The massive ongoing recall of General Motors vehicles with faulty ignition switches (and the dozen years the company spent not issuing a recall) has made headlines, launched lawsuits, angered legislators, but many consumers who don’t own a recalled car have shrugged and said, “Glad I don’t drive one of them.”
One small defect in a part that controls a car’s ignition switch: that’s what’s at the root of a massive car recall linked to at least thirteen deaths. The cars all came from General Motors brands sold for most of a decade — and as we now know, someone, somewhere knew about the fatal potential of that defect for as long as it existed. The ignition switch problem affects everyone who drives a GM car. But the way that the defect was allowed to remain in the production line for so long affects nearly everyone who drives or shares roads with cars — whether you’ve ever set foot in a GM vehicle or not.
The GM ignition switch recall started in February with an announcement about 778,000 compact cars. Over the months since then, the recall list has expanded to include about 2.6 million Saturn Ion (2003-2007), Chevrolet Cobalt (2005-2010), Chevrolet HHR (2006-2011), Pontiac G5 (2007-2010), Pontiac Solstice (2006-2010), and Saturn Sky (2007-2010) vehicles. (GM has also recalled another three million cars this year for other, unrelated issues.)
MORE THAN JUST A RECALL
The recall, though, isn’t just a recall. It’s led to an investigation that has shown that GM and the National Highway Traffic Safety Administration (NHTSA) were, between them, peripherally aware of the defect for over ten years. Let’s take a quick, summary review of key moments in the timeline of events:
- 2001-2002: The first report of a switch problem shows up in pre-production notes for the 2002 Saturn Ion.
- 2005: GM realizes the Chevy Cobalt has a problem with the ignition switch and opens repeated engineering inquiries, but takes no action.
- 2006: GM test drivers become aware of the ignition problem. GM makes some repairs, but mixes older, defective part and newer, improved part under same item number, causing years’ worth of confusion.
- 2007: A NHTSA crash report makes mention of the ignition switch turning itself off. NHTSA proposes opening an investigation, but decides not to.
- 2010: After more accidents and deaths, NHTSA once again considers, but then decides against, opening a formal investigation.
- 2012-2013: GM internal testing finds that no, really, these ignition switches are broken.
- 2014: GM finally issues recalls due to the faulty part, totaling roughly 2.6 million vehicles.
At least 13 people were killed (and possibly more) due to this particular defect in that 13-year span, and dozens of other drivers complained about it. But between the start of the problem in 2001 and the enormous and very public recalls in 2014, a few things changed at GM. And by “a few things,” we mean “everything.”
GENERAL MOTORS IS DEAD. LONG LIVE GENERAL MOTORS.
The early years of the 21st century were not among GM’s best. It’s easy to see why a GM at the time was so desperately concerned with cutting costs wherever possible: after a high point in 1999, their annual sales numbers began to drop slowly but steadily from 2000 onward. They posted significant losses in 2005, 2006, and 2007, and so were already off to a rough start in 2008.
Then came, well, 2008 — a now-infamous year of domestic and international economic crisis. In the space of less than a year, everything tanked: the housing market collapsed, giant megabanks began flailing wildly, energy prices jumped, and the automotive industry found itself in dire straits.
The combination of a less-than-great half-decade and an international near-collapse of the industry was a one-two punch that GM couldn’t withstand. In Nov. 2008 the company announced that without drastic action, they’d be out of cash and out of business by the middle of 2009.
Ford, Chrysler, and GM all testified before Congress in Dec. 2008 to the effect that the U.S. car industry, that most American of industries, was going to collapse in on itself without an infusion of federal bailout cash. Congress declined to hand over money, but GM did get a “bridge loan” from the Bush administration to keep it afloat while a longer-term solution could be worked out.
Between Dec. 2008 and March 2009, things failed in any way to get better for GM as they kept moving through a back-and-forth of proposed business plans to and with the federal government. On March 30, 2009, the Obama administration announced that the government would not be handing GM a mountain of cash, but that a detailed restructuring plan including Chapter 11 bankruptcy had been worked out in order to save the company. GM officially filed for Chapter 11 reorganization in a New York court on June 1, 2009.
Under the terms of that Chapter 11 filing, a new corporate entity called NGMCO Inc. — the “new” GM corporation — purchased all of GM’s “continued operational assets.” As part of the terms of sale, NGMCO, Inc., changed its name to “General Motors” and kept all of GM’s brands, logos, and trademarks. In one fell swoop, GM ceased to be GM, the troubled corporation with a pile of liabilities, and became GM, the newer, leaner corporation that conveniently left all its liabilities sitting in a trash heap near the door when it walked out.
As for that mess next to the door, the “Old GM” still had to clean it up. Having let the New GM walk off with its name and branding, the remnants of Old GM became the Motors Liquidation Company. That company has been working its way through the bankruptcy, liability, and debtor process ever since.
The New GM, about 60% owned by the U.S. Department of the Treasury, promptly shed jobs, dealerships, manufacturing facilities, and car brands. (Remember Pontiac, Saturn, Hummer, and Saab?) And most critically, they also shed liability for anything they did back when they were still the original GM.
LEAVING BEHIND THE BLAME
Several states’ attorneys general, perhaps having a collective moment of clairvoyance, filed an objection to the liability exception part of GM’s bankruptcy agreement, saying that potential later accident victims could lose “key legal rights” if it went through. (The Wall Street Journal ran a detailed explainer of the relevant legal aspects back in 2009.) Under the pressure, GM eventually agreed to somewhat expand the scope of its liability to accident victims.
The gist of the change meant that, “[C]onsumers driving old GM cars who get in accidents during GM’s several weeks in bankruptcy court, or after the new GM emerges, will be able to sue new GM.”
At the time, then-Connecticut Attorney General Richard Blumenthal, one of the attorneys general who filed the objection, said:
“This agreement captures a very significant group of claims that wouldn’t have been covered and is a very significant victory for consumer advocates. It may seem symbolic, but it will be very real and important to people who suffered injuries during this period of time, and it sets a highly significant precedent.”
That GM product liability pact is now front and center in the wake of the recall. GM is trying to get lawsuits against it held on the grounds of the restructuring, claiming liability protection.
Former Connecticut AG Blumenthal is now United States Senator Blumenthal, and he’s no less concerned about the new GM’s liabilities for the old GM’s actions than he was in 2009. In late March, he pressed the Justice Department to make sure that GM stays liable for GM’s actions. At the time, he told Consumerist, “There is a very powerful legal and moral responsibility on the part of the federal government to intervene here. They enabled GM to emerge from reorganization with very extensive protections from legal responsibility for the death, injuries, and damage their defective vehicles caused.”
NOW WHAT?
Well, that’s really the billion-dollar question.
It will take months, if not years, for the Justice Department to carry out its criminal investigation and determine if charges are warranted. Getting the various civil suits sorted out will probably take even longer still. GM, in some way, will need to compensate the car owners, accident victims, and surviving families of those who were killed due to this error. That complicated question of how much legal liability GM actually bears for their own error and cover-up will be a key factor in every proceeding.
But the most pressing question for the future isn’t about GM at all. Although this recall is massive, and GM’s particular tie to American taxpayers and the federal government is at play, this defect and this question of liability aren’t the central issues we’re facing.
Instead, the real problem that the GM disaster has brought to light is that we’ve got absolutely nothing in our safety systems right now preventing this from happening again — with GM or with any other U.S. carmaker.
GM did indeed repeatedly and consistently fail to address their own manufacturing error in any meaningful way for over a decade. But they weren’t the only ones. NHTSA entire purpose, function, and mission statement are literally to prevent exactly this kind of thing from happening:
NHTSA is responsible for reducing deaths, injuries and economic losses resulting from motor vehicle crashes. This is accomplished by setting and enforcing safety performance standards for motor vehicles and motor vehicle equipment, and through grants to state and local governments to enable them to conduct effective local highway safety programs.
NHTSA investigates safety defects in motor vehicles, sets and enforces fuel economy standards, helps states and local communities reduce the threat of drunk drivers, promotes the use of safety belts, child safety seats and air bags, investigates odometer fraud, establishes and enforces vehicle anti-theft regulations and provides consumer information on motor vehicle safety topics.
We know from unearthed documents and from Congressional testimony that NHTSA was aware that something was wrong with GM cars well before the 2014 recall. So why didn’t they act?
A DEFECTIVE RECALL SYSTEM
Congress and the Department of Transportation (NHTSA’s parent agency) are both asking that same question. The NHTSA Office of Defects Investigation (ODI) had at least six complaints about the power shutting off in the Chevy Cobalt by 2007, but apparently failed to draw any connections or push the investigation farther up the chain.
The DoT is undertaking a review of NHTSA to find out who knew what, when they knew it, and who broke the chain, dropped the ball, let the report fall through the crack, or committed any other standard metaphor leading to the agency failing in its mission. And though something may very well be amiss inside the NHTSA, the problem might lie higher up — in Congress.
Bloomberg recently did the math on the NHTSA’s budget and staff as compared to what they have to oversee — and it’s not pretty. There are nearly 250 million registered cars on the road in the United States… and 51 ODI employees to make sure that we all stay safe around them.
Of those 51 employees a little over half are investigators, Bloomberg reports. It makes for a ratio of about 8.6 million cars on the road for every defect investigator NHTSA has. The agency also receives more than 40,000 consumer complaints per year — and of course, not every consumer who has reason to make a safety complaint ever bothers to do so. NHTSA’s 2015 budget for investigating defects is about $10.6 million, and it’s been in that $10 million ballpark for years.
With those odds, it starts to feel surprising that NHTSA actually catches as many problems as it does.
28 investigators can only capture so much data first-hand. In order to act, NHTSA relies on data from the car companies themselves. When the companies take their own sweet time providing it, as GM has been doing, the safety review process hits a bottleneck… and just stops going anywhere at all.
So where do we sit today?
Consumers are aware of the problems, but the defective GM cars are still on the road. GM is paying meager fines of $7000 per day (from their 2013 revenue of $3.8 billion) for each day they miss their deadline for providing data to NHTSA. And thirteen people who were driving or riding in cars that had one small, faulty part in them are still dead.
Whatever this investigation uncovers about this particular defect, this tragic incident spotlights the fact that there are systemic problems with carmakers for whom lives are but data points on a cost/profit sheet and with regulators who ignore their own investigators’ reports. Until those underlying issues are remedied, it’s only a matter of time until another vehicle with a deadly defect is not only allowed to hit the road, but stay there for far too long.
by Kate Cox via Consumerist
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