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GM Fires 15 Workers for Inept Handling of Safety Problem--3rd Update


By Jeff Bennett and Mike Ramsey

WARREN, Mich.-- General Motors Co.'s chief executive vowed to upend the corporate culture responsible for what she denounced as a "pattern of incompetence and neglect" in the auto maker's 11-year failure to recall cars equipped with a defective ignition switch.

The scathing indictment by Mary Barra, a GM veteran who inherited the recall crisis shortly after she became CEO in January, coincided with the release of a company-funded report that could deepen GM's legal vulnerability and scrutiny from regulators, prosecutors and lawmakers.

The 315-page report by former U.S. Attorney Anton Valukas concluded that information about the faulty ignition switches, which could abruptly slip from the "on" position, stall vehicles and disable their air bags, bounced around an "astonishing number of committees" inside GM.

That led to a "troubling disavowal of responsibility" and devastating consequences, Mr. Valukas concluded. So far, GM has attributed at least 54 crashes and 13 deaths to switch-related air bag failures. GM President Dan Ammann didn't rule out the possibility that the death toll could climb.

In the report, Ms. Barra was cited for a description of what she called the "GM Nod," or meetings where participants appeared to nod in agreement that action should be taken, then did nothing. Another official invoked the " GM Salute," or crossing arms and pointing toward other employees to indicate that "responsibility belongs to someone else, not me," the report said.

In a meeting Thursday morning with GM employees at the company's technical center here, the 52-year-old Ms. Barra tried to position the report as a defining moment in a new effort to transform the auto maker's management after decades of dysfunction.

She claimed responsibility for fixing problems still entrenched after the company's bankruptcy and 30 years of similar crusades by predecessors. "We will accept responsibility for our mistakes, and we will do everything in our power to make sure this never happens again," she said.

Ms. Barra promised to expand an overhaul of GM's product-development organization and legal department to make sure that information about safety problems doesn't get bottled up in "silos."

As expected, the report exonerated the CEO, executives who report directly to her and the company's board of directors. Fifteen employees have been dismissed from GM because of misconduct or failure to respond properly as evidence of the ignition switch's defects mounted, Ms. Barra said.

More than half of those officials were executives, and Ms. Barra said five other GM employees have been disciplined but remain with the company. Ms. Barra wouldn't identify the employees by name, except to confirm that two low-ranking engineers involved with the design of the defective switch were dismissed. Also fired were lawyers and officials responsible for safety and dealings with regulators, according to people familiar with the matter.

The internal report was especially critical of one of the fired engineers, Raymond DeGiorgio, who approved the initial ignition-switch design in 2001 even though he knew it failed to meet GM's standards, the report said. After problems surfaced, Mr. DeGiorgio tweaked the design but told no one about the change and didn't assign a new part number to the switch, which might have alerted GM to the problems, the report concluded.

As a result, the company's investigators were stumped for years. Mr. Valukas said GM officials were "misled" by Mr. DeGiorgio, whose name was cited more than 200 times in the report and its footnotes.

The report is a big step in Ms. Barra's scramble to bring the recall crisis under control, and the findings fill in many of the blanks that she declined to answer when questioned by lawmakers in early April. She now faces an uphill battle to instill urgency and accountability throughout a sprawling company long known for marathon meetings, PowerPoint presentations and a maze of departments largely cut off from other parts of GM.

GM still is wrestling with a Justice Department criminal investigation, Securities and Exchange Commission probe and civil lawsuits from deaths, injuries and economic losses allegedly tied to the ignition-switch problems. Congressional committees are investigating the company's handling of safety defects, and Ms. Barra is expected to testify again as early as this month.

Sen. Richard Blumenthal (D., Conn.) said the internal report is "not only a window into GM's incompetence but also a failure to come clean and acknowledge full responsibility." House Energy and Commerce Committee Chairman Fred Upton (R., Mich.) said GM and federal officials "must continue to cooperate and provide us honest answers as we work to determine what went wrong, if there are gaps in the law that allowed the system to fail, and what legislative remedies may be necessary."

Plaintiffs' lawyers saw the report as ammunition to reopen wrongful-death lawsuits previously settled by the company. "It is critical that the civil cases move forward so that the American public may learn the whole truth, not just the truth GM chooses to disclose," said Lance Cooper, a lawyer representing the family of crash victim Brooke Melton.

Ms. Barra and Mr. Ammann reiterated that GM will move ahead with an effort to compensate victims of crashes linked to the defect, using a fund set up and run by compensation expert Kenneth Feinberg. He also will decide how many deaths can be tied to the ignition-switch defect.

"I am gathering some preliminary ideas, I will talk with plaintiff attorneys, the company and others and devise a plan within the next few weeks," Mr. Feinberg said Thursday.

Separately, GM Chairman Tim Solso said the board had "retained independent counsel to advise us with respect to this situation and governance and risk management issues. We will establish a stand-alone risk committee to assist in overseeing these efforts."

The report by Mr. Valukas used "failure" or similar words more than 150 times. Information about problems with Chevrolet Cobalt ignition switches was shuffled among an "astonishing number of committees." GM engineers investigating complaints about air bag failures failed to locate key documents in GM's own data systems. When senior executives in the engineering and quality departments realized in late 2013 that a recall might be necessary, they waited weeks to act while sending subordinates to find more data.

Engineers and executives failed to recognize that a car's sudden shut-off was a safety concern or that turning the ignition switch to the "off" position would cut power to air bags, Mr. Valukas said. Employees saw the switch problem as a "customer convenience" issue, not a safety defect.

"Had GM personnel connected the dots and understood how their own cars were built, they might have addressed the safety defect before injuries and fatalities occurred," the internal report concluded.

From 2011 to 2013, GM engineers assigned to figure out why air bags were failing on the Cobalt and other vehicles bogged down in a search for "root causes" and an inconclusive hunt for an "ultimate solution."

Ms. Barra refused to delve into the moves by Mr. DeGiorgio, the fired GM engineer. The report didn't address why Mr. DeGiorgio changed the ignition switch's design.

"To this day, in informal interviews and under oath, DeGiorgio claims not to remember authorizing the change to the ignition switch or his decision, at the same time, not to change the switch's part number," the report said.

Joann S. Lublin, Neal E. Boudette, Siobhan Hughes and Christina Rogers contributed to this article.

   -- Report Slams Switch Engineer for Actions in Recall

   -- Dismissals Include Top GM Lawyers

   -- The 'GM Nod:' 325 Scathing Pages on GM's Culture

   -- U.S. Lawmakers Say GM Probes to Continue

   -- GM to Compensate Victims; What About Those Who Lost Money?

   -- Experts Say Fixing GM's Flawed Culture Is Barra's Main Task

   -- House Panel to Call Barra Again for Testimony

   -- Man in the News: Anton Valukas

   -- GM Recall: Seeking Answers From Valukas Report (6/1/2014)

   -- Ignition-Switch Compensation Plan Weeks Away (6/3/2014)

   -- GM Engineer Talks to Investigators (5/28/2014)

   -- Most Recalled GM Car? Chevy Malibu (5/22/2014)

   -- GM Offers Discount to Owners of Recalled Cars (5/6/2014)

   -- GM's Barra Quickens Pace as Recall Unfolds (5/2/2014)

   -- Regulators Twice Failed to Open GM Probes (3/31/2014)

Write to Jeff Bennett at jeff.bennett@wsj.com and Mike Ramsey at michael.ramsey@wsj.com

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  06-05-142259ET
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