General Motors Co.
) 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
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
Ford Motor Co.
Toyota Motor Corp.
) have also been fined for late recalls.
General Motors currently holds a Zacks Rank #3 (Hold).
Fox Factory Holding Corp.
), carrying a Zacks Rank #1 (Strong Buy), is a better-ranked
automobile stock worth considering.
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