GM ignition-switch recall poses first big test for new CEO – Reuters

Posted: Tuesday, March 11, 2014

DETROIT (Reuters) – In her first big test as General Motors Co’s chief executive, Mary Barra has taken a hands-on approach behind the scenes in directing the automaker’s response to ignition-switch problems that have been linked to 13 deaths.

On Monday, GM said the team conducting an internal probe ordered up by Barra of the recall of more than 1.6 million vehicles is being led by the lawyer who investigated Lehman Brothers after the financial services firm collapsed in 2008.

Barra has been heavily focused on the recall since she learned of the issue in late January, about two weeks after she took over as the industry’s first female CEO.

The No. 1 U.S. automaker has said the recall to correct a condition that may allow the engine and other components, including front airbags, to be unintentionally turned off will begin next month when it has the replacement parts. Most of the affected vehicles are in North America.

Barra apologized for the recall and sent a letter last week to employees promising an “unvarnished” look at the recall that is occurring 10 years after the issue first came to light. She has not granted any interviews on the matter.

“Mary believes that her time is best spent on making the recall work as smoothly as possible for our customers,” GM chief spokesman Selim Bingol said in an email. “Meanwhile, GM is keeping our customers informed about the recall while working to provide timely responses to questions from regulators.”

While recalls are not unusual, the number of fatalities involved and the way GM handled this one stretching over the past decade has the potential to cost the company hundreds of millions of dollars in fines and possible legal damages, in addition to tarnishing its reputation.

U.S. safety regulators have also opened an investigation into whether GM reacted swiftly enough. The National Highway Traffic Safety Administration sent the automaker a list of 107 questions about the recall to answer by April 3.

In addition to ordering up the apology and crafting the letter to employees with Bingol’s help, Barra has designated assignments for top executives related to the recall, according to a person familiar with the situation.

Barra placed global product development chief Mark Reuss in charge of working with supplier Delphi Automotive to obtain the replacement parts as quickly as possible and assigned North American head Alan Batey to work with GM dealers on serving the customers, said the person, who asked not to be identified discussing the recall.

She also involved GM quality and customer service chief Alicia Boler-Davis as well as Bingol, who is in charge of GM’s governmental affairs in Washington, the person said.


Anton “Tony” Valukas has been named head of GM’s internal probe. He is chairman of the law firm Jenner & Block, whose attorneys are helping with the investigation of the recall. Valukas could not immediately be reached for comment.

Co-leading the investigation with Valukas is the automaker’s general counsel, Michael Millikin.

Sources previously said GM’s team of investigators had begun interviewing employees involved in the problems surrounding the ignition switch, which first came to the company’s attention in 2004.

Valukas, a former U.S. attorney, was the court-appointed examiner in the Lehman Brothers bankruptcy. His probe resulted in the so-called Valukas report, a 2,200-page document released in 2010 which detailed the causes of the financial services firm’s spectacular collapse.

The report showed how Lehman had long used accounting gimmicks to bolster its balance sheet, and had been insolvent for many weeks prior to its September 15, 2008, bankruptcy filing. It did not find extensive wrongdoing at the Wall Street bank.

GM went through a U.S. government-led bankruptcy in 2009, which is the dividing line between what became known as “old GM” and “new GM.”

Valukas also served as lead counsel for the U.S. Securities and Exchange Commission’s four-year investigation of “old” GM’s pension accounting, which concluded with no allegations of fraud or intentional misconduct.

Jenner & Block, which is based in Chicago, was the lead outside counsel for GM’s initial public offering in 2010 when it returned to the market as a public company following its bankruptcy restructuring. Another lawyer who works at Jenner is Robert Osborne, GM’s general counsel from 2006 to 2009.

The law firm referred questions to GM.

In addition, GM said lawyers from the firm King & Spalding are also part of the team investigating the recall. The firm also referred questions to GM.

King & Spalding, founded in Atlanta, represented “new” GM during some of its bankruptcy proceedings, in addition to some other litigation work since then. Partners at the firm include Gary Grindler, the former U.S. deputy attorney general under Eric Holder.

Regarding the ignition-switch issue, GM previously said the weight on the key ring, road conditions or some other jarring event may cause the ignition switch to move out of the “run” position, turning off the engine and most of the car’s electrical components. GM has recommended that owners use only the ignition key with nothing else on the key ring.

The company said last week that the initial replacement parts will be available in early April.

(Additional reporting by Jessica Dye in New York; editing by Matthew Lewis)


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