GM Fires 15 Workers, Plans Compensation Program - Analyst Blog

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General Motors Co. ( GM ) announced that it plans to act according to the recommendation of the report generated by Attorney Anton Valukas, the chairman of Chicago law firm Jenner & Block, Tony Valukas, and General Motors' general counsel Michael Millikin. In Mar 2014, the automaker hired this team to probe into the ignition switch recall of 2.6 million older-model small cars associated with 13 front-seat fatalities.

Valukas, in order to generate the report, investigated and undertook more than 350 interviews with over 230 individuals and went through more than 41 million documents. Thus Valukas generated a thorough and tough report.

General Motors has removed 15 employees who were senior legal and engineering executives. According to the report, they failed to disclose the defect and acted inappropriately in the recall.

Moreover, the company undertook disciplinary actions against 5 other employees. The engineers and others in the company ignored the issue considering it to be a customer-convenience problem rather than a safety issue. CEO Mary Barra, Mark Reuss, the chief of global product development, two other top executives and Michael Millikin were unaware of the defect till Jan 2014.

General Motors also plans to launch a program to compensate the crash victims and the affected families. Under this program, the automaker will be accepting claims from Aug 1.

In addition, General Motors undertook five strategies, the first being the appointment of Jeff Boyer as the vice president of Safety. Secondly, General Motors hired 35 safety investigators, to identify and address issues faster. Next, the company introduced Speak Up for Safety program, under which the employees are encouraged to report any potential safety issue. The company also created the new Global Product Integrity organization which will enhance the overall safety and quality performance. Lastly, the company restructured the safety decision-making process.  

General Motors has been facing heat for delaying the recall of 2.6 million vehicles with defective ignition switches which can lead to shutting down of the engine and prevent deployment of front air bags in the event of a crash. The company issued a recall this year, although the problem was identified in 2001. As a matter of fact, the engineers provided different ways to rectify the defect but none of them was accepted due to cost concerns.

Recently, General Motors agreed to pay a fine of $35 million to the U.S. safety regulators due to the late recall. The Congress says that the fine to be imposed on the automaker should be raised to $300 million. However, the consumer safety advocate wants a Justice Department investigation to decide the penalty. Earlier, automakers like Ford Motor Co. ( F ) and Toyota Motor Corp. ( TM ) have also been fined for late recalls.

General Motors currently holds a Zacks Rank #3 (Hold). Fox Factory Holding Corp. ( FOXF ), carrying a Zacks Rank #1 (Strong Buy), is a better-ranked automobile stock worth considering.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: GM , F , TM , FOXF

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