General Motors (NYSE: GM) will be paying $35 million in fines for shoddy vehicle manufacturing, according to the Department of Transportation on Friday.
It doesn't seem like that big a fine when considering the hundreds of deaths blamed on the bad parts. However, the negative publicity from this delayed recall has been strong enough to shame GM into getting its act together.
The company yesterday recalled another 2.7 million vehicles for a variety of defects. But unlike earlier recalls totalling seven million vehicles - many of which came a full ten years after their defects were first discovered – these latest recalls include a number of vehicles of model years as recent as 2013-15.
Recognizing its culpability over previous recall delays, GM seems to be responding more quickly and effectively now. We have to attribute this new attitude to the company's new executive in chief, Mary Barra.
Corrosion Troubles
The main defect prompting this latest recall is faulty wring, which, if corroded, causes the brake lights to light up when the brake is not applied, and to fail to light up when the pedal is pressed. Electrical shorts in wring have also caused the disabling of cruise control, traction control, electronic stability control, and panic braking assist operation.
In addition to faulty wiring repairs, another 263,000 vehicles were called back for fixes to headlights, hydraulic brake boosters, windshield wipers and tie-rod defects. The recalls were ordered on the accumulation of several hundred complaints, 13 crashes and two injuries. Luckily, though, there were no fatalities.
"We have redoubled our efforts to expedite and resolve current reviews in process and also have identified and analyzed recent vehicle issues which require action," informed Jeff Boyer, vice president of the company's Global Vehicle Safety department. The latest recalls "are examples of our focus to surface issues quickly and promptly take necessary actions in the best interest of our customers."
Yet the company is also dealing with corrosion of another kind, eating away at its reputation. Ongoing investigations by the National Highway Traffic Safety Administration and the Department of Justice continue to probe GM's failure to act sooner in recalling 2.6 million vehicles with faulty ignition switches which resulted in the deaths of 13 people and injuries to hundreds more.
GM is more culpable now because it downplayed the seriousness of the faulty switches when it had numerous reports of crashes, injury and death dating back to the early 2000's. Rather than summon any recalls, GM opted to issue a few simple warnings.
The investigations must play out through to the end, and those responsible must be held accountable. Yet even while this dark chapter in the company's history is still being written, the writing of a new chapter is already underway.
With a bookmark in each chapter, GM's new CEO Mary Barra finds herself flipping back and forth between the two – simultaneously penning the epilogue to the old, and the overture to the new.
Corrosive Effect Contained
Barra has lost no time steering her company in a new direction, creating a new Global Product Integrity Organization, "dedicated to reviewing products going through the pipeline," she introduced.
Under the supervision of Mark Reuss, vice-president of Global Product Development, the new product inspection group will work closely with another new appointment, that of Jeff Boyer as vice-president of the company's Global Vehicle Safety Department.
Apart from new appointments, Barra has also wielded her pen in ousting a few high-ranking executives, including Selim Bingol, the former senior vice president of communication, as well as suspending two engineers under whose responsibility the ignition switches were held.
"I'm getting very good feedback," Barra reported on the company's reception of her changes. "Jeff Boyer is having regular sessions with NHTSA [National Highway Traffic Safety Administration]. They've made some suggestions on how we can improve, and we'll implement them immediately," she assured.
http://www.wealthdaily.com/articles/investing-in-general-motors-nyse-gm/5171
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