P&A Providers & Administrators
MenuMENU
SearchSEARCH

GM Directors Ask Why Cobalt Data Didn't Reach Them

May 16, 2014
5 min to read


Via The Wall Street Journal


General Motors Co.'s board has stepped up its response to the controversy over the auto maker's handling of vehicle safety recalls, hiring a law firm to review how information about potentially dangerous defects flowed to its members.

Ad Loading...


Directors at the largest U.S. auto maker weren't previously apprised of the troubles with small cars stalling due to a faulty ignition-switch, according to a person close the board. They want their review to ensure that future vehicle safety issues move more quickly to their attention through the auto maker's management, that person said.


The board hired prominent New York law firm Wachtell, Lipton, Rosen & Katz to conduct its probe, the person said.


Directors also have begun meeting as a group at least weekly with Chief Executive Mary Barra to monitor her overhaul of the company's operations.


"GM had quite a robust system in place for identifying problems, dealing with them and moving them up to appropriate levels," this person said. "This [ignition switch] problem did not reach the board level," this person added. "There will be changes. There already are significant changes in the procedures."


A GM spokesman said on Wednesday the company wouldn't comment on the board's activities, and wouldn't make Ms. Barra available to comment.

Ad Loading...


Some corporate-governance experts say GM's board hasn't been as visible as it should be in providing information on how it is overseeing the recall response. Directors need to explain the board's investigative process and steps planned to improve its oversight of risks "so that a similar problem does not recur,'' says Beverly Behan, a corporate-governance consultant and author.


Ms. Barra has said she intends to withhold a detailed public response to questions about the recall until an internal investigation is completed. A report on the company's probe is expected to be finished by late May or early June, people familiar with the situation have said.


GM's board faces at least three lawsuits charging directors failed in their duties to act on issues that might affect GM's operations, profitability or image. The auto maker is facing more than 60 different potential class-action suits stemming from revelations that executives took nearly a decade to recall some 2.6 million vehicles equipped with faulty ignition switches. The switches, installed in various compact cars manufactured in the mid-2000s, can slip out of the "run" position if the keys are jostled, cutting power to the engine, steering and air bags.


GM has linked 13 deaths to the problem, which surfaced in Chevrolet Cobalt, Saturn Ion and other cars that are no longer manufactured. Plaintiffs' lawyers and safety groups say the number of deaths and injuries is much higher.


What directors and senior company executives knew about the problem before the announcement in February of the first recall related to the ignition-switch issue is one of many questions under investigation by two congressional committees, regulators at the U.S. Department of Transportation and criminal prosecutors at the U.S. Department of Justice.

Ad Loading...


The GM board's move in April to hire its own legal counsel occurred weeks after Ms. Barra hired former U.S. attorney Anton Valukas, chairman of the law firm Jenner & Block, to investigate the handling of the ignition-switch problem. GM directors approved the selection of Mr. Valukas, according to the person familiar with the board.


Mr. Valukas declined to comment and referred all questions on the matter to GM.


GM Chairman Theodore "Tim" Solso said that he and Ms. Barra are in regular contact.


"We usually talk three to five times per week for various lengths of time. The most common topic is all the issues surrounding the recall, but we also cover many other items. We both have lists and cover each other's issues.''


Mr. Solso, former CEO of engine maker Cummins Inc. took command of the GM board in January, the same month that Ms. Barra advanced to CEO. In a January interview, Mr. Solso pledged to be an active outside chairman of the auto maker.

Ad Loading...


In congressional testimony last month, she denied knowing about the switch issue before late 2013. Ms. Barra served as the auto maker's global product chief in 2011 before taking the CEO spot in January.


While head of product development, Ms. Barra was informed in 2011 of a widening government probe of steering problems with certain sedans at a time when GM was fighting a recall of those cars, according to a document released last month by the House Energy and Commerce committee. The document didn't link her to earlier knowledge of the ignition recall.


Mr. Valukas is working with GM General Counsel Michael Millikin as the auto maker tries to piece together the events between the discovery of the faulty switch in 2004 and February's recall. Mr. Valukas was the lead examiner of the Lehman Brothers Holdings bankruptcy.


However, some governance experts have questioned whether Mr. Valukas has enough of an arm's-length relationship with GM management. Jenner & Block has long advised GM management.


"A law firm cannot function as both counsel to and independent investigator of the same client,'' said Edwin Stier, a partner at Thacher Associates LLC, a New York law firm. Mr. Stier has completed about 15 corporate investigations for public companies but hasn't worked for GM.

Ad Loading...


With senior management controlling the Valukas probe, "the public will not be convinced that the investigation has truly gotten to the bottom of all the facts,'' Mr. Stier said.


GM's directors and their advisers don't see a conflict in Mr. Valukas's role because his firm has worked with the company in the past, the person familiar with the board's thinking said. Mr. Valukas's own integrity is on the line, this person noted.

More Industry

Photo of gray SUV plugged into public electric-vehicle charger in parking lot
Industryby Hannah MitchellJuly 21, 2026

World EV Adoption Set to Grow

A new report says the segment, despite recent setbacks in some regions, is poised for acceleration as many countries look to reduce pollution.

Read More →
Bar chart of truck and SUV segments' weekly value change
Industryby StaffJuly 21, 2026

Black Book: Weekly Market Update

Wholesale automotive auction business stayed steady last week as bidders encountered lower prices, analysts observed.

Read More →
laptop with blue car on screen on a shopping website, Clear Costs Convert
Industryby Lauren LawrenceJuly 21, 2026

Pricing Transparency Drives Purchase Consideration

An annual study by JD Power found that clear pricing matters to consumers on automaker websites, so much so that it increases their purchase consideration.

Read More →
Ad Loading...
Bar graphic of used-car segment weekly change
Industryby StaffJuly 14, 2026

Black Book: Weekly Market Update

Used-vehicle market depreciation was the prevailing story in the wholesale market last week.

Read More →
Light-blue Fiat car parked on a sunny Chicago street
Industryby Hannah MitchellJuly 14, 2026

Smaller Is Looking Better

A growing number of Americans in the market for a new vehicle are opting for more affordable options, not waiting for market stability to bite the bullet.

Read More →
man sitting at desk using calculator with charts in front of him, to-go coffee cup on desk, rising and falling data chart in front
Industryby Lauren LawrenceJuly 14, 2026

U.S. EV Market Slowly Stabilizes

U.S. electric-vehicle interest is slowly stabilizing since a major dip in sales after last year's end of the federal EV tax credit, and hybrids remain the leading electrified power train.

Read More →
Ad Loading...
blue background, map of the world with connecting lights and an electric vehicle emblem in the middle
Industryby Lauren LawrenceJuly 8, 2026

Global EV Market Entering New Phase

Automakers are making investments to lower battery costs and optimize production to meet changing consumer needs.

Read More →
Bar chart showing week-over-week wholesale automotive price change
Industryby StaffJuly 7, 2026

Black Book Weekly Market Update

The holiday weekend, not surprisingly, put a drag on wholesale automotive activity last week, analysts observed.

Read More →
Photo of Honda CR-V SUV on two-lane road next to roadside trees
Industryby Hannah MitchellJuly 1, 2026

Auto Affordability in Context

Cox Automotive points out the complex circumstances that have led to eye-popping vehicle prices.

Read More →
Ad Loading...
Line chart of used-vehicle days to turn over past week
Industryby StaffJune 30, 2026

Black Book: Weekly Market Update

Automotive auction inventory increased last week, giving choosy bidders even more leeway.

Read More →