General Motors Co.’s (NYSE:GM) problems have gotten so bad that this year it has recalled more vehicles than it’s sold since the company’s 2009 bankruptcy, raising questions about whether the century-old carmaker has made any progress under U.S. taxpayer support.
The last time GM had a recall even close to this year’s 13.7 million vehicle debacle came a decade ago when it ordered 10.7 million autos back to dealerships for fixes, including faulty Chevy Trailblazer tail lights and sticky Pontiac Grand Am accelerators.
The 30 recent safety recalls, including the one announced Wednesday for 218,000 older model Chevrolets due to a potential fire hazard, puts into question how effective $11.2 billion of public rescue funds have been in getting GM to improve quality. The answer may be the publicly funded rescue had nothing to do with autos at all.
“GM has become a client state of the U.S. government,” Joseph M. Giglio, professor of strategic management at Northeastern University’s D’Amore-McKim School of Business, said. “For years it’s been a job bank that happens to make cars.”
Saving jobs was one of the main priorities car czar Steven Rattner, lead advisor to President Barack Obama’s auto industry task force in 2009, had when he helped orchestrate GM’s quick reorganization. Questions about quality control, and GM’s long history of pressuring parts manufacturers to lower costs, which ultimately jeopardized quality, were considered secondary to preserving jobs of United Auto Worker members who worked for GM and GM suppliers.
At the time many critics urged the government to take a more traditional Chapter 11 reorganization course that would have made GM a smaller, leaner operation.
Since then Ratter, now a regular face on MSNBC, has often defended the bailout almost exclusively through the prism of saving jobs and said only the U.S. government was up to the task.
Rattner did not respond to requests for comments about GM’s quality control issues.
The same federal government that emphasized the need to save GM and industry jobs is only recently addressing its fatal quality-control problem.
Last week U.S. regulators slapped the company with a $35 million fine for dragging its feet in providing the National Highway Traffic Safety Administration’s (NHTSA) data it requested about the recalls. To date the most serious problem has been related to 2.6 million defective ignition switches GM has linked to 13 deaths.
CEO Mary Barra, GM’s fifth CEO since 2009, said she learned of the ignition switch problem in January. But some employees knew of a problem as far back as 2003.
Plaintiffs’ liability suits claim GM is not protected by its reorganization because it knew about the problem switch and then but did not disclose it.
So where does GM go from here?
“This is still only the beginning of what could be a lengthy and expensive process for General Motors,” Jack R. Nerad, executive editorial director and senior analyst for Kelley Blue Book, said in an email. “The fine by NHTSA is not only warranted but appropriate. The new GM is working diligently to make right of this situation.”
The company has also appointed Jeff Boyer, who has worked at GM since 1974, vice president for global vehicle safety, a new position aimed at tackling quality control. It has also created a team of investigators to look into past warranty claims to find any previously unreported defects.
“They are doing damage control and reacting to the outrage over their history of concealing safety issues,” Sen. Richard Blumenthal, D-Conn., told the New York Times on Tuesday.