Belated recall deals GM, new CEO a fresh image challenge

General Motors is facing qustions over why it took nearly a decade to recall 1.6 million cars sold in North America for defects that have been tied to 13 deaths. The world's number three automaker is now facing two official probes over the issue, one from the governmet's National Highway Traffic and Safety Administration, and a second from a powerful congressional committee, asking why both GM and the NHTSA were so slow to move after hundreds of complaints. Republican Congressman Fred Upton said the House Energy and Commerce Committee would hold hearings in the coming weeks. Upton noted that he pushed through legislation in 2000 aimed at ensuring automakers reported and acted on defects before they became an ongoing problem. "Yet, here we are over a decade later, faced with accidents and tragedies, and significant questions need to be answered," he said. That was bad news for GM, and its shares tumbled 5.2 percent to $35.18 Tuesday. - Slow to recall cars - GM employees already knew in 2004 and 2005 of ignition problems in the Chevrolet Cobalt, according to an official chronology from investigators, seen by AFP. Drivers said the ignition turned off by itself, while they were moving. That would shut down electrical systems, including the safety air bags, as shown in a number of accidents. Over the years, more reports came in, including links to crashes in which the airbags did not deploy, resulting in sometimes fatal injuries. But it was only last month that any concrete action was taken, and even then, haltingly. At first GM announced a recall involving 780,000 cars in the US, Canada and Mexico, saying the ignition could be jarred from "run" position to "accessory" or "off", especially if the vehicle was off road or the key ring was particularly heavy. GM said it knew of 22 crashes involving frontal impact where the front seat airbags did not deploy, with six deaths resulting. But the automaker added that all of the fatal crashes "occurred off-road and at high speeds, where the probability of serious or fatal injuries was high regardless of airbag deployment." Just 12 days later the company expanded the recall to 1.6 million cars, saying it had recorded 31 crashes in which the defect may have stopped the airbags from deploying, and 13 deaths. The list of cars was expanded to six popular models manufactured between 2003 and 2007: Chevrolet Cobalt and HHR, Pontiac G5, Pursuit and Solstice, and Saturn Ion and Sky. The initial investigation was "not as robust as it should have been," admitted GM North America President Alan Batey. "We are deeply sorry and we are working to address this issue as quickly as we can." - New CEO Barra orders probe - The recall is the first big crisis for new chief executive Mary Barra, who took the company's helm on January 15 as the first woman to lead a major automaker. Last week she announced an internal review into why the company was slow to act, promising an "unvarnished" report. The review will be led by a respected lawyer, Anton Valukas, who earlier led an examination of the collapse of Lehman Brothers. "I deeply regret the circumstances that brought us to this point," Barra said in a memo to employees on the company’s website. "We will hold ourselves accountable and improve our processes so our customers do not experience this again." Barra's transparency recognizes the damages the company faces. In 2009-2010 Toyota was forced to call back some 12 million vehicles worldwide at a cost of $2.4 billion. The Japanese company's executives were forced to appear in Congressional hearings, where they were sharply denounced for allegedly hiding and downplaying dangerous defects in some of the company's most popular models. GM faces only small official fines at the moment: a possible $35 million, minute compared to $155 billion in revenues last year. But analyst Douglas McIntyre at 24/7 Wall St. said ultimately GM's recall "could prove to be one of the most costly in automotive history," running "well into the billions of dollars." "The legal liability triggered by what could be thousands of personal injury lawsuits may be just as damaging to the reputation of GM's important brands," he said.