Peter Morici

Mary Barra, CEO of General Motors, was called before Senate and House Committees last week to explain why a faulty ignition switch, responsible for at least 13 crash deaths, was not recalled for several years in vehicles manufactured by GM.

Barra, who served as Executive Vice President for Global Product Development, Purchasing and Supply Chain until January, told members of Congress that she had no knowledge of the switch problem prior to the recent recalls.

Members of Congress were left frustrated. Neither Barra nor federal regulators provided good answers as to why the vehicles were not recalled sooner and the faulty part continued to be installed in GM vehicles for so many years.

Here are five takeaways from the hearings and what we know so far from the actions of GM and government officials.

1. The GM bailout failed and $10 Billion in Taxpayer Money has been squandered

Starting in 2009, the U.S. Treasury put $51 billion into General Motors—through loans and stock purchases—and ultimately lost $10 billion. Part of President Obama’s strategy to put GM through “quick wash” bankruptcy, this left most of the existing management in place.

Managements’ mediocre commitment to quality and safety helped put GM into financial trouble a decade ago, and now we see that problem continues unabated.

Had GM been forced through conventional bankruptcy reorganization, private investors would have replaced much of the existing senior management with more customer focused leadership. Better quality control systems to guard against episodes like the ignition switch scandal could have saved lives.

2. GM’s culture is broken. The company can’t make reliably safe cars

GM has heavily layered and highly compartmentalized management and product design structures. Problems like the ignition switch can be discovered by GM engineers—as the result of customer complaints or tragic accidents—but go unnoticed by other units and senior leadership.

All this results in top management left unaware of tragic defects, and the public driving unsafe vehicles that should have never been put on the road.

3. There’s not much accountability for bureaucrats at the Obama White House

The National Highway Traffic Safety Administration was aware of the ignition switch problem as early as 2007 but took no concrete action to protect drivers and passengers.


Peter Morici

Professor Peter Morici is a recognized expert on economic policy and international economics. He has lectured and offered executive programs at more than 100 institutions including Columbia University, the Harvard Business School and Oxford University.
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