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GM recall process will be under congressional microscope

General Motors Co's new chief executive Mary Barra addresses the media during a roundtable meeting with journalists in Detroit, Michigan Jan
General Motors Co's new chief executive Mary Barra addresses the media during a roundtable meeting with journalists in Detroit, Michigan Jan

By Ben Klayman and Richard Cowan

DETROIT/WASHINGTON (Reuters) - When General Motors Co Chief Executive Mary Barra faces Congress next week she will have to explain how the top brass at the biggest U.S. automaker can say they knew nothing for more than a decade about a faulty ignition switch linked to crashes and at least 12 deaths.

For lawmakers trying to find who to blame for the lack of responsiveness by GM and its regulator to the tragedies, and in particular the multi-year delay in recalling potentially dangerous vehicles off the roads, it may turn out to be a frustrating couple of days.

GM built a system to deliberately keep senior executives out of the recall process. Instead, two small groups of employees in the vast GM bureaucracy were tasked with making recall decisions, a system GM says was meant to bring objective decisions.

It means that lawmakers may also focus on asking who is responsible for a system that failed so badly that there weren't red flags raised for those higher up the food chain.

"In this day and age, to think that stuff like this can be kept quiet or forgotten is ridiculous," independent auto analyst and author Maryann Keller said. "The right question to ask is who knew, when did they know and why was this not brought forth to be dealt with. Did they hope that it was just going to go away?"

The company has recalled 1.6 million cars for a problem first noted in 2001, spurring the congressional enquiries as well as investigations by federal safety regulators, who will also testify, the Justice Department, and GM itself.

GM has said Barra and other top executives did not learn of the defective switches until January 31, explaining that smaller groups of lower-level company executives are responsible for leading a recall. Some executives who might use this argument include former CEO Rick Wagoner and his immediate successor Fritz Henderson, who have not discussed the matter publicly.

"The process here is supposed to be drilling deep into the data and objectively looking at this and having peer groups question it, and senior management and leadership's influence on that is not a healthy thing," global product development chief Mark Reuss said last week.

GM spokesman Jim Cain said the company was not yet commenting on why the decision to recall took as long as it did. GM is still investigating, he added.

Within the GM community, several former executives contacted by Reuters were asking why the ignition switch problem did not catch the attention of company attorneys, engineers and employees who worked with dealers and processed warranty claims.

"Why did these dots not get connected? Or worse, if they were connected, why did it take so long to do something?" said one former executive with experience in service matters, who asked not to be identified and had not heard of the issue while it was developing.

When the ignition switch in older-model cars, including the Chevrolet Cobalt and Saturn Ion, is jostled, a key could turn off the car's engine and disable airbags and other components, sometimes while traveling at high speed.

"Safety-related issues always got elevated attention," said a former GM engineering executive. "Something like engine stalls would get high priority."

Lawmakers will "ask questions that will hold people accountable for the terrible accidents that have occurred," Representative Henry Waxman of California, the senior Democrat on the House Energy and Commerce Committee, which is conducting that chamber's investigation of GM, told Reuters.

Barra will testify in the House on Tuesday and in the Senate on Wednesday.

Barra and the acting head of the National Highway Traffic Safety Administration, David Friedman, are likely to face a barrage of questions from skeptical lawmakers. They may also have to deal with accusations from victims' families, some of whom plan to attend the hearings.

A lawyer for some victims' families on Saturday invited Barra to meet with them in Washington next week.

"They need to hear from you, listen to your voice to know you are truly sorry and that you share in their grief and, to an extent at least, you understand their loss," Robert Hilliard wrote in a letter emailed to Barra and GM lawyers.

GM spokesman Greg Martin said by e-mail: "Mary has expressed GM's regret and deep sympathy for all of those affected by the recall. We are determined to earn our customers' trust and to take actions necessary to make our safety processes world class. Arranging a meeting in the media is not respectful to the families. We will respond directly to the invitation."

INSIDE GM'S RECALL PROCESS

For more than a decade the company carried out engineering and field evaluation inquiries to track the problem, according to a timeline that GM filed with regulators. That document and others also suggest a failure to share information within the company.

GM first learned of the issue in 2001 during pre-production of the Ion, and it issued so-called service bulletins to dealers with suggested remedies in 2005.

A February 2005 bulletin suggested dealers look for short drivers, who would be more likely to bump the steering wheel column, according to GM documents filed in a California lawsuit.

Meanwhile, in a GM document introduced last year in a Georgia lawsuit, 6-foot-3-inch GM engineer Onassis Matthews said he inadvertently turned the ignition key off with his knee while test driving a Saturn Ion in February 2004. Matthews suggested moving the ignition key to a different location.

As fatal accidents were reported, they were not always discussed broadly.

In March 2007, NHTSA officials told a group of GM employees of a fatal Cobalt crash in July 2005. GM's legal team had opened a file in 2005, two months after the crash, but the automaker's employees at the 2007 meeting with NHTSA were not aware of it.

In August 2011, an engineer was assigned to track a group of Cobalt and Pontiac G5 crashes in which the airbags did not deploy, but the process failed to include crashes involving Ion cars that resulted in deaths.

The issue was elevated to the two committees responsible for calling for recalls in 2013. GM declined to say if the committees had looked at the issue previously.

"Product recalls was a closely held activity," said a former executive in the global product development organization.

The system served two purposes. First, it put a group of experts in charge of the decision. Second, it kept news of potential recalls from leaking, the person said.

One small group would vet incoming data and decide if a recall was warranted, then make a recommendation to an even smaller group in charge of approving the recall. If the second group approved a recall, the recommendation would then go to senior management.

Jim Heller, chair of the products liability practice at Philadelphia law firm Cozen O'Conner said top executives "can't be involved in every consumer's complaint, regardless of merit."

However, Heller, who does not do work for GM, said a growing problem that would affect company earnings and public relations should have been communicated to senior management.

GM's 2009 bankruptcy may also be part of the explanation, since it led to an exodus of executives, including Wagoner and Henderson, both of whom were forced out.

Members of Congress, as well as safety advocates, want to know whether senior GM executives may have learned of the issue long before it surfaced in late 2013 and led to last month's recall.

Wagoner declined to comment through a spokesman, while Henderson could not be reached. Former North American chief Gary Cowger also could not be reached to comment.

GM's former general counsel, Thomas Gottschalk, referred questions to the company, and GM said its current top legal executive Michael Millikin, who was previously the No. 2 executive in the department, also did not learn of the defective ignition switches until January 31. He is co-leading GM's internal probe.

Lori Queen, who was previously in charge of GM's small-car engineering when the Cobalt was introduced, said she and her husband James, who was in charge of global engineering, would not comment. Former purchasing chief Bo Andersson, who is now CEO of Russia's largest automaker Avtovaz, also declined to comment.

A company spokesman said GM's vice president of global product development Doug Parks, who was chief engineer for the Cobalt and Ion, was not commenting.

The two Congressional committees are likely to decide on additional hearings and witnesses after they digest GM and NHTSA documents they have received and the information gleaned from next week's hearings.

LESSONS TO LEARN

Barra has repeatedly apologized for the company's handling of the matter and said GM would focus on taking care of customers, and company officials have stressed cooperation in all investigations.

She may get some credit from lawmakers for that attempt at transparency.

GM's CEO "gets high marks for admitting wrongdoing. On the other hand, she hasn't been there very long," said Senate Commerce Committee Chairman Jay Rockefeller, a West Virginia Democrat, who is overseeing the Senate hearing.

The senator said he would look at documents and listen to testimony before deciding about GM, and that the committee would be looking for explanations. "You have to have lessons," he said.

(Additional reporting by Paul Lienert in Detroit, Megan Davies in Moscow, Doina Chiacu and Will Dunham in Washington; Editing by Peter Henderson, James Dalgleish and David Gregorio)

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