Barra Tells Congress She Won’t Accept Business as Usual

General Motors Co. (GM) Chief Executive Officer Mary Barra plans to tell lawmakers tomorrow the steps the automaker has taken to change its culture and act more swiftly to address safety defects, her written testimony shows.

Barra is returning to Congress 11 weeks after a hearing in which she failed to satisfy some lawmakers’ questions about why GM didn’t act sooner to fix a defective ignition switch linked to 13 deaths. An internal report this month showed engineers knew about the flaw for more than a decade, though corrective action was stymied by a pattern of incompetence and neglect.

“I know some of you are wondering about my commitment to solve the deep underlying cultural problems uncovered,” Barra said in prepared remarks released today by the U.S. House Energy and Commerce Committee. “I will not rest until these problems are resolved. As I told our employees, I am not afraid of the truth. And I am not going to accept business as usual at GM.”

GM has recalled a record 20 million vehicles in North America for various fixes so far this year, more than double the number of cars and trucks it sold worldwide last year. The spate of recalls largely began in February when the company said it would replace faulty ignition switches in what now totals 2.59 million cars, including the Chevrolet Cobalt and Saturn Ion.

Anton Valukas, the former U.S. attorney hired by GM to lead the internal investigation, is scheduled to testify tomorrow with Barra. In his testimony, he reiterated findings from his report about how GM’s engineering and legal departments failed to connect the dots and move quickly enough on the main recall.

“I understand that while this report answers many questions, it leaves open others,” he said in prepared remarks.

Unanswered Questions

Among the questions still to be answered are how many more defective GM cars are on the road, and whether GM can be trusted to tell the truth, Jere Beasley, a lawyer who has filed lawsuits in relation to the ignition switch, said in a statement.

“This automaker has lots of explaining to do to the American people,” Beasley said. “It’s time for GM to come clean.”

House Energy and Commerce Committee Chairman Fred Upton and other lawmakers plan to focus tomorrow on why it’s taking GM so long to fix the cars. GM has repaired 154,731 cars of the 2.59 million and has shipped 396,253 repair kits globally, according to a memo released by congressional investigators.

Another question from lawmakers tomorrow will be whether GM’s effort to root out potential safety defects is working, or whether the spate of additional recalls indicate the company’s troubles go much deeper than initially thought.

Record Recalls

The Detroit-based company has initiated two new ignition recalls in the past week unrelated to the action to fix the Cobalt, Ion and four other U.S. models. Yesterday, it recalled 3.36 million vehicles, including some model years of the Chevrolet Camaro and Cadillac Deville, because their ignitions could slip out of the “run” position.

As of yesterday, about 9 million of the 20 million GM cars recalled this year were for ignition-related issues such as switches, cylinders and keys.

GM shares and sales have held up despite the publicity surrounding the recalls. GM in May had its best month of U.S. auto sales since August 2008, rising 13 percent to 284,694 vehicles. In April, it reported first-quarter net income, despite $1.3 billion in recall-related costs.

Those gains suggest consumers are separating new models on the lot from the older small cars that are part of the ignition-switch recall.

Design Engineer

GM rose 0.6 percent to $36.29 at 12:57 p.m. in New York trading. The shares through yesterday had risen 1.4 percent since Feb. 12, the day before the first batch of ignition-related recalls was formally announced.

Of 20 analysts who evaluate GM tracked by Bloomberg, 17 had positive recommendations for investors.

GM said the engineer responsible for signing off on a flawed ignition design in the Cobalts and Ions also oversaw switches in the cars recalled yesterday. While they have a different switch, they shared the same design-release engineer, Alan Adler, a GM spokesman, said in an e-mail yesterday.

Ray DeGiorgio was named in an internal report released this month as being responsible for the faulty ignition switch in cars recalled in February. He and 14 other people were ousted for their roles in the company’s mishandling and years-long delay in recalling the fatally flawed vehicles.

Valukas Report

Most of the cars involved in February’s recall were designed more than a decade ago mainly as entry-level models. Soon after the cars reached the market, GM dealers began receiving complaints about unintentional engine shut-offs. It would later be determined that the ignition switches, when jostled out of position, led to stalling engines and disabled air bags.

Barra, GM’s first female CEO, promised lawmakers in April to return once Valukas came back with his findings. In June, Barra revealed to employees that Valukas found a pattern of incompetence and neglect though didn’t uncover any conspiracy to cover up facts.

The Valukas report didn’t contradict her previous claims that she first learned of the analysis of the stalling in December and of the recalls in January.

‘Brutally Tough’

GM’s attempts to understand ignition-switch and air-bag failures were impeded by a 2006 DeGiorgio decision change a design without following proper procedures such as changing the part number, Valukas said in his June 5 report. That effectively hid the problem and made it harder for engineers later to understand what happened and address it.

“Throughout the decade that it took GM to recall the Cobalt, there was a lack of accountability, a lack of urgency, and a failure of company personnel charged with ensuring the safety of the company’s vehicles to understand how GM’s own cars were designed,” Valukas said in his written testimony.

“We found failures throughout the company -- including individual errors, poor management, byzantine committee structures, lack of training and inadequate policies,” Valukas said.

In her statement, Barra outlines all of the steps taken to change GM including restructuring safety management with reviews at the highest levels and the roll out of a new organization for global product integrity.

Barra called the Valukas report “extremely thorough, brutally tough and deeply troubling,” according to the written statement.

“I was deeply saddened and disturbed,” Barra said. “For those of us who have dedicated our lives to this company, it is enormously painful to have our shortcomings laid out so vividly.”

To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net; Tim Higgins in Detroit at thiggins21@bloomberg.net

To contact the editors responsible for this story: Romaine Bostick at rbostick@bloomberg.net; Jamie Butters at jbutters@bloomberg.net

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