What was the GM recall scandal of 2014?
General Motors faced an uproar in 2014 over its handling of a defective ignition switch in some of the cars it manufactured — a problem that led to at least 13 deaths.
In the first three months of 2014, GM ordered the recall of 2.6 million small cars because of faulty ignition switches that have been linked to at least 97 deaths since 2005. The faulty switches could inadvertently shut off car engines and airbags during driving. Recalled models included Chevrolet Cobalts and Saturn Ions.
Worse still, evidence has emerged that GM knew about the faulty switches since at least 2003 — but had been slow to fix the problem, possibly because it would have cost too much. Both Congress and the federal government investigated GM on precisely this question.
After taking charge of GM on January 14, 2014, CEO Mary Barra found herself under public scrutiny for the recalls. In early April, she testified before Congress and apologized for the company's actions before her tenure. "In the past," she said, "we had more of a cost culture, and now we have a customer culture that focuses on safety and quality." Even so, plenty of questions remain about why GM didn't fix the switches or recall its vehicles earlier.
After facing a backlash for not fixing the ignition-switch problem earlier, GM recalled millions more vehicles — some for similar ignition-switch problems and others for unrelated problems. As of June 30, GM had recalled 28 million vehicles in 2014.
General Motors is based in Detroit and is the third-largest automaker in the world, making vehicles under a variety of brands, including Chevrolet, Buick, GMC, and (until recently) Saturn. The company was bailed out and partly owned by the US government between 2009 and 2013 after falling into financial trouble during the recession.
How many vehicles did GM recall in 2014?
In 2014, GM recalled some 30.1 million vehicles in North America. A portion of the recalls were definitely due to the faulty ignition switch, some were possibly related, and others seemed to be unrelated. A breakdown:
Ignition-switch recalls: In early 2014, GM recalled 2.6 million small cars because of a defective ignition switch that could shut off the engine and airbags while the car was in motion. This was the big, controversial recall — the ignition-switch problem has been linked to at least 97 deaths.
That recall included Chevrolet Cobalts, Chevrolet HHRs, Saturn Ions, Saturn Skys, Pontiac G5s, and Pontiac Solstices that were produced between 2003 and 2011. GM will replace their switches for no charge and is offering affected drivers free loaner vehicles in the meantime.
The models before 2008 all had the defective ignition switch. GM reportedly redesigned the switch for cars built in 2008 and later, but some of those later models may have inadvertently received faulty replacement switches when they went in for repairs. So those cars got recalled, too.
Possibly related recalls: On June 30, 2014, GM recalled an additional 8.4 million vehicles in the United States and Canada — most of them for a defective ignition switch. The automaker says these models have been involved in seven crashes resulting in eight injuries and three deaths in which the airbags had failed to deploy.
However, GM added: "There is no conclusive evidence that the defect condition caused those crashes."
Possibly unrelated recalls: GM has recalled millions more cars for a variety of other problems over the course of the year, as well — nearly 30.1 million in all as of November 2014.
Some of these were for seemingly unrelated problems. For instance, in March, GM recalled 1.5 million cars because the electronic power steering could suddenly stop working, making it harder to steer. This appears to be a different problem, although one that also involves Chevrolet Cobalts and Saturn Ions. (There's evidence that GM knew about this power steering problem in Saturn Ions for years before the recall.)
What's so bad about a faulty ignition switch?
The faulty ignition switches were a huge problem — drivers could inadvertently knock them to "off" or "accessory" mode while driving, if, say, they were using a heavy keychain. Once that happened, the engine would shut off and cars would lose their power steering and power braking capabilities. The airbags also wouldn't inflate in the event of a crash.
In its initial count in the spring of 2014, GM linked 13 deaths and 32 crashes to the faulty switches. As of May 2015, that number had risen to 97 deaths.
GM said the cars could still be safe to drive if people removed everything from their keychains except the key itself. Others, such as Sen. Richard Blumenthal (D-CT), alleged that the cars could still inadvertently switch off — if, say, they hit a bump in the road while driving. Regardless, GM recalled 2.6 million vehicles to replace the ignition switches in the spring of 2014.
Young people appear to have been disproportionately involved in the crashes. That's because the vehicles affected, like the Chevrolet Cobalt and Saturn Ion, were the sort of cheaper cars that younger drivers are more likely to buy. What's more, experts say, inexperienced drivers were more likely to panic and lacked the focus necessary to wrestle the stalled car safely to the side of the road.
What did GM do about the ignition switch?
It looks like GM engineers knew about the faulty switch at least as far back as 2004, but failed to address it until 2006 — possibly because it would have been too expensive to fix. And the defective vehicles themselves didn't get recalled until 2014.
That was the version of events laid out in an investigation by the House Energy and Commerce Committee. Here's a breakdown:
Noticing the problem (2001–2004): GM engineers noticed a defect in the ignition switch for Saturn Ions in 2001 and for Chevrolet Cobalts in 2004 — the ignition could inadvertently switch off while driving if, say, hit by a driver's knee. (There's some evidence that GM had considered a more resilient ignition switch in 2001 but rejected it for cost reasons.)
Failing to fix it (2005): GM investigated the issue several times. One inquiry was closed off in March 2005 because, according to a project engineering manager, the ignition switch was too costly to fix. (Emails unearthed by Reuters suggested the fix would have cost GM 90 cents per car.) Another design change was approved in May 2005 but never implemented for unclear reasons.
Possible fix (2006): Finally, in April 2006, a GM engineer approved a new ignition-switch design to increase torque performance. Delphi, a parts maker, later told Congress that the new switch for 2008 models was harder to move out of position but "still below GM's original specifications."
So it's not clear that this redesign actually fixed the problem. What's more, the new design was never given a new parts number — which means that the earlier, faulty switch might have been inadvertently been installed in later models when those cars went in for repairs.
Signs of crashes (2007–2013): In March 2007, safety regulators informed GM of the death of Amber Rose, who crashed her Chevrolet Cobalt in 2005 after the ignition switch shut down the car's electrical system and the airbags failed to deploy. The company didn't appear to launch a formal investigation at that time.
In 2011, a Georgia lawyer named Lance Cooper began investigating the 2010 death of Brooke Melton, whose Chevrolet Cobalt lost power while driving and veered into oncoming traffic. Over the next two years, Cooper's law firm begins unearthing evidence related to the defective ignition switch.
Finally taking action (2012–2014): By 2012, GM had identified eight crashes and four deaths involving 2004 Saturn Ions that were attributable to the ignition-switch defect. By the end of 2013, they had determined that the faulty ignition switch was to blame for at least 31 crashes and 13 deaths in a variety of car models. A formal recall began in January 2014.
Investigation (2014): In June 2014, GM released an internal review of the events leading up to the recall. The probe, led by Anton Valukas, confirmed that GM employees had neglected to take action for many years — although he concluded that it wasn't due to a cover-up but rather a "failure to understand, quite simply, how the car was built."
Why didn't GM fix the ignition-switch problem earlier?
That's not entirely clear — though there are plenty of theories. On March 31, 2014, GM CEO Mary Barra appeared before Congress and couldn't explain why it took a decade for the company to recall its vehicles after identifying the problem as far back as 2001 and 2004.
The switch appears relatively easy to fix. As the Washington Post put it: "The part costs less than $10 wholesale. The fix takes less than an hour. A mechanic removes a few screws and connectors, takes off a plastic shroud, pops in the new switch, and the customer is back on the road."
One theory for inaction is that GM's management simply thought the replacement was too expensive. According to an email chain from 2005 unearthed by investigators, GM's managers estimated that replacing the key ignition-switch component would cost 90 cents per car but only save 10 to 15 cents on warranty costs.
When presented with those documents, Barra told Congress that decision was not acceptable. "In the past," she added, "we had more of a cost culture, and now we have a customer culture that focuses on safety and quality."
There are other questions, too. In 2006, GM reportedly redesigned the ignition switch for 2008 models and later. But then why didn't GM recall its earlier cars? And did this redesign really fix the problem? (Delphi, a parts maker, told congressional investigators that even the new design was "below GM's original specifications.")
How common are car recalls?
They're fairly common. In 2013, car companies recalled roughly 22 million vehicles in the United States for dangerous defects or problems, promising to repair them free of charge. Toyota had the most recalls that year, with 5.3 million recalls.
In 2014, automakers recalled a record 52 million vehicles in the United States — and GM had the most recalls, with 26 million.
Between 1990 and 2013, car companies in the United States have issued 3,497 recalls that affected some 398 million vehicles in all:
Vehicles are typically recalled when they have a problem that could jeopardize public safety — and are fixed for no charge. Toyota recalled 803,000 vehicles in October 2013 because of a problem that could inadvertently set off the airbags or shut down power steering.
The automakers with the most recalls aren't necessarily the companies with the most problems, says the federal agency that tracks the data. Different companies have different decision-making processes in deciding how to deal with vehicle problems. One investigation by the New York Times, for instance, found that GM has often relied on sending discreet "service bulletins" to car dealerships in order to avoid full-blown recalls.
Overall, the number of car recall campaigns appears to be increasing over time for a variety of reasons. Toyota has suggested that recalls are often bigger because companies are using the same parts across several model lines — so if the part fails, more models are affected. Other experts point to a growing crackdown by US regulators.
What did regulators do about GM's ignition-switch problem?
It looks like regulators were slow to respond, although the agency in charge has blamed GM for not being forthcoming with information.
Slow to respond: Back in March 2007, the National Highway Traffic Safety Administration (NHTSA) first informed GM of the death of Amber Rose, who crashed her Chevrolet Cobalt in 2005 after the ignition switch shut down the car's electrical system and the airbags failed to deploy. Neither GM nor NHTSA opened an investigation.
Then, in September 2007, NHTSA investigators looked into four fatal crashes and a variety of reports of defective ignition and disabled airbags in Chevrolet Cobalts. But the agency couldn't identify a discernible trend and closed the investigation. Something similar happened in 2010.
Blaming GM: David Friedman, the acting chief of NHTSA, told Congress in April 2014 that regulators would have acted earlier if GM had been more forthcoming. "GM had critical information that would have helped identify this defect," he said. "Had this information been available, it's likely NHTSA would have changed its approach to the issue."
Among other things, Friedman said that his agency did not know that GM was talking with suppliers about concerns over airbag failures. Regulators also did not know that GM had redesigned the ignition switch in 2006 without giving it a new part number.
Fining GM: On May 16, 2014, NHTSA fined GM $35 million — the maximum allowed under the law — for delays in recalling the faulty ignitions. In the consent decree, GM admitted that it broke federal law by not recalling the vehicles in a timely fashion.
(For more on this, see this New York Times piece by Jackie Calmes.)
How did GM respond to the scandal?
The company announced it would replace the faulty ignition switches for 2.6 million recalled vehicles. Replacements for Chevrolet Cobalts, Saturn Ions, and other models began April 7, 2014. Repairing all of those cars could take months, so the company offered free rental vehicles to affected drivers in the meantime.
GM also conducted an internal investigation into why the part wasn't fixed earlier, which was released in June 2014. That report confirmed that GM had neglected to address the ignition-switch problem for many years — although it said this wasn't due to a cover-up but rather a misunderstanding in "how the car was built." The company dismissed 15 employees and disciplined five others after the investigation was published.
GM has also tapped Kenneth Feinberg as a consultant to help them decide how to compensate families who were injured by the recalled cars. As of May 2015, the company has set aside $550 million to compensate victims. The fund has reviewed more than 4,000 claims and determined that at least 97 deaths could be linked to the faulty ignition switches.
On April 1, 2014, GM CEO Mary Barra appeared before Congress and said that the company had once been too focused on cutting costs — but has since changed. "In the past," she said, "we had more of a cost culture, and now we have a customer culture that focuses on safety and quality."
What consequences did GM face?
Here's what the company has faced as of June 2014:
A $35 million fine: On May 16, 2014, the US Department of Transportation hit GM with $35 million in fines — the maximum allowed under the law — for delays in recalling the faulty ignitions. In the consent decree, GM admitted that it broke federal law by not recalling the vehicles in a timely fashion.
The cost of recalls: GM already has to pay the cost of the recalls, which ran to at least $1.7 billion in the first half of 2014.
Investigations: In March 2014, Manhattan US Attorney Preet Bharara opened a federal probe into whether GM could be criminally liable for failing to disclose information. (This wouldn't be unprecedented: back in March, the Justice Department levied a $1.2 billion fine against Toyota for allegedly lying to the public over an unintended-acceleration problem in its vehicles.)
Possible payments to victims: As of May 2015, the company had set aside $550 million for the GM Ignition Compensation Fund to compensate victims of the faulty switch. As of January 31, 2015, the company has received more than 4,000 claims and linked at least 97 deaths to the switch.
Wasn't GM owned by the government during the scandal?
Yes. GM declared bankruptcy in 2009 and was owned by the government between 2009 and 2013.
That's after the company supposedly redesigned the faulty ignition switch. But the government ownership came during a period when GM failed to recall millions of defective vehicles that were out on the road.
Some observers have wondered whether GM officials were too focused on pulling the company out of bankruptcy to worry about the faulty ignition switches. Others have asked whether federal regulators may have turned a blind eye toward GM's problems during this period.
The backstory: In 2009, GM was burdened by declining sales, high pension costs, and escalating losses. To forestall a total collapse, the US federal government invested some $50 billion into GM in exchange for a 60 percent stake in the company (which it sold off over time). As part of the deal, GM filed for Chapter 11 reorganization on June 1, 2009.
During the restructuring, GM closed brands like Saturn and Hummer, cut thousands of jobs, reduced its labor costs, and went public again in July 2009. The company has been profitable since 2010.
The Obama administration sold its last remaining shares in the company in December 2013 — ultimately taking a $10.5 billion loss on the taxpayer-funded bailout. (Supporters of the bailout argue that letting GM fail would have had a ruinous economic impact during the nadir of the recession.)
Why it matters: That bankruptcy was an issue during the scandal. As part of the government restructuring, GM technically isn't liable for injuries that happened before it went bankrupt in the summer of 2009. That potentially includes some of the victims of the ignition-switch defect. In 2014, some members of Congress urged GM to pay up anyway — and suggested potentially revising the terms of the company's deal.
Is driving getting more dangerous?
Driving in the United States is an inherently dangerous activity — 33,561 people died in car crashes in 2012.
But driving's not getting more dangerous. The number of traffic fatalities in the United States has fallen dramatically since the 1970s:
That's partly due to the fact that people are becoming safer drivers (less drunk driving, less driving in general). And it's partly due to the fact that cars are getting safer — airbags save lives, and the combination of antilock brakes and electronic stability control have cut crashes 30 percent.
Still, some critics argue that driving could be much safer. In Slate, Nicholas Freudenberg argues that the rate of auto deaths in the United States is three times as high as it is in, say, Sweden. And, he argues, auto companies have often resisted regulations that could make driving even safer.