Apr. 3, 2014

GM's Deadly Defect and the Politics of Government Ownership

CEO appears before Congress to answer for what looks like a cover-up before a recall.

We’d wager that few on Capitol Hill were bragging over their Chevy Cobalts on Tuesday as GM CEO Mary Barra, along with National Highway Traffic Safety Administration Acting Administrator David Friedman, faced a congressional inquiry into why neither entity addressed a known mechanical defect that resulted in the deaths of at least 13 people (and possibly many more) and led to the recall of millions of vehicles.

The questions asked by the House Subcommittee on Oversight and Investigations went beyond the typical “What did you know, and when did you know it,” as evidence has already exposed the fact that GM knew as early as 2001 of problems with faulty ignition switches – which shut off cars unexpectedly, disabled airbags and led to a loss of power brakes and power steering. If it were only the “what” and “when” questions, well, those are easy to answer – and easy to lie about. The harder question is “why,” and that’s the question left unanswered in Tuesday’s hearings.

When asked why GM didn’t recall the vehicles, Barra replied, “Sitting here today, I cannot tell you why it took so long for a safety defect to be announced for [the small car] program, but I can tell you we will find out.” She noted that she herself didn’t know of the issue until early this year, and, to be sure, she has been CEO since only Jan. 15. (As a side note, less than two weeks into her tenure, she was the guest of Michelle Obama at the State of the Union Address, in which the president bragged again that “we rescued our automakers.”)

Meanwhile, NHTSA’s Friedman claimed that GM had never shared certain “critical information” related to the defect. However, as early as 2007, NHTSA knew of potential problems with GM vehicles, but took no action.

Why?

On GM’s part, evidence seems to suggest the company concluded that replacing the 57-cent part posed an “unacceptable cost increase.” But what about the government’s dereliction of duty?

While Congress is investigating, there is more to this story than meets the eye – and more questions that need to be asked.

Consider, for example, that GM was one of the companies famously deemed “too big to fail” during the government bailout frenzy of 2008-2009. As a result, the company received $49 billion in taxpayer dollars – effectively becoming a ward of the government. Of course, GM’s problems predated the government’s takeover, but still, this raises two important questions. First, as National Review’s Jim Geraghty asks, “Did anyone on the [president’s Auto Industry] Task Force even examine whether GM had any safety issues before going ahead with the bailout, which ultimately used $49 billion in taxpayer dollars?”

Second, why was the government so quick to move against Toyota for alleged safety flaws while NHTSA virtually dismissed complaints against GM? As we noted recently, Toyota is paying a record $1.2 billion in fines for unproven acceleration flaws in some of its vehicles, this following a four-year probe by the Department of Justice. This means that not long after the government became a 61% stakeholder in GM, Obama’s Justice Department launched a criminal investigation of one of Government Motors’ chief competitors. Yet, for all its investigatory zeal, Washington seemed to have none left for GM. Conclusive, no. Curious, absolutely.

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