Video: Questions mounting over GM, NHTSA response to deadly defect

Over the last couple of weeks, questions have been raised over why General Motors did not act to recall vehicles with a known ignition-switch defect, which has been linked to at least 12 deaths and possibly hundreds more. Even more questions are coming up about the lack of action from National Highway Traffic Safety Administration (NHTSA), especially during the same period as their crackdown on Toyota — and the government’s ownership stake in GM. The Associated Press now reports that the NHTSA missed other clues as well on another GM vehicle, even though they had plenty of data available to catch the problem:

An Associated Press review of complaints to the National Highway Traffic Safety Administration shows that over a nine-year period, 164 drivers reported that their 2005-2007 Chevrolet Cobalts stalled without warning. That was far more than any of the car’s competitors from the same model years, except for the Toyota Corolla, which was recalled after a government investigation in 2010.

Stalling was one sign of the ignition switch failure that led GM last month to recall 1.6 million Cobalts and other compact cars, including the Saturn Ion, Pontiac G5 and Chevrolet HHR. GM has linked the problem to at least 12 deaths and dozens of crashes. The company says the switch can slip out of the “run” position, which causes the car to stall, knocks out the power steering and disables the air bags.

GM has recently acknowledged it knew the switch was defective at least a decade ago, and the government started receiving complaints about the 2005 Cobalt just months after it went on sale. House and Senate subcommittees have called the current heads of the automaker and NHTSA to testify on April 1-2 about why it took so long for owners to be told there was a potentially deadly defect in their cars.

On a percentage basis, the failure rate was much higher for the Cobalts than with the Corollas, one of the most popular vehicles in the US market. The defect was the same or similar to the ignition-switch problems in other GM cars. Furthermore, the Cobalt already had a raft of other issues, including a steering defect that NHTSA did investigate. And yet, the NHTSA did nothing about GM’s vehicles while demanding much greater responsiveness from GM’s biggest competitor.

One should always consider the tried-and-true axiom to never assign to malice what could be explained by incompetence. However, the easy ride that GM apparently had from the government that owned a big chunk of its stock at least raises the question of whether the federal government either (a) deliberately shielded GM from a potentially disastrous recall while it was still getting back on its feet, (b) went after Toyota to make them less competitive against the government’s own auto manufacturer, or (c) both. That suspicion is one good reason that the government that regulates a market should never have an ownership stake in one of its players, especially one as dominant as GM in the market.

Bloomberg’s Edward Neidermeyer warns consumers not to expect GM to ever be more than “Government Motors”:

When Mary Barra appears before Congress next week, she’ll face many versions of the same basic question: How do you solve a problem like General Motors? It’s actually one the representatives might do well to ask themselves, as the government bailout five years ago not only gave the company permanent too-big-to-fail status, but also immunized it from defect-related liability and, more broadly, helped further entrench the worst aspects of its long-dysfunctional corporate culture. …

In the decades since, GM has lived up to that reputation, consistently losing market share while handsomely rewarding lifelong executives. The federal bailout was supposed to change things; several of those involved have written books claiming their share of credit for GM’s “turnaround.” Yet what is different? No GM executive has so far admitted knowledge of anything about the 2006 ignition-switch redesign at the heart of a recall now involving 1.6 million vehicles and too many lives. (Because the part number wasn’t changed in 2006, likely to conceal evidence of a defect, GM admits it doesn’t even know how many switches on parts shelves across America it needs to recall.) As in all broken cultures, the smallest successes have a thousand fathers while the biggest problems are orphans. …

Cultural dysfunction of the scale now on display at General Motors thrives on impunity, which up until 2008 derived from inherited scale. Since the bailout, the moral hazard of the government’s implied backstop has made government complicit. After all, Washington’s response to GM’s clearly foreseeable collapse was to simply fix symptoms: crush debtholders, force union concessions, fire the CEO, pump in cash and cut it free of legal liability.

Now, five years after the government committed to these “fixes,” GM is in the grips of a quality scandal that seems to have no end. Spooked into hasty action by a stumbling giant that couldn’t keep accounts within a half-billion dollar margin of error and was too arrogant to even create contingency bankruptcy plans, public officials eliminated the only real solution to such terminally flawed cultures: creative destruction. Until Congress puts that option back on the table, GM is still very much Government Motors.

Maybe they should do the same with the NHTSA.