the tragedies related
to the Cobalt ignition switch occurred in Wisconsin, taking the
lives of two young women and seriously injuring a third young
woman in October 2006.
I wanted, Ms. Barra, to call your attention to an article
on June 19, 2005 in The New York Times. An auto reviewer who
was doing a companion article on the Cobalt, Jeff Sabatini,
described encountering the now-familiar phenomenon of the
Cobalt's ignition moving to Accessory and cutting off the
engine. That article, which is entitled ``Making a Case for
Ignitions That Don't Need Keys,'' includes a statement from
GM's spokesman, Alan Adler, about the engine shutoff problem.
In reading it, Mr. Adler downplayed the issue, saying ``the
Cobalt is still controllable'' when the power to the engine is
cut, and ``the engine can be restarted after shifting to
Neutral.'' He went on to say that GM did not consider the
situation a safety issue.
Aside from the fact that his answer was completely
unsatisfactory, Mr. Adler's statement demonstrates that someone
at GM knew about the defect back in 2005, before the tragedy
that occurred in the State of Wisconsin in 2006.
Who at GM directed Mr. Adler to make the statement about
the Cobalt engine cutoff? Because I'm assuming--and this is an
assumption on my part--that in his role as spokesman, that it
wouldn't include an expertise on the engineering. So he had to
have information. He had to be directed either by an engineer
or an executive to make this statement that this was not a
safety issue. So I'm wondering who at GM made that
determination that this was not a safety issue.
Ms. Barra. Senator Baldwin, as was uncovered in Anton
Valukas' report, early on with this issue they didn't
understand the connection of the stalling and of the switch,
that it meant that the airbag didn't deploy. So this was
misclassified at the very beginning as more of a customer
annoyance, clearly the wrong thing. They didn't understand that
connection.
At that time across the industry, stalling on its own--
remember, you can stall if you pop the clutch, you can stall if
you run out of gas. So the overall stalling aspect wasn't
considered safety. I will tell you it is now, and any time
there's a stalling issue where we identify that there's a
defect in the vehicle that causes the stalling--in this case it
would have been the ignition switch--we are treating it as a
safety issue. In fact, we treat stalls as a safety issue until
we understand what has happened.
So that was a broader view at that time. I can't tell you
who told Mr. Adler that. I can't tell you who did that, but I
can tell you it was a broad understanding across the industry
beyond GM at that time.
Senator Baldwin. Who can tell me who counseled Mr. Adler
before he made these statements on behalf of GM?
Ms. Barra. I can look to see if I can find out.
Mr. Valukas. There was a discussion, including a discussion
within lawyers of GM's legal staff, around the time of the
Cleveland Plain Dealer article, and there had previously been
discussion within some of the engineering committees, as to
whether the stalling did or did not exist and whether this
issue with regard to the stall did or did not constitute a
safety issue, and the conclusion was reached that it did not.
When the first PRTS report of a Cobalt stall was opened, there
was an individual engineer who made that initial decision to
categorize the problem as a customer convenience issue, the
committees accepted that assessment, and that decision then
became the way that they approached it.
So there was an engineer involved in the first instance who
said this did not appear to be a safety issue, this appears to
be an issue involving customer convenience, and it went on
through and committees accepted it as it went forward.
Senator McCaskill. I'm curious. Was the lawyer that was
involved in that, was that Mr. Kemp?
Mr. Valukas. Yes, and Elizabeth Zatina was also involved in
that issue.
Senator McCaskill. OK.
Mr. Valukas. May I correct something I said before? I don't
want to leave something----
Senator McCaskill. Absolutely.
Mr. Valukas. I'm sorry. I was asked whether or not we had
looked at those death reports. We did look at those death
reports, as Senator Boxer had asked. We reviewed those, but we
reviewed those for purposes of seeing whether it was
information in there which would reflect on why and how this
took so long. We did not review them for some other purpose.
Senator McCaskill. OK.
I'm going to now ask a question for Senator Rockefeller,
and then we will adjourn until the votes are over, and we'll
come back.
Senator Rockefeller could not be here today, and so I am
going to try to paraphrase his question for him, and I'm going
to change it a little bit because there has been some testimony
that would have impacted it that he hadn't heard. So I'm
putting that on the record so the Chairman knows why I am
changing slightly his question.
Ms. Barra, Senator Rockefeller has two West Virginia
constituents, Mr. Sam Spencer and Mrs. Belinda Spencer, who
tragically lost their son Leslie in a crash along U.S. 460 in a
2007 Chevy Cobalt, one of the models subject to your recall
because of the defective engine switch.
According to Mr. and Mrs. Spencer, the facts point to
Leslie's Cobalt losing power because of the defective ignition
switch and the airbag not deploying upon impact. However, for
reasons still unknown, the airbag eventually deployed after the
initial deadly impact. Consequently, as we heard earlier--this
is where I'm changing it slightly--it's my understanding
according to Mr. Feinberg's testimony that under those
circumstances a claim can, in fact, be made. But it is not
clear, I think, to victims out there this scenario, that there
may not have been an initial deployment upon impact but maybe a
deployment after the fact. Mr. Feinberg did testify that
somebody should file a claim in those situations, but Senator
Rockefeller's question is that you have consistently stated in
public that GM will do all it can. You have repeatedly told
Congress that the new GM will do the right thing.
If they are correct, if their son did in fact tragically
lose his life because it lost power because of a defective
ignition switch, will you pledge to do everything you can to
allow the Spencers and victims under similar circumstances to
seek financial redress from your compensation fund? Will you
amend the terms of the compensation fund if that's what it
takes? That's his question.
Ms. Barra. So, first of all, I've been very clear that I
would like the compensation program that Mr. Feinberg is
administering to reach every person who might have been
impacted in this case by these ignition switches. So as Mr.
Feinberg said, I would encourage the Spencer family to submit a
claim.
There has been extensive rigor that has gone on in the
protocol for months that was worked. So I'm very confident in
the protocol the way it stands today, so I do not plan to amend
it. But I still believe within that protocol there are
technical issues that need to be understood in the Spencer
case, and I encourage them to submit a claim.
Senator McCaskill. OK.
We will now adjourn and go vote, and we should be back here
in about, hopefully, 20 to 25 minutes. As soon as the third
vote opens, because your folks will understand this who are
with you, when the third vote opens I will vote immediately and
come directly back here. So within five minutes after they call
the third vote, I'll be here.
[Recess.]
Senator McCaskill. Thank you all very much. I appreciate
your understanding. As much as I was tapping my foot over
there, I couldn't get them to roll the votes as quickly as I
would have liked, so I appreciate it very much.
Ms. Barra, when you were here before, you were very
forthcoming about the facts were going to be the facts. In
fact, I think the direct quote was ``the facts will be the
facts.''
My question to you today, have you accepted the Valukas
Report as factual?
Ms. Barra. Yes.
Senator McCaskill. Is there anything in it that you think
is erroneous or misstates the facts in any way?
Ms. Barra. I think overall the Valukas Report characterizes
and captures what happened, and that's what we've dealt with,
and that's why we're going to implement all of the
recommendations that were made.
Senator McCaskill. So my question to you, Mr. Millikin, if
the CEO has just said on the record that this report is
factual, why has General Motors refused to stipulate to the
Valukas Report as factual in bankruptcy court?
Mr. Millikin. Senator Boxer--excuse me. Senator McCaskill,
I'm not aware of our position on that in bankruptcy court, but
I can tell you that that issue is associated probably with the
attorney-client privilege issues that are present in that
proceeding, and on that basis they are probably taking that
position. But I'm not familiar with the position that you're
talking about in bankruptcy court on that issue.
Senator McCaskill. Who would be? That is obviously an
important legal decision that has been made by your company,
and you're the lawyer in charge. This is obviously--I don't
know that you could have any more high-profile litigation than
the bankruptcy proceedings right now as to what did and didn't
happen when bankruptcy occurred as it relates to
representations that were made.
So if you don't know, who does know?
Mr. Millikin. Senator, I'm familiar with that particular
piece of litigation and I've been working with the lawyers on
it in terms of making sure that we're making the arguments that
need to be made to deal with the economic loss claims that are
part of that litigation. Just on that particular point, I don't
know the answer that you're asking for.
Senator McCaskill. Do you understand it's a big one?
Mr. Millikin. I'll be happy to get that answer and come
back with it.
Senator McCaskill. That would be terrific, because this is
a big question.
Mr. Millikin. Yes, it is.
Senator McCaskill. If we are, in fact--and I will tell you
I believe, Ms. Barra--I keep saying Beara instead of Barra. I'm
sorry. You're probably used to it, aren't you?
I believe her, but there's a disconnect here again, because
if, in fact, your company has decided this report is factual,
that Mr. Valukas did a good job of ferreting out all the facts,
then why in the world wouldn't you save time in the bankruptcy
court by acknowledging that?
Mr. Millikin. Senator, if my understanding is correct, then
it's related to the attorney-client privilege.
Senator McCaskill. I don't understand what you mean.
Mr. Millikin. I don't know the issue. I'm telling you I'm
assuming that that position may be associated with that.
Senator McCaskill. I can't imagine how, evidentiary-wise.
When somebody asks for a stipulation, the issue is your company
has decided through its lawyer to say they will not stipulate
to the Valukas Report being factual.
Mr. Millikin. Senator----
Senator McCaskill. That's not attorney-client. Attorney-
client would be the discussions between you and your lawyer.
The position you've taken in the proceeding would not be
subject to attorney-client, unless you're saying that the
advice you've been given is something you don't want to share
because it would violate the privilege?
Mr. Millikin. No. What I'm saying, Senator, and I committed
to you to find out exactly what the answer is and to come back
to you.
Senator McCaskill. OK. And who in your company is
monitoring this? When Mr. Holliday took the deposition when the
bombshell dropped, he called a lawyer on your staff that day.
As I said in a previous hearing, the first thing he did was
call somebody that worked for you, Mr. Millikin, and that
lawyer was over at his hotel room that night picking up those
pictures.
Mr. Millikin. That's correct.
Senator McCaskill. OK. So who is that person in the
bankruptcy? Who is the person that is--if something happens in
bankruptcy court, I assume you have outside counsel for the
bankruptcy proceedings.
Mr. Millikin. Yes, we do.
Senator McCaskill. And who is that outside counsel
reporting to directly?
Mr. Millikin. He's reporting in to Mr. Michael Gruskin.
Senator McCaskill. OK. And where is Michael Gruskin on this
chart? Is he below Lucy Clark Dougherty?
Mr. Millikin. Mr. Gruskin is a direct report to me.
Senator McCaskill. OK. And what is his title?
Mr. Millikin. He handles general--I've split the litigation
function since this occurred into two parts.
Senator McCaskill. I see.
Mr. Millikin. One is product litigation, one is general
litigation.
Senator McCaskill. OK.
Mr. Millikin. Michael Gruskin has general litigation.
Senator McCaskill. OK. So Mr. Gruskin has never discussed
with you whether or not to stipulate that the Valukas Report is
factual in bankruptcy? You've never had that discussion?
Mr. Millikin. That is not an issue that I remember having a
conversation with Mr. Gruskin on.
Senator McCaskill. Wow. Not good. OK. It will be important
for us to find out why you are hesitating to stipulate that the
report is factual.
The NHTSA answers on the death inquiries, who signs off on
those in the legal department? The answers where they said GM
refused--I'm sure there is no way they are sending
information--your company is not sending information to NHTSA
about somebody in legal signing off on it; correct?
Mr. Millikin. Senator, again, I'll have to get the answer
to that and get back to you because that's handled by Product
Investigations, as Ms. Barra indicated.
Senator McCaskill. OK. But isn't there a lawyer that would
look at it? Product Investigations doesn't get to make that
final call on language.
Mr. Millikin. There could well be. I don't know that for a
fact.
Senator McCaskill. OK. I would like to know what part of
the legal department signs off on the responses to NHTSA
inquiries, particularly the death inquiries.
Mr. Millikin. I will get back to you.
Senator McCaskill. Who was it that gave Product
Investigations the authority and sign-off to say we won't
answer this question?
Mr. Millikin. I understand.
Senator McCaskill. OK. Second, the technical service
bulletins, there was certainly in the Valukas Report a lot of
information about not using the word ``stall,'' that there was
some fear that ``stall'' would bring in regulators and it would
catch the attention of NHTSA. I'm assuming technical service
bulletins, the language of those are also run by the legal
department.
Mr. Millikin. I would assume so.
Senator McCaskill. Do you know who in your legal department
does that?
Mr. Millikin. I know who does it today. It's done under the
supervision of Lucy Clark Dougherty working with Jeff Boyer and
his organization.
Senator McCaskill. OK. I would like to know who did it when
the word went out that they couldn't use the word ``stall'' in
a technical service bulletin.
Mr. Millikin. OK. I will get that information and get back
to you.
Senator McCaskill. OK.
Mr. Valukas, one of the things that was interesting to me
is the DeGiorgio situation. This is how old I am. When I tried
to explain to my staff that Mr. DeGiorgio reminded me of the
character in Hogan's Heroes, ``I know nothing,'' nobody on my
staff even got it because none of them had ever heard of
Hogan's Heroes.
Mr. Valukas. I get it.
Senator McCaskill. Hopefully you've heard of Hogan's
Heroes.
Mr. Valukas. I have.
Senator McCaskill. It is astounding to me that Mr.
DeGiorgio has refused to acknowledge all of the involvement he
had in changing this switch. But it was interesting to me you
said there was no evidence that Mr. DeGiorgio ever told anyone
else about switching out the part and not changing the number.
But then you went on to say there were e-mails that were copied
to other engineers.
Mr. Valukas. Correct.
Senator McCaskill. But your report didn't go any further
about the other engineers that were copied. Could you briefly,
because I'm over my time--my colleagues are here now--could you
briefly explain if you can remember? And if not, I would like
to get it for the record, who were the engineers that were
copied on e-mails that showed that this part had been changed?
Mr. Valukas. Yes. Let me give it to you briefly, and then
I'll give it much more detailed since there is a time issue
here, and I'm happy to submit that.
In the report, page 102, there is a footnote 417 which
focuses on this issue. Very briefly, what took place is there
was an e-mail of June 2, 2006 which comes from Delphi. There
are 30 people on that e-mail. Six of them were associated with
General Motors.
The e-mail related to changes that were taking place. Most
of the changes they're talking about were in the circuit board.
Senator McCaskill. Right.
Mr. Valukas. We sought out the individuals who were on
there. They were, as best we can tell--we don't know that all
of them were, but we think they were all involved with
electrical issues for the switch on the Ion. None of them had
any knowledge--strike that. The individual we talked to said
this meant nothing to him about the change in the detent in the
switch. He was focused on the issue of the electrical issues
that were involved here for the Ion. We were not able to reach
the other four GM individuals on the e-mail. They were long
retired and we couldn't find them, but best we can tell from
our information, they were not at all involved in the process
of investigating the stalls or airbag non-deployment, stalls in
particular, that issue at all.
Senator McCaskill. So this was just an issue that the
people that were copied had no understanding of the
significance of that information in the e-mail.
Mr. Valukas. Short and sweet, that is what we understand to
be the case. But I'll get you the detail.
Senator McCaskill. Thank you.
Mr. Valukas. It's relatively complicated, but that's the
answer.
Senator McCaskill. Thank you very much.
Senator Klobuchar?
Senator Klobuchar. Thank you very much, Madam Chairman.
Thank you, everyone.
Mr. Valukas, your report demonstrated very clearly that the
ignition switch issue was viewed internally at GM as a customer
convenience issue, and as a result it just didn't have that
kind of urgency to fix it. From your report--this is a quote--
``not one of the Committees considering a fix for the switch,
which were filled with engineers and business people whose job
was to understand how GM's cars were built and how different
systems of the cars interact, ever reclassified the problem
from one of customer convenience to one of safety or
demonstrated any sense of urgency in their efforts to fix the
switch.''
Do you want to elaborate on that?
Mr. Valukas. What took place back then, we're talking 2004,
2005, 2006 period of time where they knew, in fact, that they
knew the switches weren't--that the cars were, in fact,
stalling. They knew at the time of one of the press events that
that was taking place, and they had The New York Times article
and other articles which were calling that to their attention.
But what happened in connection with this, an engineer looked
at this when the first PRTS was opened and did not categorize
the stall as a safety issue. Having made that decision, that's
where they went in connection with that.
But when we went back and asked the individuals in that
committee, those committees, did you know that the airbag
wouldn't deploy if it went into the Accessory, and the answer
was no, we didn't know that. And the question then became,
well, had you known this, would you have responded differently,
and the answer was yes.
So what we found was that people who were in this silo
looking at the switch were not covering the issue of the
deployment, which was in another silo, if you will. So those
who were making the decision did not focus on that issue and
claimed not to know about that issue.
Senator Klobuchar. And somehow that state trooper saw the
issues together.
Mr. Valukas. Yes.
Senator Klobuchar. I just found that interesting.
So, Ms. Barra, going forward now, what is going to be the
process when these things are considered, or are there still
going to be these silos when something is viewed as a customer
convenience issue versus a safety issue?
Ms. Barra. Absolutely not. First of all, we've put in much
more rigor on how issues are analyzed. The heart of it, though,
is with the Product Integrity organization and the fact that in
addition to the group of people that are responsible to do
parts and design individual parts, they then will be--the parts
coming together will be integrated into the Product Integrity
organization, and they will look at it from a systems
perspective, and they were specifically designed around all the
safety systems in the vehicle, and we're actually bringing in
outside groups, for instance from aerospace, to look at the way
we designed the Product Integrity organization to assure that
we have state-of-the-art or the most modern possible to make
sure that these types of issues won't happen again, and we'll
really be looking at how the system operates, especially as it
relates to safety.
Senator Klobuchar. And then is there going to be some kind
of a metric used to decide what is customer convenience or
where it goes? How is that going to work?
Ms. Barra. I would say there is going to be much more rigor
in all of the safety systems in the vehicle, and those
individuals will have I'll say the ability to change someone
else's opinion. If someone on the parts side says no, I think
this is customer convenience, those who truly understand from a
systems perspective will be the ones who make the call and they
will override if someone else has a different opinion. So I
think it's going to be the very knowledgeable people that we're
putting in on the systems engineering to know that.
We're also, though, looking at the systems, and that
responsibility won't cut across a couple of different folks. It
will be more in one group so they understand the whole way the
system operates.
Senator Klobuchar. Very good.
Mr. Valukas, another thing from your report. It points to
an instance in September 2005 when a team of engineers
considered replacing the switch after reports of ``moving
stalls'' but was rejected because, as the engineer whom you
interviewed told you, it was rejected as being too expensive
and not resulting in offsetting changes in savings on warranty
costs.
Do you find that throughout that period, 11 years, when
confronted with replacing the ignition switch, the employees
used the acceptable business case as the most important metric?
Mr. Valukas. Yes, for the period of time that the problem
was considered a ``customer convenience'' issue. What happens
in that context is that once you've characterized it as non-
safety or customer convenience, then cost becomes an issue, and
the issue becomes will this solution solve the problem
completely, and how much will it cost. And during this point,
that was the consideration, will it solve the problem
completely--they didn't know that would be the case--and how
much was it going to cost. Had they elevated it to a safety
issue, those considerations would not have been in play.
Senator Klobuchar. And I assume, Ms. Barra, the answer
would be similar to what we talked about earlier?
Ms. Barra. Yes, definitely. Once it's in safety, we just
look at what it takes to fix the issue. Cost doesn't come into
the equation.
Senator Klobuchar. OK. And then one last question. We
talked earlier in the first round of questions just about the
GM nod and the change of culture and what you've been working
on. Just one last question along those same lines about
transparency.
I think we all know that has been a major focus here, to
respond to inquiries, to work with NHTSA. My colleagues have
raised a number of instances where things weren't forwarded.
And to work with Congress by being here today--that's a good
thing--in an open and transparent way to ensure we improve
vehicle safety.
Could you, last, just talk about the steps that you've
taken so far to ensure that you're fulfilling this commitment
to process more transparency? And then what other things do you
think you can do in the future?
Ms. Barra. Sure. Well, again, from a transparency
perspective, a couple of categories. One, the way we do the
work across the company, and that would very much be looking at
the integration of the car as we do it with Product Integrity.
So there will be transparency in the way the systems operate
and much more rigor in the validation of those systems.
As we work with NHTSA, again with the appointment of Jeff
Boyer, who is the Vice President of Safety, he will be working
in a much more cooperative way, already is, to make sure when
NHTSA has an inquiry we're very responsive to it.
I would also say the way that we're working with our data
analytics, that as pieces of information come in, whether they
come in from our plants, from warranty data, out in the field
from our dealers, directly from customers, there's a tremendous
amount of information now through social media, through legal
claims, we are working and have data analytics tools to mine
that data so there won't be information in one place that isn't
known across the company.
So those are just three examples. And then probably the
most powerful, because it's people, is making sure people
understand our expectations, and I've already had employees
call me personally to raise an issue. We've turned it around in
24 hours. In addition to the engineer responsible talking to
the employee, I've called them back and said are you
comfortable with your answer. That type of behavior I think
demonstrates to all of our engineers and all of our employees
that we want to listen to them and take their issues seriously.
Senator Klobuchar. Thank you very much.
Senator McCaskill. Senator Blumenthal?
Senator Blumenthal. Thank you very much, Senator.
I think you can fairly gather that this committee is
listening with a fair amount of incredulity to the contention
that the General Counsel of this company had no knowledge about
this defect or about the concealment of the defect and the
deceit of the Federal Government and of its customers before
February of this year. And you've provided answers that I think
for me are unsatisfactory on waiving the bankruptcy shield,
disclosing documents, making employees available, and opening
the secret settlements.
I want to ask you about a specific person whose life was
changed, and she's still alive. Her name is Candice Anderson.
As you know, she pled guilty to criminally negligent homicide
after a car she was driving crashed and killed Jean Erickson,
and she was found to have traces of a drug in her system. We
now know that the crash was due to not anything she did. It was
due to a defective ignition switch.
She still has that conviction on her record. She has borne
the feelings of guilt and suffering for years thinking she was
responsible.
I'd like to ask you, Mr. Millikin, will you recommend to
Ms. Barra that GM join me and others, including the former
prosecutor, in calling on the Governor of Texas to pardon Ms.
Anderson?
Mr. Millikin. I will recommend to Ms. Barra that General
Motors cooperate with any governmental agency that is taking a
look at the circumstances behind that conviction and what needs
to be done with that conviction.
Senator Blumenthal. Ms. Barra, will you recommend to the
Governor of Texas that he pardon Ms. Anderson?
Ms. Barra. I think we will provide information to support
that decision, but I don't think it's something that is
appropriate for me to do. I don't have all the facts of the
case.
Senator Blumenthal. You know, with all due respect--and I'm
sympathetic to what you're trying to do in changing the culture
at GM, and I cannot say enough good things about your workers
and about the company. But I think that that answer really is
unworthy of GM. I hope you'll think more about it, because this
is a young woman whose life has really been changed as a result
of a perversion of the justice process, as a result of GM
knowing and concealing that she was innocent. GM allowed an
innocent person to be convicted of a serious crime.
We've been talking here about the GM nod. I have a feeling
what we're getting here is the GM salute--someone else is
responsible, someone else should take the job of doing the
right thing. So I hope you'll reconsider. I'm not taking this
answer as necessarily final, and I hope we'll have a chance to
talk some more about it.
Let me ask you about, Ms. Barra, about expanding
compensation. I mentioned at the opening that there have been a
number of recalls. I think the number is 8 million cars with
defective ignition switches which the company acknowledged
caused deaths and injuries. Will those deaths and injuries be
included in the compensation fund?
Ms. Barra. There are very distinct differences between the
population that is included in the compensation program that is
being administered by Kenneth Feinberg as it relates to very
specific issues, a series of mistakes that were made over a
long period of time in what I'll call the Cobalt family of
vehicles. So a very specific set of facts.
On the other vehicles, I would say quite the contrary. We
went aggressively and proactively and looked at each of the
systems as it relates to how they worked and recommended in
some cases, even with no field data, and did testing, by the
way--first of all, we did testing to understand what people put
on their key rings. Ninety-nine percent of the population puts
0.6 pounds at the highest level.
Senator Blumenthal. I apologize for interrupting. I
understand that there are technical distinctions between the
two ignition switches. But isn't it true that, regardless of
the distinctions in the so-called population group, ignition
switches failed in all of those models?
Ms. Barra. No. I would say there are very different facts
related to what happened in the Cobalt ignition switch
situation versus the actions we've taken, very different.
Senator Blumenthal. If you could supplement that response
with more technical detail, I'd appreciate it.
Let me ask you one more question. I appreciate your
response to Senator Markey on what seemed to be your support
for legislation on expanding accountability and information
going to NHTSA. I wonder if you would agree with me that
corporate officials who conceal or hide dangerous defects that
can cause deaths or injuries ought to be held criminally
culpable.
Ms. Barra. I don't support that concept. I think that there
are many other avenues where those types of issues are already
dealt with, so I don't support the change.
Senator Blumenthal. Do you support legislation which I
proposed with Senator Graham that would provide for a public
interest standard before any settlements are sealed, as those
involved in this defective ignition switch were done?
Ms. Barra. I would have to understand the legislation a lot
more to be able to answer that question.
Senator Blumenthal. Thank you.
Thank you, Madam Chairman.
Senator McCaskill. Senator Markey?
Senator Markey. Thank you, Madam Chair.
Mr. O'Neal, documents show that in 2001 Delphi engineers
drew up two designs for the GM ignition switch, two designs.
The main difference between the two designs was that the one
that failed dramatically, the 2006 switch, had a spring that
was shorter and less stiff than the other one, and it was that
spring that caused the switch to fail to meet GM's
specifications and caused the key to so easily turn the engine
off.
Why was the weaker spring used in the actual vehicle rather
than the stronger one, which was clearly available
simultaneously in 2001?
Mr. O'Neal. Senator, our investigation into that portion of
the evolution of that switch actually supports what Mr. Valukas
also uncovered in that the original specifications were sort of
a target, and then as the switch evolved from a developmental
standpoint Mr. Ray DeGiorgio also wanted a switch that had a
certain tactile feel, and by that I mean it would feel a
certain way, a smoothness as you moved it from one position to
another. I believe the description of that desired feel was to
be more European-like. In order to achieve that feel, that is
where the softer spring comes into play, and as a result of
that the torque was lower.
Senator Markey. Did Delphi produce or review a cost
estimate that compared the cost of the two switch designs?
Mr. O'Neal. I don't recall, but I would think the cost
involved to switch from one to the other would be
insignificant.
Senator Markey. Could you provide that information to us?
Mr. O'Neal. Sure.
Senator Markey. Now, in 2006, when GM was starting to
acknowledge that it had a problem, it changed the ignition
switch design to this version, and this switch turned out to
consist of the identical stronger spring design that was not
used in 2001 but available in 2001. Was Delphi involved in the
design discussions with GM in this later period of time, and
did you suggest the one over the other? That is, the one that
was accepted over this one that was rejected in the earlier
time period.
Mr. O'Neal. Obviously, we were involved or the change could
not have been made. I mean, clearly that's there. Our
investigation shows that the GM team was extremely concerned
about warranty, customer satisfaction and quality issues. They
actually approached the Delphi side to ask if there was
anything that could be done in order to raise perhaps the
torque level to improve some of those issues, not safety
related but quality. And then obviously what came out was a
solution set that we have today.
Senator Markey. So do you have documentation back in that
earlier period of time as to why one was chosen over the other?
And if you have that, you're saying that it was the ease of use
that ultimately led to the selection of the one that did not
work as opposed to the one that----
Mr. O'Neal. Well, I don't think the selection of the detent
plunger and the spring that was in play from the initial was in
question. It was selected, and it was approved by General
Motors. So, yes, we do have that, and I think Mr. Valukas'
report supports that.
Senator Markey. So did you recommend one of the--did you
recommend the one that was selected in 2006 over the one that
ultimately was used in 2010 that has been working? Back in
2001, did you at Delphi make that recommendation to GM?
Mr. O'Neal. That development is a mutual give-and-take
between the supplier and the car manufacturer.
Senator Markey. I appreciate that. But what did Delphi
recommend at the time?
Mr. O'Neal. Obviously, at the end of the day what we ended
up with is what we all agreed to go do in order to meet the
requirements that the switch was asked to meet.
Senator Markey. Again, I think it's important for us to
have that as part of the record here, and whatever you could
provide to us from that earlier decisionmaking period would be
very helpful to us.
Mr. O'Neal. Thank you.
Senator Markey. Madam Chair, I would just like to thank you
again for also focusing on NHTSA. The NHTSA Administrator told
The New York Times just yesterday that it was GM that stood in
the way of safety; and, of course, we all agree that GM
deserves much of the blame. But while Ms. Barra and Mr. Valukas
have described the GM nod, which was said to occur when
everyone in a meeting all nodded their heads but then did
nothing to solve the safety problems, what we have at NHTSA is
the NHTSA shrug. NHTSA didn't think that reports of cars
stalling posed a safety problem. NHTSA ignored its own
contractors' reports linking the ignition switch defect to
fatal accidents in which airbags didn't deploy. NHTSA paid no
attention to documents it requested from GM that spelled out
exactly what was causing these crashes. And NHTSA completely
failed to notice the high numbers of consumer complaints and
other reports about GM's vehicles that were submitted to its
data bases. NHTSA was also repeatedly warned, and NHTSA also
just shrugged in response.
So we do have a GM nod; we also have simultaneously a NHTSA
shrug. I think the whole story ultimately has to get out there,
and I thank you for your pursuit of the truth.
Senator McCaskill. Thank you. Thank you, Senator Markey.
Mr. Millikin, maybe you can explain. I'm curious about
ESIS.
Mr. Millikin. I'm sorry, Senator, there was some background
noise, I couldn't hear you.
Senator McCaskill. I'm curious about ESIS, this company
that administers claims for you.
Mr. Millikin. Yes?
Senator McCaskill. It's a weird deal. They work at GM, they
work only for GM, but they're not GM employees?
Mr. Millikin. No, they're not.
Senator McCaskill. And why is that? Why is there that
structure? They don't work for anybody else in the world but
you. They are a captured company. Are they a subsidiary of your
company?
Mr. Millikin. Not to my knowledge.
Senator McCaskill. Are they a subsidiary?
Ms. Barra. Not that I'm aware of.
Senator McCaskill. So the people that are on the front
lines gathering the information and handling these claims as
they come in--I'm trying to understand for what business
purpose would you want them to be separate from your company if
they are completely captured by your company and doing nothing
but a GM function.
Mr. Millikin. So they have been doing product
investigations for us for quite some time. They've been doing a
very good job for us for quite some time. I'm not familiar with
the initial set-up for them. I do know that there are people
whose names I am familiar with who I've talked with our product
litigators about who say they do a very good job.
It's not unusual to see use of outside suppliers to take on
functions inside General Motors. For a long time, for example,
we had outsourced, as they call it, our security function, and
they did it because they felt that someone else could
probably----
Senator McCaskill. I think the security function is a
little different than----
Mr. Millikin. No, I'm just saying----
Senator McCaskill. I understand. I understand the point
you're making. If you can provide any illumination for the
record as to why that business model makes sense for your
company. It's unusual to have the frontline claims people, in
my experience--and I used to do legal work on behalf of
insurance companies, and obviously they have a whole lot of
claims people, and typically--I'm just curious as to why. I
thought that was interesting.
Mr. Valukas, you made a couple of conclusions, one in the
House hearing and one in your report, that I thought--I'm very
familiar with your report. I felt like I was back in school
studying, cross-referencing, going to the acronym table. I did
think it was thorough. I did think it was complete. But a
couple of conclusions are interesting to me.
One is that you said that--you kind of went out of your way
to conclude that GM did not put cost over safety as it related
to this defect, and I think the facts in your report are
inconclusive in that regard. All you had to go on to say that
is what the people that you interviewed told you, and these
were the same people that you have called out for indifference,
incompetence, lack of urgency. Is there something I'm missing
here that you base that conclusion on?
Mr. Valukas. Yes, and if I can be helpful in this regard.
Senator McCaskill. Sure.
Mr. Valukas. My experience as a former prosecutor, as an
individual who is a litigator, is that people's recollections
are what people's recollections are, and sometimes they change
over time when considering where they are at a given point. So
I focused and we focused initially and throughout on that 41
million documents that we were reviewing and that we were
pulling out and looked at that for purposes of saying, OK,
don't tell me what you're telling me now, I'd like to know what
you were thinking and doing then.
And as we reviewed those documents and reviewed those
documents very carefully on this issue, do we have evidence on
these issues where someone was sending an e-mail or writing a
memo or doing an analysis which says, well, I'd like to deal
with this problem but it costs too much, and so I'm not going
to deal with this problem, so where you would have cost over
safety, and we looked at that issue in a number of different
ways.
So the witnesses testified to what the witnesses testified
to or told us, and you have that in the report, but the
documents do not reflect a cost-over-safety matter.
Senator McCaskill. I understand.
Mr. Valukas. That being said----
Senator McCaskill. That makes sense.
Mr. Valukas.--we also call out the fact that there was
enormous cost-cutting taking place at GM during that period of
time. Engineers were being doubled up with additional
information. People who were assigned to safety things were
taking on two and three assignments where there had been one
before. And we could not say with certainty that that wouldn't
have had some impact.
Senator McCaskill. So macro cost-cutting could have been
part of the influence, but you found no smoking gun in
evidentiary documents that would indicate this was actually
being discussed.
Mr. Valukas. Yes, and in no testimony. In fact, in the
testimony, people absolutely disclaimed that. They said that
was not the way they were doing business.
Senator McCaskill. OK. The other thing that jumped out in
the report that I found astounding was the recall on power
steering. In 2010, General Motors did a recall on a power
steering defect, and what was interesting about that was that,
of course, you did not consider a recall for stalling problems
with the faulty ignition. According to the report, GM did not
consider the loss of power steering a safety problem. You
internally noted that power steering was normally a customer
satisfaction issue. Cobalt was handled in a different manner
based on GM's desire to obtain a quick resolution and closure
of the government investigation. So all NHTSA had to do was
write a letter saying they were going to look into the power
steering defect, and you guys recalled. You did the recall on
the power steering defect.
Alan Adler, GM's manager for safety communications,
remembered that GM had initially been planning to characterize
electric power steering as a customer satisfaction issue, but
as a result of the Congressional scrutiny of Toyota and the
unintended acceleration issues, it was agreed that GM should
issue the recall before the hearing so ``we would not get
mentioned and dragged into the Senate.''
That's concerning to me, Ms. Barra, because it looks like
there was a quick reaction when NHTSA threatened combined with
Congressional action against another manufacturer that got the
result that was so desperately needed on this ignition switch.
One of the tragic ironies is that one of the young women that
was seriously injured in one of these accidents, her car had
been taken in for the power steering recall and it was fixed
for the power steering. But, of course, there was no recall for
the ignition switch. So had the same urgency been around the
stalling and the engine turning off and the ignition switch
issue--have you figured out why structurally there was such a
quick response on something that you typically wouldn't have
quickly responded to, and do you really feel that you've gotten
a handle on changing that in the culture?
Ms. Barra. I think the Valukas Report captures and you've
stated largely the reasons. And also if you look, then, at the
data around the power steering, it clearly led to support that.
I would say I do feel that we've gotten around that very much
so, and I think I have data to support that with the recalls
that we've done, because when you look at the fact that in some
cases, of the 29 million vehicles that we've recalled this
year, with 58 recalls, in some cases we've recalled vehicles
that have no field incidents because when we went back and
looked from a systems engineering perspective did it meet what
it needed to meet, if it didn't, even if there was no field
data, we've made the recall.
Senator McCaskill. That's great, that's great. I appreciate
that.
Senator Klobuchar?
Senator Klobuchar. Thanks. I just had one last question on
the recalls.
If you could just go through again how you're doing those
recalls. I think we're all aware there have been a large number
of recalls, and I've been trying to focus in this second round
of questioning just about how things are going to change in the
future. I think we all know that this was a tragedy and that
the justice issues and the compensation issues are going to be
key for the victims, but key for those victims' families and
consumers is the changes that are going to be made going
forward, and I think we can learn as much from the changes that
are being made as we can from the past.
I want to know just exactly, beyond even the power steering
issue, just how you're doing these recalls differently and how
that will continue in the future.
Ms. Barra. Well, first off, I would say we're dedicated to
creating and designing and validating vehicles that won't need
recalls because they will be designed well, and that's the work
and the validation work and the systems engineering focus. So,
point one.
But if indeed we get data from any number of sources that
I've already shared, that data is being processed much more
quickly for us to look at and say is there an issue that
affects a safety system that requires a recall. I would also
say that Jeff Boyer, who runs this process, our head of Global
Product Development, sits on that committee. I get an agenda
for that before the meeting occurs so I'm completely aware,
along with our General Counsel, our CFO, and our President. So
this is now at the top of the company, and we're demonstrating
we're focused on safety. We're mining the data. And again, as
we see issues, we're going to be quick to respond, as we've
demonstrated.
Senator Klobuchar. I was just at one of your dealerships
looking at--well, getting my 15-year-old Saturn tuned up a
little bit. But there was a lot of action at those dealers, and
I know a lot of people are bringing their car because this was
one that had repairs. So I can see that people are bringing
them in, that these cars are getting repaired. And again, just
like everyone else, we hope that the next versions of these
cars you won't have to do it again. So, thank you very much.
Senator McCaskill. Senator Blumenthal?
Senator Blumenthal. Thank you.
I was interested in your response on the testimony and the
documents which seemed to support GM's contention on putting
profits ahead of safety, Mr. Valukas, and I was interested in
it because it would seem to be in GM's interest to make public
those documents. Is that so?
Mr. Valukas. I'm sorry, Senator. I have a little problem
with the hearing on the right side. If you could just repeat
the last question, I'd appreciate it.
Senator Blumenthal. Sure. I'll try to restate it, and I
hope my time will not be subtracted.
Mr. Valukas. It's my fault.
Senator McCaskill. You have all the time you want.
Senator Klobuchar. You appear to be the last person.
Senator McCaskill. We have to vote again in 4 minutes.
[Laughter.]
Senator Blumenthal. It would appear to be in GM's interest
to make public some of those documents and testimony that
underlie your report. Is that correct? You just made reference
in your response to Senator McCaskill, and I thought here's an
example of transparency actually working in GM's interest.
Mr. Valukas. Senator, I can't respond to that question. My
responsibility was the Board asked me to write this report, to
gather up the facts. I believe we did what we were asked to do.
The issue of how it will be disclosed or what should be
disclosed resides with the client. I don't have that authority.
Senator Blumenthal. Thank you.
May I ask you, Ms. Barra, will GM know about applications
to the fund at the time they're made? How much knowledge will
GM have of what the applications are, what the awards are, in
real time, so to speak?
Ms. Barra. Mr. Feinberg is completely independent as he
administers this. I don't know his procedure, if anything will
be shared. But it is his sole discretion if anything is shared
and when he chooses to do that.
Senator Blumenthal. Will it be his discretion alone as to
whether applicants are given time to postpone their decisions
until after the Department of Justice concludes its
investigation? In other words, will applicants be given the
choice to wait until they know what the full story is out of
the Department of Justice investigation?
Ms. Barra. I think with the fund we've been very clear on
the timeline associated with it, that claims will begin to be
accepted on August 1, and that period for applications will end
at the end of the year, and then he will evaluate and make
decisions.
Senator Blumenthal. But he has not, at least so far as I'm
aware, definitively stated whether then applicants can postpone
the decision as to whether to accept the offer from the fund or
bring private litigation.
Ms. Barra. I don't know the time-frame in his process of
how long a person, once they have what his decision is, I don't
know the time-frame on that.
Senator Blumenthal. That would be his decision?
Ms. Barra. That will be I think what's called out. I just
don't have it in front of me.
Senator Blumenthal. And if it's not part of the protocol
now, it would be within his discretion?
Ms. Barra. Again, I don't plan to change any part of the
protocol. I haven't reviewed this aspect, but I think the
protocol is very well defined, and it's going to stand.
Senator Blumenthal. And let me ask Mr. O'Neal, if I may,
can you do anything to accelerate the production of these
replacement parts that go into the vehicles to repair them?
Mr. O'Neal. We have worked extremely hard to do exactly
what you said. We're up to a million complete at this stage,
and it looks like the 2 million mark will be clipped right
around the end of August, and there's very little more we can
do because of where we started. I don't think we can do more
between now and August on the 2 million----
Senator Blumenthal. If GM were to pay more or invest more,
you're saying there's nothing you can do?
Mr. O'Neal. No, I don't think it's a money issue. It's just
there's only so much you can get accomplished in a short period
of time to ramp up from nothing, literally nothing, to a
million. I think it's the fastest we can go, but we'll go back
and look at it again. Mary and I have talked a few times about
this and things have improved considerably from when we started
talking, probably by several months, as a matter of fact. So
we'll look at it again. I understand the need to get it done as
soon as possible.
Senator Blumenthal. Because I am hearing from dealers, who
are hearing from consumers, and the dealers say they're having
trouble, at least in Connecticut, and I think it's probably
elsewhere, in really getting the parts they need as quickly as
they would like to do. I understand you've got to make the
machine tools. There isn't a magic wand here. But if you could
tell us whether, in fact, there are steps you can take, I would
appreciate it.
Mr. O'Neal. Again, we'll go back and look at it. But right
now the commitment is to exceed the 2 million by the end of
August.
Senator Blumenthal. And I just want to make a final
question to Ms. Barra. On those issues where Mr. Millikin has
said he has recommendations--for example, the bankruptcy shield
issue--I hope you will reconsider, as I hope you will on the
Candice Anderson issue, the responses that we've heard here. I
know that you are making valiant efforts to overcome these
problems, and I think consumers appreciate the numbers of
recalls, the frankness and candor that those recalls
demonstrate, and my hope is that the new GM won't be hiding
behind the old GM's bankruptcy on giving those pre-2009
customers the opportunity to go to court and have a choice
between what the fund may give them and what they could obtain
in court, and also others who have been damaged economically.
So I thank you very much for being here today and all of
the witnesses for your testimony here. Thank you.
Senator McCaskill. I want to thank all the witnesses--Mr.
Millikin, Ms. Barra, Mr. O'Neal, and Mr. Valukas. Thank you for
your patience. This has not been short, and I know this is not
your first visit, and I have a feeling you're not looking
forward to another invitation anytime soon.
Ms. Barra. That is correct.
Senator McCaskill. I knew I could speak for you in that
regard.
But it is important, I think, and the fact that you
acknowledged our role in this and that you respected it is
important. We all want General Motors to succeed. There's no
one in Congress that doesn't. This is an American company that
all of us are very proud of, and those of us who helped save
General Motors with votes during the crisis are very proud of
what the American automobile industry has in fact accomplished
since those days.
You've got a big problem still ahead of you, and we will
continue to be asking questions and do follow-ups on this
hearing. But know we appreciate the efforts you're making, and
we will look forward to checking in with you after we have a
further visit with NHTSA and making sure that all of those
systems are working the way they should so that we have the
right oversight on an ongoing basis so we're never dealing with
this again.
Thank you all very much.
Ms. Barra. Thank you.
[Whereupon, at 1:47 p.m., the hearing was adjourned.]
A P P E N D I X
Delphi Automotive PLC
Troy, MI, July 29, 2014
Senator Edward J. Markey,
218 Russell Senate Office Building,
Washington, DC.
Dear Senator Markey:
This letter provides the requested follow-up to your questions to
me at the July 17, 2014 Senate Subcommittee Hearing.
Question # 1: What was the cost difference between the switch using
the longer Catera spring and the switch using the shorter Delta spring?
As I noted, the cost difference between the two springs was
insignificant; in fact, less than a penny (in 2006 the Catera spring
cost $0.0225 each and the Delta spring cost $0.0302 each).
Question # 2: Can Delphi provide additional documentation as to why
the Delta spring was chosen for the switch in 2002 and the extent to
which ``ease-of-use'' was the underlying reason?
There are several documents related to the ignition switch that
discuss the importance of ``ease-of-use'' and ``feel.'' The Component
Technical Specification dated March 22, 2001 includes specifications
related to ``ease-of-use'' or ``feel,'' which it indicates are subject
to GM Engineering approval. An excerpt is attached at Tab #01.\1\
Section 3.2.2.3 of the Component Technical Specification states in
part:
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\1\ This document was provided to the Senate Commerce Committee on
June 16, 2014, Bates Number SC-007284, SC-007305.
3.2.2.3 Tactile Characteristics
Refer to the Force Displacement Curve(s). Final switch tactile
feel is subject to GM Engineering approval. Switch efforts
shall be smooth with clearly defined detents. The switch shall
not be damaged when the maximum allowable torque is applied to
the actuator, clockwise or counterclockwise. All functionally
detented switches must operate without noticeable friction or
binding.
The supplier shall maintain GM approved master samples for
comparison throughout the life of the program.
The Component Technical Specification is discussed in the Valukas
Report, an excerpt of which is attached at Tab #02. According to the
Valukas Report, Mr. DeGiorgio explained that after the Component
Technical Specification was issued on March 22, 2001, ``the switch was
still subject to `fine-tuning' based on input from the vehicle program
team as well as GM's `TALC' engineers, who reviewed vehicle components
for touch, appearance, lighting, and color.'' (See Valukas Report (Tab
# 02) pages 39-40).
As I stated, the design incorporating the Delta Spring was approved
by General Motors. This approval came at the end of a collaborative
design process during which multiple versions of the spring, along with
other component parts for the ignition switch, were considered and
tested. During that process, GM requested samples of the switch for
review by its TALC Group. One such request is attached at Tab #03.\2\
(See Bates Number SC-001223, Item 27). An e-mail exchange in February
2002 between GM and Delphi representatives discusses the reasons why
the design incorporating the Delta spring ultimately was chosen,
including that the design matched the ``detent feel'' of the samples
reviewed by GM's TALC group, as Mr. DeGiorgio had previously directed.
The e-mail exchange is attached at Tab #04.\3\ Relevant excerpts from
the e-mail exchange state:
---------------------------------------------------------------------------
\2\ This document was provided to the Senate Commerce Committee on
May 9, 2014, Bates Number SC-001213 and SC-001214.
\3\ This document was provided to the Senate Commerce Committee on
April 28, 2014, Bates Number SEN-000002.
Previously you had directed us to match the Talc samples for
detent feel on Delta. During the PDT 2-13-02 you directed us to
15 N-mm+/-2 N-mm. The Epsilon is currently meeting that
requirement. Delta can be increased to this new requirement,
---------------------------------------------------------------------------
but there are several things we all need to be prepared for.
1. Possible damages (cracking) during durability to rotors due
to increased forces at the driver tip required to rotate
through the detent positions.
2. Possible premature (less than 3x life) wear-out of the
detent with an extremely heavy feel resulting.
3. Possible impact on electrical functions (PCB wearout) as the
spring loads are substantially larger than those previously
tested. These loads act along the same axis as the contact
forces. (See Bates Number SEN-000003 (Tab # 04)).
The Talc samples were 9.6 N-cm. The new production intent
version of the switch has 9.5 N-cm. We feel this is a match of
the TALC switch. We can revise this again but we all need to be
aware of the impacts in timing, cost, and possible other issues
that might be created when we are this close to PPAP.
If we are trying to improve the ``feel'' of the switch through
the column, please remember that we have no control over how
the lock cylinder and related parts impact the ``feel'' of the
switch. We will be happy to make any changes you need in order
to improve the system as a whole given cost and timing. (See
Bates Number SEN-000002 (Tab # 04)).
In this same exchange, Mr. DeGiorgio directed Delphi not to make
further changes to the switch. (See Bates Number SEN-000002 (Tab #
04)).
In addition to this documentation, Mr. DeGiorgio also testified in
an April 29, 2013 deposition in the Melton product liability case as to
the importance of ``ease-of-use'' and ``feel'' in the switch design. An
excerpt is attached at Tab # 05.\4\ On pages 46-47 of the transcript,
Mr. DeGiorgio stated:
---------------------------------------------------------------------------
\4\ This document was provided to the Senate Commerce Committee on
April 28, 2014, Bates Number GMHEC000138906.
One of the criticisms--I shouldn't say criticisms. One of the
customer complaints we have had in the--and previous to this
was we had cheap feeling switches, they were cheap feeling,
they were higher effort, and the intent of this design was to
provide a smooth actuation, provide a high feeling of a robust
---------------------------------------------------------------------------
design. That was the intent.
. . . the intent was to make the transition to go from run to
off with relative ease.
Please let me know if you have any further questions.
Sincerely,
Rodney O'Neal,
Chief Executive Officer and President,
Delphi Automotive PLC.
Attachments
TAB #1
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TAB #4
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TAB #5
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Delphi
Troy, MI, July 29, 2014
Senator Richard Blumenthal,
724 Hart Senate Office Building,
Washington, DC.
Dear Senator Blumenthal:
This letter provides the requested follow-up to your question to me
at the July 17, 2014 Senate Subcommittee Hearing.
During my testimony, I stated that Delphi has manufactured over one
million replacement switches and is scheduled to manufacture two
million by the end of August 2014. You asked if Delphi could increase
its production with additional funding. I told you I would investigate
and let you know.
Delphi has again reviewed the lead-time required for additional
equipment and tools to immediately increase the manufacturing output
for the replacement switches, and we have concluded that it is not
feasible to increase capacity prior to August 31, 2014, the date by
which we have committed to produce two millions switches.
Please let me know if you have any further questions.
Sincerely,
Rodney O'Neal,
CEO & President,
Delphi.