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How to prevent the next massive auto recall

Daily Ticker

General Motors (GM) auto sales rose almost 7% in April from a year ago despite the problem of faulty ignition switches that led to the recall of 2.6 million vehicles and reportedly at least 13 deaths.

GM sold over 254,000 vehicles in April amid "steady" retail demand, according to Kurt McNeil, U.S. VP of sales operations.

Related: GM stock is cheap but still not a buy

But GM is hurting from the ignition problem, according to The Detroit News. Its profits fell 85% to $125 million, or six cents a share, compared to a year ago and its faces multiple lawsuits from consumers and surviving relatives and multiple government investigations.

"This whole GM scandal can be turned to good purpose, aside from the sad fatalities, for stronger legislation on Capitol Hill, more adequate enforcement budgets, and tougher standards," says political activist Ralph Nader. He also hopes each automaker adopts "whistleblower protection [so that] conscientious engineers ... can go to an independent ombudsman and get confidential exchange of information, which will save the company a lot of trouble as we now know from GM's travails."

Related: GM’s image problem worsens

Nader tells The Daily Ticker that he's "urged" GM CEO Mary Barra "to get a whole clean slate, compensate all these claims reasonably, put an ombudsman inside the company reporting directly to her and support stronger motor vehicle health and safety laws. "In the long run it will be very good for all the auto companies not just to mention the health and safety of the American people," says Nader, who just published a new book Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State.

More than 40 years ago Nader's investigation into fatal accidents involving another GM vehicle -- the Chevy Corvair -- led to the creation of the National Highway Traffic Safety Administration, whose mandate is to "save lives, prevent injuries, and reduce vehicle-related crashes." 

But the NHTSA didn't do anything about GM's ignition flaw even though it was aware of the problem as early as 2005, according to an agency memo released by a House subcommittee.

Related: Mary Barra’s strong leadership will lead GM beyond recall drama

Says Nader: "The corporate lobbyists have been getting Congress and the White House to stamp down on the auto safety agency for years.... [creating] a culture of timidity."

At the same time the White House helped GM, bailing it out to the tune of $50.1 billion and orchestrating a planned bankruptcy from which it emerged just months later. The Treasury lost $11.2 billion in the bailout, according to a Treasury report released Wednesday.

So was the bailout a mistake? "Not at all," says Steven Rattner, who spoke with The Daily Ticker at the recent Milken Global Conference.

Rattner, who led the White House task force that orchestrated the bailout, said the recall "will be expensive but ... not life threatening" for GM and should not distract from the success of its evolution from a "bankrupt money-losing company to one that's highly profitable," with strong sales.

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