It’s not exactly the way she wanted to start the job.
Less than three months after becoming CEO of General Motors (GM), Mary Barra will testify before House and Senate committees this week to explain why it took GM a decade to recall 2.6 million cars with a potentially fatal safety flaw. At least 13 people have died in the vehicles, with many others injured. Barra took the wheel at GM in January, just as the federal government sold the last shares it acquired during the 2009 bailout of the automaker. Barra was a new face meant to signal a new era. Instead, she's been dragged back to the ugly days before GM declared bankruptcy, when the carmaker apparently jeopardized its customers’ lives in order to shave costs.
GM itself initiated a recall in February that has now spread to 2.6 million vehicles, mostly Chevy Cobalts and similar cars built between 2003 and 2007. But it could have done so years earlier, when engineers became aware that a faulty ignition switch could inadvertently slip to the “off” position, cutting power to the brakes, steering and air bags even if the car was moving. The problem has been a factor in at least 31 serious crashes, creating a legal and image problem at GM just as it is regaining lost ground with car buyers. It has also cost the company at least $700 million in charges relating to the recall. The stock is down 16% for the year, to about $34.
In prepared testimony for this week's hearings, Barra says she is "deeply sorry" for the safety problem, but "I cannot tell you why it took years for a safety defect to be announced.... I can tell you that we will find out." Barra has earned praise so far for being forthright and aggressive in tackling the problem, but that alone won’t defang critics in Congress, including some who were deeply opposed to the 2009 bailout and felt GM should have been allowed to fail. Here’s how Barra can win over critics and begin to salvage GM’s reputation:
Fly commercial. It would be wise for Barra to avoid the derision that greeted GM CEO Rick Wagoner when he flew a corporate jet to Washington in late 2008 to plead for a taxpayer bailout, making it look as if clueless fat cats were trying to milk the public. Barra has no obligation to frugality, since GM is a normal, publicly owned company again. But given that taxpayers lost $10 billion on the GM bailout, humility would be fitting — plus, somebody in Congress or the press is bound to ask how she got to D.C.
Say something new. Merely apologizing for GM’s oversights won’t cut it. GM has hired an outside law firm to investigate the problem in detail, and pledged to make those findings public once they're complete. At the hearings, it would help if Barra could provide insights other than just parroting what she's already said. Internal documents, for instance, reveal that GM didn’t feel there was a “business case” for going to the trouble and expense of replacing several million faulty switches. How did GM define a business case back then? Why wasn’t customer safety part of the equation? Was that typical at the old GM? Is it still?
Compensate victims. Some critics have urged GM to set up a multibillion-dollar victims’ fund, which the automaker can probably afford to do. GM has already reached private legal settlements with some crash victims, and there are undoubtedly many legal complexities involved with setting up a fund or finding another way to make up for shoddy products and preventable crashes. Overruling the lawyers’ objections would signal Barra is putting customers first. It will also help if she seems to show genuine sympathy toward crash victims and their families, rather than just reading from a statement scripted by lawyers. A human touch never hurts and always helps when people have been harmed.
Explain why GM is different now. The automaker’s cars and trucks are decidedly better than they were a decade ago, thanks to improved quality, sharp designs and hot halo cars such as the new Chevy Corvette. Is this a momentary updraft in GM’s long history of ebbing and flowing? Or is there a new culture in place that demands quality and can’t be ground down by the usual bureaucratic erosion? The style of Barra’s remarks will hint at whether GM plans to do just enough about the faulty vehicles to slide by, or use the controversy to convince the world it's back — and better than ever.
Show some fight. Testifying before Congress is usually a can’t-win ordeal, but if some questioners try to bully Barra, she could turn the exchange around to put herself in the underdog position and answer rudeness with feistiness. Barra is known as a nonconfrontational consensus-builder, so she’ll probably be deferential. Still, Congress’s reputation is worse than GM’s ever was, which gives Barra the opportunity to outshine her blustery interrogators. Car buyers would cheer.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
- Automotive Industry
- Mary Barra