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Faulty culture switch

14 Jan 2015 By Rob Cox

As General Motors was emerging from bankruptcy a few years ago, then-Chief Executive Dan Akerson, a veteran of the private equity industry, vowed cultural change was working. “There’s accountability in this organization now,” the former Navy man confidently told the Detroit Free Press. He was a few years premature in his diagnosis.

GM, now led by Mary Barra, is only today fully grappling with the true meaning of accountability. And it’s not because Akerson or any other executive willed it so. The Grim Reaper really deserves all the credit. GM’s mad dash through bankruptcy in 2009 provoked far less of a cultural revolution than the process of determining whose lives were destroyed as a result of widespread negligence and incompetence over the faulty ignition systems installed in 2.6 million now-recalled vehicles.

Having Anton Valukas investigate what GM got wrong got the process rolling. The chairman of Jenner & Block, the automaker’s external counsel, is also the person who wrote a scathing analysis of Lehman Brothers’ demise.

But it is the appointment last year of Kenneth Feinberg to oversee all accident claims that has pushed changes further. Handing the über-mediator the keys to the job should go down as Barra’s most important management decision.

At last count, Feinberg had determined 45 people died as a result of the switches in Chevrolet Cobalts and other small cars. The devices can slip out of position, stalling the vehicle and disabling air bags. In addition to the deaths, Feinberg’s team has determined another seven people received severe injuries and 60 others suffered injuries eligible for compensation.

As a Jan. 31 deadline approaches, the claims keep coming in. On Monday, as GM was unveiling its new Tesla-killer at the Detroit Auto Show, the fully electric Bolt, the company said it received 141 new requests for compensation in the previous week, bringing the total to 2,710.

All of this won’t bankrupt GM again. Though the company has given Feinberg something of a blank check to decide on compensation, it has already earmarked $400 million. Even if it had to put aside that much again, it would only amount to about 30 percent of its profit in last year’s third quarter.

What’s more important than the money is the act of giving Feinberg free rein to hear the heartbreaking stories of lives lost or ruined by industrial-grade incompetence. Losing money for shareholders or giving vulture investors a haircut on their debt is nothing compared to hearing the narratives of people like Candice Anderson.

For a decade, Anderson was forced to live with the guilt of believing that she caused the death of her fiancé in 2004, when she was 21 years old. Anderson was convicted of criminally negligent homicide after the Saturn Ion she was driving careered off a Texas road into a tree.

The court forced Anderson to pay a $2,500 fine and perform 260 hours of community service. As a result of her criminal record, Anderson said she was denied jobs in her chosen field of nursing. It now turns out that the air bags in the Ion never deployed for the same reason that another 44 people were killed – GM’s faulty manufacturing.

A judge cleared Anderson of the charges two days before last Thanksgiving. But as her attorney told The Detroit News: “It took 10 years for GM to find its voice. How many district attorneys around the country are now wondering if they may have sent an innocent person to prison?”

Atoning for those sins is part of what Feinberg has been brought in to do. For his work to be effective, it has to sting – not just financially, but morally. And it must be independent. Though the process is still unfolding, that appears to be the case.

“They’ve delegated all this responsibility to me – unquestioned, unfettered discretion,” Feinberg told me in a conversation at Rand Corp’s Politics Aside conference in November. “To delegate all this discretion to one person is rather ad hominem, I must say. I’m not sure it’s a good idea. But GM has been absolutely cooperative in every way, and they’ve left me alone to process these claims.”

Feinberg is accustomed to tragedy, having mediated on catastrophes including the BP oil spill, the 9/11 attacks and the mass shootings at Virginia Tech and a Colorado movie theater. But the GM mission – for which he is being paid by GM – is equally heartbreaking, not least because so many of the victims were young drivers. “You learn when you do this you just better brace yourself because it’s going to be very, very emotional,” Feinberg said.

GM’s current executive team seems to share the pain. That’s why they tasked Feinberg. As Dan Ammann, GM’s president, explained it to me, Feinberg’s “credibility and his reputation – which were why we brought him in – are clearly at stake” in the outcome of the ignition switch matter. “Knowing him, he is not going to compromise his integrity on this.”

The soul-searching underway at today’s GM is likely to do more for the company’s bottom line and its products than its stint in bankruptcy did. But the lesson cannot be forgotten for future generations.

When Feinberg is finished with his work, GM will have written a big check. But it should go one step further and memorialize, somewhere in the lobby of its Renaissance Center headquarters, the lives lost from its negligence, as a reminder for present and future employees to never let it happen again.


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