GM’s Barra Saying Sorry Seeks to Limit Fallout on Recall

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Carlos Osorio/APGeneral Motors CEO Mary BarraBy Jeff Green

General Motors (GM) Chief Executive Officer Mary Barra apologized for the lives lost in accidents linked to an ignition defect and pledged an aggressive probe into why a recall took so long, in her boldest effort yet to limit damage from safety lapses at the largest U.S. automaker.

Speaking publicly for the first time since GM recalled 1.6 million cars, Barra said yesterday there would be “no sacred cows” in the company’s investigation into a failure that may have caused 31 accidents and 12 deaths. Barra said she was told about an analysis of stalling cars in December, weeks before she became CEO, and was informed on Jan. 31 of the decision by a GM committee to recall Chevrolet Cobalts and other small cars with the faulty switch.

GM was aware as long ago as 2001 that the switches could slip out of position, cutting off power. It “took too long” for the company to respond, Barra said. She’ll wait for the findings of the internal investigation led by Jenner & Block Chairman Anton Valukas, who headed the probe of Lehman Brothers Holdings’ 2008 downfall, before deciding what actions to take.

For anyone who lost a family member or who was hurt in one of the accidents, what Barra does matters more than any apology, said Mike Papantonio, a Florida trial lawyer whose clients have sued pharmaceutical, tobacco and chemicals companies.

“The public generally is very forgiving of people who mean well,” Papantonio said. “You have to build confidence in the idea that they genuinely want to do something about it. The follow-up is very important.”

‘Tylenol Moment’

While Barra’s job isn’t “on the line,” how she handles the crisis will define her as CEO, said Brian Johnson, an auto analyst at Barclays in Chicago.

“This is the Tylenol moment for her, where the company is either seen as quickly and thoroughly addressing the issue or seen as dragging its feet and denying reality,” Johnson said. “She was kind of quiet the first week, but this week they seem to be stepping up.”

Barra didn’t say whether GM would compensate the families of those who died or any of the people injured. The automaker hasn’t informed relatives of anyone it has identified as having died in a defect-related crash and hasn’t communicated with them, she said, though it may do so after concluding its investigation, which could take months.

“I want to start by saying again how sorry I am personally and how sorry General Motors is for what has happened,” Barra, 52, said at the company’s Detroit headquarters. “Clearly lives have been lost and families are affected, and that is very serious. We want to just extend our deep condolences for everyone’s losses.”

Key Chains

GM announced it was replacing the switches last month, years after customers started complaining their cars could go dead if they were bumped or if their keys were on heavy key chains. The company issued the first recall on Feb. 13, then more than doubled the number of models with a second on Feb. 15.

The U.S. Justice Department opened a criminal investigation on March 11, according to people familiar with the matter.

Barra said a crucial step in fixing the system was her naming a 40-year engineering executive, Jeff Boyer, to the newly created position of vice president of global vehicle safety. Boyer, who joined GM in 1974 as an intern, will be responsible for identifying and resolving product-safety issues, Barra said. She said she’s known Boyer since the early 1980s and expects him to change the process.

Criminal Probe

“Our goal is that something like this will never happen again,” she said in a conference room on the Detroit River where she and Mark Reuss, vice president of global product development, met with reporters.

In addition to the criminal probe and an investigation by the National Highway Traffic Safety Administration, GM faces hearings in the U.S. House and Senate.

GM employees are meeting with congressional staff members, Barra said. In Canada, the opposition New Democratic Party has asked Transport Minister Lisa Raitt to testify about the government’s probe into the defects behind the recall.

Aside from disavowing prior knowledge of the problem, Barra didn’t say much, said Matt Stover, an analyst with Guggenheim Securities in Boston.

“Everything else was right from the playbook,” he said. “She handled herself well, but I don’t think she really told us anything. But you have to get out and talk.”

‘PR Move’

Jay Dankner, a New York automobile products liability lawyer for the past 40 years, said Barra’s meeting with reporters was “more or less a public relations move” and that what she said “does not amount to admission that could be used in a court of law that makes General Motors responsible.”

GM rose 1.6 percent to $35.17 at the close Tuesday in New York.

An apology by a CEO isn’t uncommon. In 2009, after a Toyota Motor (TM) recall for misshapen floor mats linked to sudden acceleration, Toyota chief Akio Toyoda apologized to the family of Mark Saylor, a California Highway Patrol officer who was killed along with his wife, daughter and brother-in-law in a Lexus that sped out of control.

For Barra, 63 days into the CEO job, there aren’t only pitfalls ahead.

“She doesn’t have to take the blame — she can be the fixer,” said Davia Temin, head of Temin & Co., a crisis management firm in New York. “Saying you’re sorry is the first 5 percent of it. She will be judged on how she handles the next 95 percent of it,” Temin said. “She has a wonderful opportunity to do this right.”

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