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GM Ignition Switch Recall: What To Expect From Valukas Report

Published 06/02/2014, 09:29 AM
Updated 06/02/2014, 09:30 AM
GM Ignition Switch Recall: What To Expect From Valukas Report

GM Ignition Switch Recall: What To Expect From Valukas Report

By Angelo Young - Former federal prosecutor Anton Valukas' report about General Motors Co.’s (NYSE:GM) bungled response to a defective ignition it ackowleges killed at least 13 people, could be released as early as this week and is expected to address why it took more than a decade for North America’s largest automaker to rectify a flaw it said some of its engineers were aware in 2001.

So far, GM has not fired anyone in connection to the $1.7 billion recall affecting 2.6 million cars whose ignition switches can slip from the “on” to the “accessory” position while the vehicle is in motion, disabling power brakes, airbags and power steering.

© Reuters. Anton Valukas testifies before the House Financial Services Committee regarding the Lehman Brothers bankruptcy on Capitol Hill in Washington April 20, 2010. Valukas, who was hired by GM to look into how the company handled a fatal flaw in one of its ignition switches, is expected to release the results of his findings as early as this week.

GM CEO Mary Barra, who took the helm of GM on Jan. 15, went before two congressional hearings in April, but she declined to answer some of the most important questions, urging indignant lawmakers to wait until the release of the Valukas report. House members, including Marsha Blackburn, R-Tenn. And Diana DeGette, D-Colo., went as far as to suggest GM was involved in a cover up.

Valukas, a Republican and former federal prosecutor who famously cracked down on judicial corruption in Cook County, Illinois, in the mid-1980s, has been given “free reign” to pursue the facts in the case, according to Barra. The attorney for the Chicago-based law firm Jenner & Block was appointed examiner in the Lehman Brothers Holdings bankruptcy in which he was applauded for his work outlining the causes of the collapse of the financial services firm in 2008.  

After Valukas releases his report, GM is expected to reveal new measures aimed at speeding up disclosure of safety issues to the company’s top executives. GM claims it is not liable for damages for vehicle defects prior to its Chapter 11 reorganization in 2009.

Some of the most important questions revolve around who at GM knew what and when about the faulty ignition switch. Both Barra and her predecessor, Dan Akerson, have publicly denied any knowledge of the ignition switch problem prior to December when the company was preparing to issue a safety recall of the affected vehicles, 13 years after the first indications of a problem emerged regarding the ignition switch in the Chevrolet Cobalt, Saturn Ion and Pontiac G5. By 2005, dealers were reporting customer complaints about the ignition switch and GM employees, including the switch’s chief designer, Raymond DeGiorgio, were discussing the cost of fixing the problem.

By 2012 there was sufficient evidence to suggest people inside the company were well aware of the problem, but at what level does this knowledge constitute a cover up? Last month GM was fined $35 million by the National Highway Transportation Safety Administration (NHTSA) for not reacting quickly enough to the agency’s request for answers.

"GM engineers knew about the defect. GM investigators knew about the defect. GM lawyers knew about the defect," David Freidman, NHTSA acting administrator, said in announcing the fine. "But GM did not act to protect Americans from that defect."

GM executive deny any cover up, and are blaming a flawed internal process that kept knowledge of the defect from traveling up the ladder of command at the company. The Valukas report should offer a clearer picture of that process.

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