U.S. senator accuses GM of 'culture of cover-up' in recalls

Reuters
GM CEO Barra testifies before Senate subcommittee in Washington
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General Motors CEO Mary Barra testifies before the Senate Commerce and Transportation Consumer Protection, Product Safety and Insurance subcommittee in Washington April 2, 2014. REUTERS/Gary Cameron

By Ben Klayman and Eric Beech

WASHINGTON (Reuters) - General Motors Co CEO Mary Barra came under withering attack for her company's decade-long failure to deal with defective parts linked to fatal crashes, in a hearing where U.S. Senators accused the company of "criminal" behavior and "a culture of cover-up."

Democratic and Republican senators, including some former prosecutors and state attorneys general, challenged Barra's assertion that GM had vastly improved its safety and management practices since emerging from bankruptcy.

Repeatedly, she was pressed to explain why GM redesigned faulty ignition switches in 2006 but did not change the identifying part number. That has raised questions about whether the company was trying to conceal the problem, after years of consumer complaints and at least 13 deaths linked to the faulty part.

"I believe this is criminal," said Republican Senator Kelly Ayotte of New Hampshire. The Senate grilling was decidedly more emotional than the previous day's panel in a House of Representatives subcommittee, while Barra was calm and measured both days.

Seated behind Barra as the CEO responded to senators' questions, the parents of 21-year-old Kelly Erin Ruddy, who died in a 2010 accident in Pennsylvania while driving a 2005 Chevrolet Cobalt, held up photos of their daughter and the wrecked car.

Barra, who was promoted to CEO in January, said in her prepared testimony: "While I can't turn back the clock, as soon as I learned about the problem, we acted without hesitation."

Barra testified that issuing a new part without new model or serial numbers was "completely unacceptable" and violates fundamental practices. "It's engineering principle 101 to change the part number when you make a change," she said.

Democratic Senator Claire McCaskill chairs the Senate subcommittee on consumer protection and product safety that is investigating GM. The automaker is often thought of as two companies: the "Old GM" which bust and the "New GM" which emerged after its 2009 bankruptcy.

"It might have been the 'Old GM' that started sweeping this defect under the rug 10 years ago. Even under the 'New GM' banner, the company waited nine months to take action after being confronted with specific evidence of this egregious violation of public trust," the Missouri senator said.

'YOU DON'T KNOW ANYTHING'

In testimony that lasted slightly less than two hours, Barra frustrated senators with her lack of answers to detailed questions about the failed switches. Barra repeatedly said she would wait for results of the company's ongoing internal probe.

"You don't know anything about anything," California Democratic Senator Barbara Boxer quipped.

Barra kept calm, declining to say whether the death toll might rise and whether GM will create a compensation fund for victims and their families.

She also rebuffed demands that GM urge car owners to stop driving cars until they are repaired, saying the vehicles are safe if operated only with the ignition key and no other items hanging from key rings.

But she did tell the Wall Street Journal in an interview that going forward, company executives will be informed of vehicle safety problems when they first surface. Top executives say they did not learn of the ignition-switch problem until January, 13 years after it was first noted.

Committees in the House and Senate are investigating why it took GM more than a decade to recall 2.6 million cars. The largest U.S. automaker also faces a criminal probe by the Department of Justice.

Those switches, without warning, can make vehicle engines stall during operation and stop air bags from deploying and power steering and power brakes from operating.

When Connecticut Senator Richard Blumenthal asked Barra about her personal driving experience, the chief executive said she once suffered a loss of power steering and power braking.

"Pretty frightening?" he asked. "It's -- it can be startling," she responded.

GM officials declined to provide details on the incident Barra described. She did not say what model she drove.

McCaskill said the "a culture of cover-up" caused a GM engineer to deliver untruthful testimony about his knowledge of the defective ignition switch, as part of a lawsuit related to a fatal 2010 crash in Georgia.

In a 2013 deposition related to a suit against GM, Ray DeGiorgio, a senior switch engineer, said he was unaware of a change in the part. Documents submitted by GM to Congress show the engineer signed off in April 2006 on the redesign of the ignition switch.

"He lied" about his knowledge of the defective part, McCaskill said. Barra said that what she had seen indicated that, as well, but she said she wanted to let the company probe first run its course. Repeated attempts by Reuters to contact DeGiorgio were unsuccessful.

DeGiorgio is still employed by GM, which has not made him available to comment.

Barra told senators the internal probe is "well along," adding that GM hopes to wrap it up in 45-60 days. She told senators she will share with Congress all information related to safety that turns up in the probe.

GM was not alone in the hot seat during the Senate hearing.

McCaskill, a former prosecutor, complained of the National Highway Traffic Safety Administration's "failure to spot a trend" with GM's ignition switches. That failure came despite a 2000 law aimed at giving the agency improved resources for spotting automaker safety troubles, she said.

Senator Edward Markey of Massachusetts pressed for further toughening up federal laws to prevent such safety problems.

NHTSA acting Administrator David Friedman said he supported Congress raising the agency's maximum $35 million fine on companies to $300 million for not complying with safety reporting requirements.

Friedman also said NHTSA has contacted other automakers and suppliers to find out if airbags in other cars are disabled when the key is in the "accessory" position.

Transportation Department Inspector General Calvin Scovel told the Senate panel that Transportation Secretary Anthony Foxx had asked his office to initiate a new audit of NHTSA's performance.

In his prepared testimony, Scovel noted "major weaknesses" in some of the agency's processes for tracking consumer complaints and documenting investigative decisions. Those findings were part of a 2011 inspector general's report that Foxx ordered to be revisited.

(Additional reporting by Doina Chiacu and David Lawder, writing by Richard Cowan; editing by Karey Van Hall and Peter Henderson)

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