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Weekly GM Compensation Claims Statistics Report

On May 1, the GM Compensation Fund released a new set of program statistics with the death toll rising from 90 to 97. Every number added is a life lost and a family destroyed. Sadly, that number will only increase until all the submitted claims are reviewed. So far, about 75% have been processed, with about 1,000 claims remaining.

gm compensation fund may 1 report

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GM’s hit and run: How a lawyer, mechanic, and engineer blew open the worst auto scandal in history

In March 2010, Brooke Melton, a 29-year-old nurse living in Georgia, had been driving when her 2005 Chevy Cobalt’s engine shut down in traffic. Before taking the Cobalt in for servicing, she started a list of all of the issues:

Brooke Melton's List, Courtesy the Cooper Firm

Mechanics cleaned the Chevy’s fuel injection system and returned the car to her promising that nothing was wrong with the vehicle.

Having that assurance, on March 10, 2010, her birthday, Brooke was driving to meet her boyfriend for a birthday celebration. She never arrived. Her Cobalt lost power, she veered into oncoming traffic, tried to correct for the skid, but had no anit-lock breaks or power steering. She was hit on the passenger side of her car, and the force of the impact – identical to falling from a building’s 16th floor – sent her car down a hill adjacent to the road and into a creek.

Brooke Melton's 2005 Chevy Cobalt

Represented by Larry Cooper, Brooke’s parents sued GM, and Ray DeGiorgio’s April 2013 deposition was related to that lawsuit.

In September 2013, GM settled the suit, but they didn’t issue a recall until five months later.

GM’s hit and run: How a lawyer, mechanic, and engineer blew open the worst auto scandal in history | PandoDaily.

GM ignition-switch death toll rises to 90

Since I created my graphic depicting the number of cars recalled due to ignition switch issues, the statistics have changed. As of April 24, Kenneth Feinberg, administrator of the GM Compensation Fund had approved 90 death claims and 163 injury claims, up from the previously released fund statistics.

The deadline for claims was January 31, 2015, but we could still see more death and injuries since Feinberg has 997 claims to review.

GM ignition-switch death toll rises to 90.

Is My Car a Lemon?

I had a hand-me-down car once, a boat-sized Oldsmobile, that I inherited from my Great Aunt Judy (actually my great-great aunt). That car always had problems, even when it had low mileage, and I never fully trusted it. The folklore in our family is that the Oldsmobile dealer saw my Aunt Judy as an easy mark and went to her house to pressure her into the sale. I was grateful to have the car, but I didn’t love it. In fact, in the only photo of the car I could find, it is covered in snow. (The first and only time I saw it snow in Phoenix.)

All states have lemon laws: the Better Business Bureau publishes a summary of each. The lemon laws apply only to cars under warranty. In New York, “the lemon law covers vehicles during the first 18,000 miles of operation or during the period of 2 years following the date of original delivery of the motor vehicle, whichever is the earlier date.”

If cars are subject to a recall before they are sold by a dealer, the dealer can’t sell them without repairing the defect. This seems like a simple proposition, but the databases for car dealerships, manufacturers, and the NHTSA don’t seem to be compatible, and a centralized database of recalls at the NHTSA requires dealers to look up recalls by entering one VIN at a time. All this is to say: the system is such that selling cars with open recalls is not uncommon.

As part of its new safety focus, General Motors is rolling out new software that will make it more difficult for dealers to sell a car with an open recall (Henry, 2015, April 15). In the first phase of the implementation, software will block searches for sales incentives if the car has a recall. Since dealers across the country conduct about 50,000 searches for incentives each day, GM expects the new software will have an immediate effect.

Mark Rosekind, NHTSA Administrator, commended GM for delivering an innovative approach to improved vehicle safety and noted that the company spearheaded the effort, having no federal regulation or law driving the program (Henry, 2015, April 15; Shepardson, 2015, April 15).

Representatives from the trade group the National Automobile Dealers Association had recently asked Rosekind to enable batch downloads, but he told them budget constraints at the NHTSA made such a change unlikely (Shepardson, 2015, April 15).

While it may be difficult to identify and repair new cars with open recalls, it is legally required. The same is not true for used cars. No federal law prohibits dealers from selling you a used car with an open recall. Dealers don’t even need to disclose the recall status of used cars. Some states are considering laws, and at least one city, New York City, is trying to prevent the sale of vehicles with open recalls. The New York Times explains:

New York’s requirement is a stricter interpretation of a state law that requires all vehicles to be safe and roadworthy in order to be sold. Now, city officials want to make it clear to dealers that being safe includes repairing cars under recall (Abrams & Jensen, 2014, July 30).

To me the surprise isn’t that NYC is strictly interpreting the law; the surprise it that some consider cars with open recalls safe and roadworthy. At the very least any open recalls should be disclosed to potential buyers.

References

Abrams, R., & Jensen, C. (2014, July 30). New York City imposes a used-car repair rule. B3. Retrieved from http://nyti.ms/1tqrLlG

Henry, J. (2015, April 15). GM launches software that flags recalled vehicles on dealer lots. Automotive News. Retrieved from http://goo.gl/m3bS4e

Shepardson, D. (2015, April 15). NHTSA praises GM for dealer recall fix incentives. The Detroit News. Retrieved from http://goo.gl/9TQZ7M

Leadership for Collective Wisdom

Alan Briskin, author and consultant, explores and shares insight on what he describes as “the interplay between the soul’s journey and society, a manifestation of the collective.” His work might be described as falling into a “new age” category, but his principles of leading for collective wisdom correspond to current research in organizational behavior (Briskin, 2009) and could be very useful for General Motors as they engage in the difficult work of culture change. Conversely, the absence of these principles at the “old” GM helped create the conditions leading to the ignition switch crisis.

    • Deep Listening: in addition to listening with intention and attention so that the other person has the space to express him or herself, deep listening involves awareness of what is said – and what is unsaid.
    • Suspend Certainty: Be willing to suspend our preconceptions to be open to other alternatives.
    • See Whole Systems: Using systems thinking is difficult because as employees, we are specialized. However, it is really the only way to approach complex problems. Briskin (2009) recommends asking questions and solicit perspectives from diverse sources. He also mentions sensemaking in relation to systems thinking. “Sensemaking is the activity that enables us to turn the ongoing complexity of the world into a ‘situation that is comprehended explicitly in words and that serves as a springboard into action’ (Weick, Sutcliffe, & Obstfeld, 2005, p. 409, as cited in Ancona, 2009). To engage in sensemaking, according to Ancona, organizational members, guided by leadership, need to 1) explore the wider system, 2)create a map of the current situation, and act to change the system to learn more about it.
    • Gather for Group Emergence: This principle can best be described as setting a climate for authenticity in which dialogue is promoted, individuals are respected, and emotions are considered.
    • Trust in the Extraordinary: Briskin describes this as trusting “what can emerge above and beyond your current understanding.”

The “old GM” failed to listen and certainly did not engage in deep listening as employees flagged early warning signs or mentioned recalls (as early as 2005). Because they categorized the moving stalls as a customer convenience issue, they treated the categorization as a certainty instead of revisiting it when new data arose. One of the biggest delays in the recall related to the GM engineers’ failure to see whole systems, even though certain review committees had employees from different departments expressly to prevent siloed thinking. The GM culture was one in which employees failed to take accountability (e.g., the “GM nod” and the “GM salute”). Since employees wanted to fly beneath the radar of executives, they failed to express their true concerns. Thus “group emergence” was impossible. Certainly without these four elements, it would be difficult for employees to trust in the extraordinary or to even have hope.

CEO Mary Barra has promised change. It won’t be easy, but it is an opportunity to create new values and norms that will enable GM to perhaps become extraordinary.

See also: Root Causes, Culture Shock

References

Ancona, D. (2012). Sensemaking: Framing and acting in the unknown. In S. A. Snook, N. Nohria & R. Khurana (Eds.), The handbook for teaching leadership: Knowing, doing, and being (pp. 3-19). Thousand Oaks, CA: SAGE Publications.

Briskin, A. (2009). The power of collective wisdom and the trap of collective folly. San Francisco, CA: Berrett-Koehler Publishers.

Government Bailout

President Obama visits GM plant in Hamtramck, MI

As the subprime mortgage crisis hit the economy in late 2008, American automakers General Motors, Chrysler, and Ford lost customers. New vehicle sales in the United States decreased by 37%; General Motors sales slipped 41% (Stoll, Dolan, McCracken, & Mitchell, 2008, December 3). GM’s credit rating nosedived (S&P cuts General Motors, 2008, November 7) as they hemorrhaged cash. By November, the companies’ CEOs travelled to Washington, DC seeking aid from the government (McCraken & Stoll, 2008, October 27). Executives relayed that they would likely run out of cash by the end of 2008.

The Bush Administration provided $13.4 billion to GM in December 2008 through the Trouble Asset Relief Program (TARP), and the Obama Administration negotiated a plan to provide additional assistance in exchange for concessions from GM. CEO Rick Wagner and several board members were replaced, and GM entered a fast-line bankruptcy in which they shuttered some of their brands (e.g., Saturn and Pontiac) and reduced the job force (Rattner, 2009, October 21; see White House Fact Sheet below). In June, GM filed for bankruptcy reorganization and in July, they exited bankruptcy (Woodyard, 2013, December 9). At this time, the U.S. government held a 61% percent stake in the company. When GM was relisted as a public company in November 2010, the U.S. Treasury sold almost half of their stock in GM for $13.5 million. By December 2013, the U.S. government had sold all of its shares in the company.

At the time, public opinion was divided. Some though GM should face bankruptcy. Others supported the bailout, not just because it would save the industry but because it would preserve jobs. Even now, people disagree about whether the bailout was the correct course of action (see Boudette, 2013, December 9).

More relevant to this website is the impact of the bailout on the ignition switch recalls. Some pundits blame government intervention in 2008-2009 for creating the conditions leading to the faulty ignition switches. My assessment is that the cultural norms were in place long before the bailout, as evidenced by the slow-to-act approach taken by engineers and investigators between the early 2000s, through the bailout, until 2013. It’s possible that cost-cutting from the bankruptcy process exacerbated a focus on reducing cost, but the Valukas report does not ever refer to the bailout.

The government task force overseeing GM’s restructuring also did not know of the looming crisis (Former U.S. Auto Advisor, 2014; Kary & McCracekn, 2014, April 3). Given how little GM itself knew, I do not doubt the truth of these assertions.

The biggest impact of the bailout relates to their standing as defendants in civil lawsuits. As I discuss in the post “Ruling Shields GM From Ignition Suits,” because of a liability clause in GM’s bankruptcy, the “New GM” is protected from legal suits related to the ignition switch. Experts believe that GM would have been forced to pay billions of dollars had the suits gone forward.

References

Boudette, N. (2013, December 9). Did Detroit receive America’s most successful bailout? Wall Street Journal. Retrieved from http://blogs.wsj.com/corporate-intelligence/2013/12/09/did-detroit-receive-americas-most-successful-bailout/

Former U.S. auto advisor: GM recall crisis ’emblematic’ of cost culture. (2014). Automotive Digest. Retrieved from http://automotivedigest.com/2014/05/former-u-s-auto-adviser-gm-recall-crisis-emblematic-cost-culture/

Kary, T., & McCracken, J. (2014, April 3). U.S. government said unaware of GM faulty switches in bailout. BloombergBusiness. Retrieved from http://www.bloomberg.com/news/articles/2014-04-03/u-s-government-said-unaware-of-gm-faulty-switches-in-bailout

McCracken, J., & Stoll, J. D. (2008, October 27). Bankruptcy fears rise as Chrysler, GM seek federal aid. Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB122506556122670509

Rattner, S. (2009, October 21). The auto bailout: How we did it. Fortune. Retrieved from http://archive.fortune.com/2009/10/21/autos/auto_bailout_rattner.fortune/index.htm

S&P cuts General Motors to CCC+. (2008, November 7). BloombergBusiness. Retrieved from http://www.bloomberg.com/bw/stories/2008-11-07/s-and-p-cuts-general-motors-to-ccc-plus-businessweek-business-news-stock-market-and-financial-advice

Stoll, J. D., Dolan, M., McCracken, J., & Mitchell, J. (2008, December 3). Big Three seek $34 billion aid: GM, Chrysler warn of collapse this month as lawmakers explore bankruptcy. Wall Street Journal. Retrieved from http://www.wsj.com/articles/SB122823078705672467

Woodyard, C. (2013, December 9). GM bailout played out over five years.
USA Today. Retrieved from http://www.usatoday.com/story/money/cars/2013/12/09/gm-bailout-timeline/3929953/

The Auto Industry Bailout: Thoughts About Why GM Executives Are Clueless And Their Destructive “No We Can’t” Mindset

The No Asshole Rule

Bob Sutton wrote one of my favorite books in Organizational Behavior: The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn’t. When I was researching the 2008-2009 automobile industry bailout, I found that Sutton had written about GM in his blog, and I was very excited to read the entry. This reflects a pre-recall snapshot of GM leadership and culture from one of my favorite organizational scholars.

Sutton had interactions with GM employees while a graduate student, and later as a consultant, and his assessment of a possible bailout for GM might best be described as a futile effort. Even with an influx of government funds, he highly questioned whether GM could make the cultural changes necessary to be a successful organization.  He reflected: I believe [the bailout] will be a waste because the leaders of these firms (at least GM, which I know best) are so backward and misguided that the thought of giving these bozos any of my tax money turns my stomach.”

He explained: “I could list hundreds of management, cultural, and operational reasons why I believe that GM is such a flawed organization, but to me, a pair of root causes standout:  Most of the senior executives  — and many of the managers — are (1) clueless about what matters most and (2) suffer from  a ‘no we can’t’ mindset.”

I recently read the Vakalus report to GM covering the investigation into and finally a recall of the ignition switch in a number of vehicles in their line. Valkulas tracked events from about 2000 to 2014. At the very time Sutton wrote his critique of GM, GM employees were fumbling in their attempts to understand problems with the Chevy Cobalt. The descriptions of meetings, conversations, and decisions regarding the ignition switch demonstrate that Sutton’s appraisal was, sadly, completely on target. As I read the report, the sentiment, if not the word “bozos” crossed my mind.

From the first reports of moving stalls in the Cobalt, GM engineers classified the issue as one of “customer convenience.” Because drivers could still steer, they reasoned, the stall was not a safety concern. This attitude certainly provides evidence that the GM employees involved in the ignition switch investigations were clueless about what mattered.

Over and over, for over ten years, individuals and committees started inquiries over the moving stalls and ignition switches, only to abandon them when they could not determine the “root cause.” The Valkulas report concluded, “the search for the root cause became a basis for doing nothing about the problem for years. the lengthy search for root cause thus diverted GM from its obligations and failed to produce the required urgency to bring the matter to full closure” (p. 258). This reflects the “no we can’t” mindset identified by Sutton.

Sutton also remarked, “My experience with GM is that – more so than any company I have dealt with – the norm in meetings is that the highest status person in the room does all or most of the talking.   Plus, more so than any organization I have ever dealt with, employees are expected to express agreement with their bosses.” This cultural norm was evident in the moving stall / ignition switch investigation. The Valukas report revealed, “Some witnesses said there was resistance or reluctance to raise issues or concerns in the GM culture. For example, a Red X Manager said that, if an employee tried to raise a safety issue five years ago, the employee would get pushback…. In a Corporate Executive Board Company survey administered at GM in 2013, GM participants’ rate of reporting misconduct they observed was far below the benchmark rate…. A small number of participants also suggested a fear of retaliation” (p. 252).

The NHTSA Consent order required GM to implement a number of changes: a system that allows employees to report safety or non-compliance issues, training to improve employee documentation and communication, increasing communication between departments, reducing the time required to review safety issues, improving internal data analysis, and strengthing communication with the NTHSA. The consent order explicitly forbade GM from delaying any meetings related to a recall because a root cause had not been determined.

Informed by the Consent order and the Valukas report, in June 2014, CEO Mary Bara identified what she considered five key steps to change GM’s safety culture:

  • Naming Jeff Boyer as Vice President of Safety
  • Hiring 35 additional safety investigators
  • Implementing a “Speak Up for Safety” program
  • Creating a Global Product Integrity organization
  • Restructuring the safety decision-making process.

Bara also expressed a commitment to adopting the full range of recommendations outlined in the Valukas report.

These steps are positive. What I don’t see is how the reward system has changed to reinforce the importance of safety, what steps are being taken to change the knowledge management system at GM, and how they plan on overcoming departmental silos. Over the next few years, we’ll be able to tell if GM was able to create real change in its culture, or, if indeed, the company is run by bozos. Perhaps they need to read one of Sutton’s other books: The Knowing-Doing Gap.

The Auto Industry Bailout: Thoughts About Why GM Executives Are Clueless And Their Destructive “No We Can’t” Mindset – Bob Sutton.