Presidential candidates today frequently use popular pieces of music as campaign "theme songs" often without approval from the musicians themselves. But using music on the campaign trail is not a modern phenomenon: it goes back to our earliest presidential elections.
General Motors CEO Mary Barra meets with shareholders today. It’s her first public appearance since GM’s internal review made public last week detailed the company’s 11-year failure to recall cars with defective ignition switches. In recent months GM has been changing course: so far this year there have been 34 recalls involving 2.6 million cars. Mary Barra has promised the company will ‘do the right thing’ for families of those killed or injured as a result of the defective switches. But some say she faces an uphill battle in efforts to build trust in the company and its products.
- Mark Robinson attorney, Robinson Calcagnie Robinson Shapiro Davis,specializing in consumer class action suits
- Aaron Jacoby attorney, Arent Fox, specializing in the automotive industry
- Joan Claybrook president emeritas, Public Citizen.
- David Shepardson Washington bureau chief, The Detroit News.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. General Motors is facing a raft of lawsuits as a result of its multi-year failure to recall cars with defective ignitions which as the families of those killed or injured are involved but likely so will those who suffered economic losses on the approximately 2.6 million cars recalled since February.
MS. DIANE REHMJoining me to talk about the problems ahead for GM: Joan Claybrook, former head of Public Citizen, David Shepardson of The Detroit News, and, joining us by phone from Los Angeles, Aaron Jacoby, an attorney in private practice specializing in the auto industry. Do join us, 800-433-8850. Send us an email to email@example.com. Follow us on Facebook or Twitter. Thank you all for joining us today.
MR. DAVID SHEPARDSONThanks, Diane.
MS. JOAN CLAYBROOKThank you so much.
MR. AARON JACOBYThanks for having us.
REHMGood to have you all here. David Shepardson, I'll start with you. Yesterday's Wall Street Journal highlighted the fact that potentially more than 2 million GM car owners may have a claim against the company. Tell us why.
SHEPARDSONThat's right. So there's about 80 lawsuits or so around the country that are alleging economic loss. That is, people sold cars, or they turned in leased cars. Or they still own the cars. And as a result of the GM recall crisis, those cars have declined in value. At this point, GM is only willing to offer cash settlements through Ken Feinberg to people who were either injured or the families of those killed, but they are not yet willing to make payments in those citing the fact that GM exited bankruptcy in 2009 as a new company and therefore, they're arguing, should not be liable for those claims.
REHMDo you see that changing?
SHEPARDSONI think that's a very realistic possibility. I mean, in the case of Toyota with their sudden acceleration problems, they ultimately paid $215 million to settle similar economic loss claims. I mean, GM legally is maybe entitled not to pay the claims. But in the end, if it's a relatively small amount of money for these Cobalt, Ion cars, they may just be willing to settle.
REHMHmm. And, Joan Claybrook, what new answers did we get from their release last week of GM's own investigation into its failures regarding ignition switches?
CLAYBROOKWell, we learned a lot. I'm not sure that we learned everything though. We got a lot of details about the inadequacies of communication inside the company, the fact that people didn't talk to each other, the fact that there was a lot of secrecy, that the legal office really was in control of a great deal of this and did not want people to take notes at meetings so that they could...
CLAYBROOKNo notes. I know. That was really fabulous -- can't take any notes. And the complete disconnect, the failure to properly record when this part was changed -- the ignition switch part was changed, the decision-making process. In addition, we also learned that, in their communications with the National Highway Traffic Safety Administration, the agency also kept secret a lot of what they learned and how they communicated.
CLAYBROOKAnd so we have two major decision makers here, General Motors and the National Highway Traffic Safety Administration, both keeping things secret, and between themselves keeping things secret. And my view is that if there were more transparency both at the agency and at General Motors that this kind of problem is far less likely to have occurred.
REHMDo we even know who attended some of these GM meetings?
CLAYBROOKNo, we don't. We don't. We do not know. And...
REHMSo even that was kept secret.
CLAYBROOKEven that was kept secret, and, in fact, at NHTSA, we had no idea that they had this ongoing communication with General Motors about this particular problem, and I'm sure many others that the two agencies -- the two entities have to deal with rightly.
SHEPARDSONBut in some ways, it wasn't even about secrecy. It was about simply lack of basic recordkeeping. As the internal report found, GM didn't keep records of who actually attended meetings. They often didn't take minutes or keep any notes about what was discussed at meetings. And it was part of this whole GM culture of decisions by PowerPoint.
SHEPARDSONNobody takes responsibility for decisions. It was called the GM salute. You know, you stuck your arm out and said, hey, it's somebody else's responsibility. So the report really found, as the CEO said, a legacy of incompetence and negligence as opposed to necessarily a conspiracy, just simply people, you know, not doing the normal recordkeeping you'd expect for a big company.
CLAYBROOKBut I believe it was a conspiracy because the fact is that the rules were you don't disclose, you don't take notes, you don't have communication that's public in any way. That is in and itself a conspiracy.
REHMAnd weren't some words even banned from discussions?
CLAYBROOKYes, they were. And so the fact is that the public had no way of knowing. The dealers had no way of knowing. The dealers were given the most minimal amount of information. And the dealers are the public arm of the company. They're the ones that deal with the public every day who comes in complains and has problems. And they have to either fix something the best they can or kiss them off or, at one point, maybe have an extended warranty that the company might agree to.
SHEPARDSONIn fact, Diane, that memo you spoke of became really one of the most infamous parts of this entire controversy in that GM's lawyers told their employees not to use phrases, like Hindenburg, widow maker, death trap, even safety, dangerous, terrifying, I mean, in describing what happened. And that coupled with the fact that there was this, you know, never written down policy that everyone followed.
SHEPARDSONThe report said of not taking notes, these critical safety meetings sort of led to a culture where putting the company's sort of potential avoiding liability ahead of getting to the root problem and not telling senior executives about safety problems trumped actually getting to the bottom of these safety issues.
CLAYBROOKWhat I thought was...
REHMAnd let's bring Aaron Jacoby in here. He is an attorney in private practice specializing in the automotive industry and representing the dealers. Aaron Jacoby, talk about how the dealers were either brought into these conversations or totally left out.
JACOBYWell, certainly, as was noted, dealers were basically left out. And I don't think they were in any different position than the public although they may have seen certain repair items coming in more frequently under warranty than others. This is a problem that was not noted by dealers, and there was no more transparency with regard to dealers and with the public. One thing that was said earlier, that I understand the intent of, but just to clear it, is that dealers are the public arm of the corporation -- of General Motors Corporation. They certainly are a General Motors-branded entity, but they're independent separate entities.
JACOBYAnd they deal with the public separately. Right now, you know, in fact, while dealers are certainly monitoring the evolving response, both on the PR end and on the litigation, lobbying, investigation end -- and perhaps many are satisfied with how things are developing -- dealers are watching the news and learning of things as the public is learning them and, with the exception of knowing how they're to repair these ignition switches on a massive scale, don't really know more than the public does.
REHMAnd, Aaron, since February, there have been 34 recalls, including four last Friday. Tell me the kinds of defects that these recalls encompass.
JACOBYAnd I assume we're only talking -- focusing on General Motors. There have been, interestingly, recalls by every company, I think, using the GM crisis as cover and doing their recalls more voluntarily and more frequently under the cover of GM is going to be grabbing all the headlines anyway.
REHMDo you agree with that, David Shepardson?
SHEPARDSONWell, I'm not sure I agree it's cover. It's the fact that there's a new paradigm that the National Highway Traffic Safety Administration's taking a far more aggressive look at safety issues. They're not giving the companies a lot of leeway. And companies have decided that, you know, like Toyota, like Ford 10 years ago with Ford Firestone, that the risks to their brand and the damage of a recall not done in a potential safety issue is far worse than the short-term cost of actually recalling the vehicles. That's why we're on pace for a record number of recalls this year.
CLAYBROOKBut I think there's another...
CLAYBROOK...issue here that's really critical, and that is that the U.S. attorney for the southern district of New York is doing a criminal investigation of General Motors. It did a criminal investigation of Toyota and fined them $1.2 billion. They could put executives of General Motors in jail -- or try to. And so I think that's what's the incentive for many of these companies around the country. And I have always believed this, as a former regulator of the automotive industry myself, the tougher and meaner you are to these companies, in term of enforcing the law, the better they behave, and the better it is for those companies themselves.
REHMWhat about the...
JACOBYThat may be true, but -- and I'm not sure any of us are actually disagreeing. I think that there's the hammer on one end and the carrot on the other with regard to other companies other than GM. But GM is certainly grabbing the headlines, and it's not switching to any of the other companies that are doing recalls right now. And the criminal investigations have focused first on Toyota and now on General Motors. But in any event, I mean, we can certainly all agree that there's a lot more recalls going on.
JACOBYAnd I think your question was more related to the GM recalls.
JACOBYI think, other than the ignition switches, which are certainly grabbing everyone's attention and which have caused the injuries and deaths, I don't know that there's a big rise in other sorts of recalls that are noticed by dealers more than would be usual in this sort of context where recalls seem to be going on right and left.
REHMAaron Jacoby, he's an attorney in private practice specializing in the automotive industry. We've got to take a short break here. When we come back, we'll talk more, take your calls, your email. I look forward to hearing from you.
REHMAnd welcome back as we talk about what's going on with GM General Motors and indeed other recalls around the country, but most especially focusing on the GM problems. What's going to happen there? Here with me in the studio: Joan Claybrook, president emeritus of Public Citizen, David Shepardson, Washington bureau chief of The Detroit News. On the line with us is Aaron Jacoby, an attorney in private practice specializing in the automotive industry. David Shepardson, I guess what fascinates me is the extent to which GM cars have been selling like crazy this past month.
SHEPARDSONThey've had a very strong year. They were up almost 13 percent in May. And, you know, GM has a couple good things going for it in that these older cars that were recalled, the Cobalt, the Ion, the HHR, these cars, they don't build these any more. And they've really emphasized that the new cars are on totally different platforms, do not share any of the common parts that were recalled.
SHEPARDSONAnd, you know, sometimes people don't connect GM to Chevrolet and to its individual brands. I mean, research shows that, you know, the recall is that GM recall people don't necessarily connect it to Cadillac or to Chevy. So it's been a real bright spot for the company. And I think that's one of the reasons that the stock market hasn't hit the company harder.
REHMBut, Aaron Jacoby, I wanted to ask you about the dealers and how they have been affected by all the recalls.
JACOBYWell, in the short term, dealers are busy making a lot of repairs. And I think the repairs are being done as quickly as the new parts can be made. There's a schedule where GM is making a massive effort to repair these older cars. Just a comment, by the way, about the older cars. It is kind of amazing that there are record recalls and record sales at the same time.
JACOBYBut just as Mr. Shepardson just said that the old cars are gone, the old GM is gone also. And I think what dealers are seeing is that the new GM is actually handling things a lot different, more efficiently, more quickly, at least in terms of admitting the problem, making repairs for the problem, than GM of the past. I think dealers are noticing that.
JACOBYThis is also a subject of controversy because, of course, it's the same old new contrast that will allow GM to put up a shield against the loss of economic value claims. It would also allow them to put up a shield with regard to the injury claims although they're electing not to do that. But there is a new GM that is poised ready and repairing problems in a very quick way that is something new for dealers to watch.
REHMJoan Claybrook, do you agree?
CLAYBROOKWell, yes, but I think that the dealers are really benefiting from this because lots of people come into the dealership. The dealers are very good at selling more cars or more parts and pieces and other elements that the people are attracted to. And so that's a big advantage for them to have all these people streaming into their dealerships.
JACOBYI think that's correct, but at the same time, while in the short term they're certainly making repairs and possibly even up selling and making new sales of new cars, I think dealers remain concerned about customer concerns. They're aligned with customers in that regard and their concern for the brand long term if the brand does not handle this whole crisis properly.
CLAYBROOKThat's right, but they get to speak to the consumer.
REHMSure, that's true.
CLAYBROOKYou know, they have a way of actually communicating which is very unique and special.
SHEPARDSONBut two points though. One, GM has only -- the dealers have only been able to repair about 113,000 vehicles of the 2.6 million, you know, roughly 2 million in the U.S. So they still have about 95 percent of the vehicles in the U.S. still to fix. That's not the dealer's fault. It's in many cases because customers have not yet come in to schedule their repairs. And, secondly, the owners of these older cars, the Cobalts, Ions, from, you know, five, eight, nine years ago, they're not worth a lot of money.
SHEPARDSONSo these Cobalt and Ion owners are not necessarily coming into the dealership to buy a brand new $30,000 car. These are often, you know, kids out of college or people without the economic means to buy a new car. But certainly it's a chance for dealers to show the customers that they care, that they're committed to making things right, and really are the public face of the auto companies.
REHMAll right. And joining us now from Newport Beach, Calif. is Mark Robinson. He's an attorney in private practice specializing in consumer class action suits. Hi there, Mark. Thanks for joining us.
MR. MARK ROBINSONGood morning, Diane.
REHMI gather there are more than 80 ignition switch lawsuits, and they're going to be consolidated. How many GM car owners do these suits potentially involve?
ROBINSONWell, you've already talked about the 2.6 million vehicles that were recalled. Well, those cars and those owners are an issue and have issues in these class actions. I mean, these people have lost money. Now, maybe some of the new cars are selling, like Joan Claybrook says, but the reality is those cars that the average American is driving, the Cobalt, the Ion, et cetera, those cars are at risk for devaluation.
ROBINSONAnd that's what the MDL will look at. The new judge, Judge Furman, is a very good judge in New York. And he's going to take over all these cases, Diane. And I think that -- I think it's just beginning now. This issue, there's been a lot of publicity, but I think with the civil justice system taking a real good look at this, like we did at Toyota with the unintended acceleration cases, I think it's a brand new ballgame.
REHMAnd, Mark, what I wanted to ask you about is how the litigation that GM faces compares with what Toyota went through.
ROBINSONWell, I think that -- and I've said this to everybody -- that in my lifetime, I have never started a litigation, started the first depositions with an admission of 13 years of gross negligence, incompetence. I agree with Joan Claybrook that there is concealment here on the part of GM. I mean, you've got the -- the office of general counsel knew about these airbag deployment problems back in the 2004 to 2007 time period. They settled those cases. Those secret settlements were all part of what's going on.
ROBINSONSo I think that this is a better case than Toyota. I really do. I think this -- but something has got to be done. I mean, we have to bring justice -- in the American civil justice system with the depositions under oath, these 300 people that were interviewed by the Valukas Group, they have to be deposed under oath. And those 41 million pages -- that'll lead to other documents, Diane. So I think, frankly -- I'll keep saying it -- it's just beginning.
REHMAnd I gather it's going to be quite a long process, Mark.
ROBINSONYes. Toyota took us three years of intense depositions. We took 284 days of depositions. I think this -- we've got to get going. The judge is going to set a hearing in New York. And what he'll do is he'll take those 80 lawsuits and combine them into a small group of consolidated complaints. And once he does that, they'll set up a committee that hopefully we can then start taking a discovery.
SHEPARDSONRight. But the first issue is, will you get out of the starting gate, right? Will GM successfully be able to assert its liability shield from these economic loss claims as a result of GM's, you know, exit from bankruptcy as a new company?
ROBINSONWell, the -- at best, the claims that I've heard in the bankruptcy court -- and I was there last month -- deal with what's really old GM and the sale order. But basically that sale order exempts out liability of new GM, for example, for following the Tread Act, for following the Safety Act, for lemon law cases, for the California health and safety code. So there's definitely a lawsuit, and there is definitely responsibility and potential liability for new GM irrespective of what the ruling is by the bankruptcy court.
REHMHow much do you think it might cost in the end for GM to settle these claims, Mark?
ROBINSONWell, that's a good question, that word settle. You know, Ken Feinberg has been authorized apparently to try and settle claims. I mean, given what I know now and what I've heard even on this call from Joan Claybrook, which I agree with, he ought to start settling these cases now because I don't think an admission of incompetence and gross negligence on the part of General Motors is going to gain a lot of traction in the civil justice system. So he's got to start right now.
CLAYBROOKAnd, Mark, I thought that -- this is Joan. I thought that Ken Feinberg was dealing primarily with the injury cases, and I'm not sure that he's...
ROBINSONWell, I think he has more...
CLAYBROOKYeah. I think it's important for our guests here to understand that...
REHMRight now, it's only the injury cases.
ROBINSONOh, I understand that, but what Joan...
CLAYBROOKThat's right. What Mark Robinson is dealing with is the loss of economic value of these cars. But there's a whole separate group of cases dealing with people who were injured and killed. And, in fact, that's why I think there was a conspiracy inside General Motors. And that's why I'm shocked that the general counsel of General Motors was not asked to leave because when a lawsuit is filed -- and there were injury lawsuits now -- when they were filed, the first thing that happens is they go to the general counsel's office. The general counsel's office forms a team to deal with that litigation.
CLAYBROOKThey pull together the engineering and all the rest, so they get all the documents.
CLAYBROOKAnd then they litigate it. And if, as in some cases happened here, the plaintiff's experts discover what the problem was, then they settle the case. They settle it secretly so that they cover it up. And no one knows what the issues were that were raised in that case, or the information. And that -- they say in the report that only settlements above $5 million have to go to the general counsel for approval. And -- but I cannot believe that the general counsel of General Motors did not get a list once a month that says, we have settled these following or we're in the middle of this (unintelligible) going on.
SHEPARDSONCertainly there's no question that GM's legal practices, you know, raise a lot of questions. In fact, many of the 15 people that were fired by GM last week were GM lawyers involved in these very settlements, and they do raise a lot of questions. But at least from the report and everything we know now, there's no evidence of a conspiracy.
SHEPARDSONBut at the same time GM was settling hundreds of other lawsuits, was recalling tens of millions of vehicles, what they would say and what the report says is you had an individual engineer who made a series of catastrophic mistakes, approved a switch that did not meet their own specifications, didn't tell anybody, didn't change the part number in 2006 when it was improved. And that was the fault, not a conspiracy.
REHMDavid Shepardson, he's Washington bureau chief for The Detroit News. And you're listening to "The Diane Rehm Show." But that's where you disagree, Joan.
CLAYBROOKI do disagree. And one of the things, for example, that this report says is it never looked at something called the early warning reports. This is a requirement that was passed in 2000 after the Ford Firestone -- Firestone and Ford -- Ford Explorer Firestone debacle. And these reports are required by every company to be submitted quarterly to the National Highway Traffic Safety Administration for any death or injury that comes to the attention of a company through a claim, a letter, a lawsuit, whatever it is.
CLAYBROOKThey never looked at that and the fact is that there was a cover up by General Motors in those reports. They would submit the report and say they didn't know what the cause was, including some of these cases. So the fact that the report never looked at that, how is it going to deal with the full measure of this problem when they didn't even look at General Motor's own reports to the National Highway Traffic Safety Administration? And the wonderful thing about lawsuits is that they dig out the information. The lawyers don't get paid unless they win. And so they're, like, really aggressive at digging stuff out.
CLAYBROOKAnd that is not true of the National Highway Traffic Safety Administration. And General Motors doesn't want to disclose anything it doesn't have to.
REHMAnd of course, David, GM is facing a series of investigations from Congress, the Justice Department, the FCC and some states. Tell us about these.
SHEPARDSONRight. So the U.S. attorney's office in New York, the same office, same lawyers who investigated Toyota, have a criminal investigation into GM's conduct. In the case of Toyota, it took four years. And I think Joan's right that there are questions we don't have the answers to that potentially are going to get addressed by that. The FCC is investigating whether investors were misled.
SHEPARDSONAnd these state attorney generals are also looking at whether there was fraud on the part of GM. And, you know, this report that GM commissioned is certainly not the last word. And these other investigations are going to be painful, expensive, and they're going to take a long time. And they are going to come back in a couple of years.
REHMMark Robinson, 15 people at GM have so far lost their jobs. What do we know about them and the jobs they lost?
ROBINSONOK. There's a really important one that was fired, William Kemp. William Kemp was the number one -- according to the report, was the number one product liability lawyer at GM. He was the guy that knew everything. He was really the top dog there, even though there were different people coming in as the head of the office at general counsel. And in the report, it says that he didn't tell Mr. Milliken, and he couldn't explain why.
ROBINSONThe bottom line is, at the top level of the office of general counsel, GM knew about this. And, frankly, there is a pathway from the office of general counsel to the higher ups in GM. I mean, Mary Barra was not president -- or CEO during this period. But there are other people that were probably reported to by the office of general counsel, including William Kemp.
REHMBut you know, Mark, that's the question I have had right along. I realize Mary Barra was not CEO at the time, but she was certainly in the company. Did she have any possibility of knowing any of this data?
ROBINSONYeah, there's an October 2011 email that was referenced and sort of washed away in the Valukas report. That October 2011 email told her about these problems with the Ions, with the ignition switch, and actually talked about NHTSA wanting to do a recall. So all she had to do was, at that time in October of 2011, make a phone call and get to the bottom of it.
SHEPARDSONActually, I don't think that's right. That email referred to steering problems in the Ion, not to the ignition switch problems. I've read that email. It was released by Congress. I don't -- there's no evidence -- and that email is not evidence that she knew about ignition switch problems.
REHMAll right. We've got to take a short break here. We'll open the phones for your calls when we come back.
REHMAnd welcome back as we talk about the problems, the lawsuits, the defects in automobiles manufactured by General Motors. A number of you have written about the 2007 Cobalt and what to do. This one from Eve sort of rounds it out. She says, "My 24-year-old son drives a 2007 Cobalt. He's registered to get the new ignition installed, but, in the meantime, he's driving an unsafe car. It's frightening. Why does all this take so long?" David?
SHEPARDSONIf she or her son are concerned, they should call GM, the dealership, right now. GM has been providing tens of thousands of rental cars. And most importantly, to everybody driving these recalled cars, is to take all the keys off their keychain -- take the keychain off and only use the ignition key because the government and GM have said that they believe it's safe to drive the cars as long as only the ignition key is in use. And, again, if there's any concerns, go to a dealership, get the repairs, or get a rental car for free until it's fixed.
REHMAnd here's another email from Phil -- Bill, in Floyd, Va. He says, "Why does the attorney on your panel want to take depositions? GM has admitted liability. The only issue in the injury cases is the amount of compensation." Joan Claybrook?
CLAYBROOKWell, you want to take the depositions because they're under oath. And if General Motors is giving them a hard time in any of the settlement, you want to be sure you have that under oath. But I think that it's not the only issue because there will be issues of the amount of compensation, the amount of injury, and what caused that particular injury. So there are other issues involved in that.
CLAYBROOKBut the other thing is that under the General Motors bailout, if your injury occurred before July 10, 2009, then General Motors is absolved -- the new General Motors is absolved of any liability. And they have hired a gentleman named Ken Feinberg, who has helped in a number of other type liability cases, to try and figure out how to give compensation to those people in the Cobalt. My concern is that there are other recalls that were delayed that did not occur. They're not as well-known as the Cobalt one, and so these individuals also, I believe, should be compensated by General Motors if their crash occurred before July 2009.
SHEPARDSONThat's a good question that Joan raises. In fact, the report, which looked at these 41 million pages from GM's lawyers, only looked at the ignition switch recall.
SHEPARDSONSo none of these other recalls have been reviewed by any of their lawyers. And, in fact, last summer, NHTSA sent an email to GM saying the company was slow to act, slow to communicate, and had to be pushed to recall vehicles at times when its competitors did not.
REHMBut it sounds as though NHTSA was slow in the uptake as well.
CLAYBROOKNHTSA's terribly slow. It takes a year for them to even decide to open an investigation. They have a bureaucratic process that is worthy of the Defense Department.
REHMAll right. Let's go to Phil in Hebron, Ill. Hi there. You're on the air.
PHILGood morning, Diane. I have an initial question and a statement I'd like to (unintelligible) to. My initial question was The Wall Street Journal has been saying this is old GM. If it's a civil suit, you can't go after new GM. And they say that's all up to a judge to decide that, but the way it was written, the way the bankruptcy was kind of adjusted through GM and the administration, was to avoid this.
PHILI find it all very interesting that people in the company knew there was a problem, their accountants or whoever pushed for this type of bankruptcy, the president won reelection not by no small part saying he saved GM, which Joe Biden said, and now we turn around and find out we sold the stock at a huge loss just before this came out. I hope Micki Maynard or somebody else is writing this all down. This is a book no one will believe.
REHMAll right. David?
SHEPARDSONNo, you know, the caller raises a lot of good points. You know, remember the U.S. government used an arcane section of the bankruptcy code, Section 363, where it took the good assets of GM and sold them to a new company, thereby leaving behind all of the liabilities, asbestos claims, and all these old suits. And, you know, the government, the auto task force, Steve Rattner and all the other executives or the officials said they knew nothing about this, that GM never told them.
SHEPARDSONAnd in terms of the timing and the stock sale, it certainly is curious, but again, like GM's two CEOs, Dan Akerson then and Mary Barra now, nobody knew at a very high level of the company, they say, and therefore it's, you know, the government didn't know either.
REHMAaron Jacoby, do you want to respond?
JACOBYWell, I think that the caller brings up a good point. It's -- it is the center of the controversy about old GM and new GM. I don't agree that this is so esoteric. It is part of what happens in bankruptcy, is that you leave the old liabilities behind, and you emerge as a totally new company. This does happen, actually, all the time. And that's the purpose of bankruptcy.
JACOBYThe question here is whether people knew. And how high did that knowledge go? Is it attributable to the company? And that's the question that -- while we're all sort of talking about suppositions that GM did know and how they knew, et cetera, we don't actually know yet. And that's what will come out in the civil trial or during the investigation.
REHMAll right. Let's…
JACOBYAnd if it does come out, then old GM's liability will transfer to new GM because that's an exemption to the bankruptcy.
REHMAll right. Let's go to Jerry in O'Fallon, Mo. You're on the air.
JERRYGood morning. Thank you very much. You did an excellent show on this same topic in March of this year. And one of your guests was Bob Lutz. We kind of got into a verbal altercation. And he, in fact, basically declined to comment on my comment. And it still stands, is that going back to the Corvair, which had design problems and inherent problems even before it was put on the market, the first response by General Motors -- and it seems a lot of companies -- is to try to attack the information, so to speak.
JERRYDeny, deny, put up roadblocks. In that case, they spent money trying to discredit Ralph Nader. You saw the poor woman who died in an accident who did have blood alcohol content. But a lot of the defense -- and, in fact, I think on the show, one of your guests -- a previous one -- mentioned that point -- to try to discredit or take some of the responsibility away from General Motors.
JERRYAnd I keep seeing this over and over, that, in this case, 15 people -- you know, we know we have a number of deaths. We have a number of injuries. Fifteen people lose their jobs. No one goes to jail. And I think, unfortunately, until we address and, you know, we've given corporations the benefits of being citizens until they have to accept the responsibilities, I think this is a pattern we'll continue to see.
CLAYBROOKI completely agree with that. There is no authority up at the National Highway Traffic Safety Administration statute to prosecute criminally someone who refuses to -- a company that refuses to do a recall, even though there is a defect. There is authority in the Justice Department for criminal prosecution if you lie, if you commit fraud, if you mislead the government. And that was the authority under which the U.S. attorney for the southern district of New York went after Toyota.
CLAYBROOKBut there is there authority to put people in jail. And I believe that, until company officials who do this kind of cover-up or refusal to protect the public, which is their responsibility, are put in jail, then these companies are going to continue to misbehave.
REHMAll right. Let me read you all some...
JERRYBut we don't know. We don't know that there's been a...
REHM...of an email from Carl Nash. You know Carl Nash, Joan?
REHMTell us who he is.
CLAYBROOKWell, he used to work for me at the National Highway Traffic Safety Administration.
REHMOK. He says, "GM has not yet faced up to another major vehicle defect, the weak collapsing roofs on its SUVs that are highly prone to rolling over. General Motors has regarded the requirements of NHTSA, of the National Traffic and Motor Vehicle Safety Act and the authority of NHTSA, as a nuisance rather than a responsibility since the days of the Corvair and defective Chevrolet engine mounts."
CLAYBROOKWell, what Carl is talking about is not a specific defect, such as the ignition switch, but rather the...
CLAYBROOK...failure, the structure of the vehicle and the failure of all the companies, not just General Motors, to design proper roofs for their vehicles. Now, there are some like Mercedes or BMW that have -- or Volvo. They have stronger roofs. But many, many roofs on these vehicles are weak. And when the vehicle rolls over, it crushes in and kills people or seriously and horribly injures them. And that was the issue raised in the Ford Explorer Firestone case where these vehicles were prone to roll over to start with. And then when they did roll over, they badly damaged people inside.
SHEPARDSONIt's worth mentioning the roof-crush rules that GM and Ford essentially wrote in the early '70s were finally upgraded back in 2009 by the Obama Administration after about another decade of study. So the new vehicles coming on today have far stronger roofs than the older ones.
CLAYBROOKBut the problem is that they're not tested properly. What the NHTSA rule does -- they caved into the auto companies, in my view, on that rule, which is they just test it by putting pressure on the top of the roof. They don't actually do a dynamic test. Until you do a dynamic test and see how the roof performs, you really don't understand how it's going to perform in a crash.
REHMAll right. Aaron Jacoby and Mark Robinson, one after the other, I'd like your views on whether Mary Barra has the support and will continue as the CEO of GM. Or is she going to be caught up in this as well? Aaron first.
JACOBYYou know, I think it's very hard to say. I think we'd be guessing a little bit. I think so far, as someone who took over and then was immediately faced with this major crisis, having to appear before Congress very quickly after she became CEO, having to deal with an internal investigation, outside investigations, a U.S. attorney's office, prosecution, I think she's actually been doing a very admirable job.
JACOBYAnd that, I think, is true, whether or not it's found that there was concealment, whether or not new GM becomes liable for the old GM liabilities with regard to the issues we've been discussing. Now, if she continues to perform well, it may be that she's somehow associated with the crisis. And even if she comes out of this whole and if the company does perform as the public sees fit and the public continues to buy cars, she may be too associated with this crisis to continue. So that might be another avenue for her departure, not only failure, it could be success that leads to a departure.
REHMInteresting. Mark Robinson, how do you feel about it?
ROBINSONI agree with Aaron. I think that really it's going to be -- the story's going to be told in the future. And we really are going to have to wait and see. But one thing that hasn't been discussed here is in the bankruptcy court, on this issue of old GM versus new GM, Diane, there's a motion right now regarding due process, claiming that the people that bought these cars during the old GM reign never were told about the bankruptcy and never were told about this potential claim.
ROBINSONAnd that's probably the first issue for the bankruptcy judge. If he rules in the victim's favor on those issues, then, frankly, this issue of old GM and new GM may be neutralized because that would open up the injury cases, the death cases, and the economic loss cases that related to old GM, into the litigation in the MDL.
ROBINSONI think that's a really important point.
REHMAnd you're listening to "The Diane Rehm Show." David?
SHEPARDSONNo. He's exactly right. I mean, one of the real challenges here is that these owners of the cars, back in 2009, when there was a deadline set by the bankruptcy court to say, hey, if you have any claims you want to assert against GM, you've got to do it now. But these customers did not know that their cars had this very serious defect that would be, you know, discovered until seven years later.
REHMAll right. Let's go to Dagmar (sp?) in Mechanicsburg, Penn. Hi there. You're on the air.
DAGMARHi, Diane. Thank you for continuing to report on this story. I have a 2006 Chevy Cobalt. I've had problems with my ignition, going back to 2009. I have a problem that has not been reported on as much, which is my car not starting at all. April 30, I was told that I could bring my car in to have it fixed under the recall. I was really excited. I thought this problem was finally going to go away. And three weeks later, after I had received the new parts, I had the exact same problem of my car not starting.
DAGMARI read in The Washington Post last week that there are internal GM memos talking about electrical issues pertaining to the ignition switch. And the engineer stated he was much more concerned about that than he was about the actual switch. And I'm wondering, you know, where's the recall for the electrical problems?
REHMAll right. David?
SHEPARDSONThe caller is absolutely right. The engineer called this the switch from hell. And the biggest problem was that hundreds of complaints came in that the cars, you know, would not start, especially in cold weather. I know GM has issued technical service bulletins. And I thought there was already a recall for this issue years ago. So have you taken it to your dealer? Have they said they can't fix it the second time?
REHMShe had taken it...
REHMWell, she took it the first time. Would you advise her to take it a second time?
SHEPARDSONAbsolutely. This switch should be replaced, and the new switch, you know, should prevent this problem from happening.
REHMWould you be continuing to drive this car, Joan?
CLAYBROOKNo. I would definitely take a loaner car. And the company is making them available. But I would like to comment on Mary Barra for just one minute...
CLAYBROOK...and her future.
CLAYBROOKI think she has the richest opportunity of any CEO in America because this company needs her badly. They need her to perform. And she can then use that power and authority that she now has to reorganize General Motors. And that's a huge task. She should get some outside help to do that, and to find ways to get rid of the siloes and the secrecy and the failure to communicate and to fix the way this company operates.
REHMWell, let's hope somebody finds a way out of this mess because it really is a mess. That's the last word from Joan Claybrook, president emeritus of Public Citizen, David Shepardson of The Detroit News, Aaron Jacoby and Mark Robinson, both attorneys regarding class action suits and the automotive industry. Thank you all for joining us.
JACOBYThank you for having us.
REHMAnd thanks for listening. I'm Diane Rehm.
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