AP Business Headlines
Senators call on GM CEO to fire top lawyer
By MARCY GORDON and DEE-ANN DURBIN, AP Business Writers
WASHINGTON (AP) — Lawmakers demanded General Motors fire its chief lawyer and do more to help crash victims as a Senate subcommittee delved deeper into GM's mishandling of the recall of small cars with defective ignition switches.
Thursday's grilling was GM's fourth appearance before Congress, but senators aren't done with their investigation. Sen. Claire McCaskill, D-Mo., who chairs the subcommittee, said she will hold a hearing in the next few weeks to ask government safety regulators about their role in the recall.
GM has admitted that it knew about the faulty switches for more than a decade before recalling the cars. The ignition switches can slip out of the "run" position, causing the engines to stall and shutting off power to the air bags. It took years for GM engineers to connect the switch problem to the failure of the air bags to deploy.
GM recalled 2.6 million small cars beginning in February. That recall prompted an unprecedented safety review within the company, which has since issued 54 separate recalls for 29 million vehicles.
McCaskill praised GM CEO Mary Barra, saying she has "confronted the problem head on and the corporate culture that caused it."
But McCaskill also put Barra on the spot, telling the CEO she should have fired GM's corporate counsel, Michael Millikin, based on the conclusions of an internal report by outside attorney Anton Valukas. Barra, with Millikin sitting beside her, defended him as a man of "tremendously high integrity."
Sen. Richard Blumenthal, D-Conn., said GM needs to be more transparent and assume more responsibility. He called for the public release of all of the documents given to Valukas and the unsealing of previous lawsuit settlements. He also asked if GM will waive the legal shield that protects it from lawsuits related to crashes that happened before its July 2009 bankruptcy.
In each case, Millikin said no.
Blumenthal asked whether a compensation plan for victims of small-car crashes should be expanded to other recalls. Specifically the 8.2 million older large cars — such as the Chevrolet Impala and Malibu — that GM recalled on June 30 for defective ignition keys. Three deaths were linked to that issue, but GM has yet identify the cause.
Kenneth Feinberg, the compensation expert administering the plan, said he was only hired to deal with the initial recalls. Barra said the June 30 recall was due to different issues.
The compensation plan will take claims between Aug. 1 and Dec. 31. Blumenthal suggested that victims should be allowed to delay their compensation payments until the Justice Department finishes its investigation into GM. That investigation will likely find evidence of "cover-up, concealment, deceit and even fraud," he said.
But Barra said Feinberg's parameters won't change. Victims will likely be compensated within 90 to 180 days of a filing and will give up their right to sue the company if they accept the payments.
The Valukas report found that GM's legal staff, which began getting reports of air bags failing to deploy in Chevrolet Cobalts and Saturn Ions in late 2005, acted without a sense of urgency.
McCaskill said GM's legal staff was warned four times by outside lawyers that it faced millions in punitive damages due to the switches. The warnings began in October 2010 and ended in April 2013. Millikin said the GM board was not informed of the potential legal liabilities.
Millikin also said the warnings weren't reported to the U.S. Securities and Exchange Commission until after the recalls began earlier this year.
McCaskill, a former prosecutor, said she can't understand why Millikin and one of his top deputies still are with GM.
"This is a either gross negligence or gross incompetence on the part of a lawyer," she said. "I think the failure of this legal department is stunning."
Millikin said he only learned about the ignition switch problems in February and acted quickly once he did.
Senators also focused on how GM failed to answer requests for information from the National Highway Traffic Safety Administration on fatal crashes. GM responded to the so-called "death inquiries" by asserting attorney-client privilege or saying it had not assessed the cause of a particular crash, said Sen. Barbara Boxer, D-Calif.
"I consider it a cover-up when a manufacturer does not respond fully and accurately to NHTSA," Boxer told Millikin.
Boxer asked Barra if the people who gave "non-answers" to safety regulators had been fired. Barra said she believed they had.
Those regulators will soon have to give Congress answers of their own.
Senators say the safety agency missed signs of Chevrolet Cobalt stalling problems and failed to hold GM accountable. Sen. Edward Markey, D-Mass., said the agency ignored consumer complaints and written reports from its own contractors that linked the switches to air bag failures in two fatal crashes.
"I think the whole story has to get out there," Markey said.
Durbin reported from Detroit. AP Auto Writer Tom Krisher also contributed to this report.Associated Press