tv Bloomberg Bottom Line Bloomberg April 1, 2014 2:00pm-3:01pm EDT
what the key inserts were supposed to do is go in the middle and just create a little hole so the keys wouldn't go back and forth. unfortunately, gm never made this bulletin public. out of the00 people thousands of drivers got the key insert. and gm knew it. as soon after this decision, company officials quietly redesigned the switch but they never changed the part number. hingly, when they approved a new switch in 2006, they did it still knowing that the news which did not meet specifications. the company even put more cars with bats which is on the road . between 2000 3-2014, gm learned of hundreds
of reports of ignition switch problems through customer complaints, lawsuits, warranty claims, press coverage, field reports and even more internal investigations. , gm did time again nothing. the company continued to sell cars knowing they were unsafe. it i know we have a lot of family members here and i want to express my deepest sympathies to them. i want to tell them something more. we will get to the bottom of this. we will figure out what happened and we will make sure it does not happen again. ms. barra fork coming. i know every member of this committee is concerned about this. thank you very much. >> we will now recognize mr. upton for five minutes. that with a two ton piece of high velocity
machinery, there is a zero margin of error. but safety is a life or death issue. vehicle safety has fallen short and it's not the first time. of 2000,e late summer i led the oversight hearings four firestonehe recalls. americans do not save -- feel safe behind the wheel. we got testimony from the company and agency officials and reviewed thousands of pages of documents. we found that the system indeed had failed. information about the defective tires had been shared with the companies. over 100 people died. after that investigation, introduced the act to solve the many problems that have contributed to the firestone tragedy. so that effects can be quickly identified and fixed and lives ultimately saved.
the act has now been lost since 2000. last friday, the recall was for another 9000 vehicles. gm acknowledges that one dozen people have died in automobile crashes related to that effect. the gm ignition switch recall hearing -- we are awaiting opening remarks from mary barry. stay with us. you are watching bottom line on bloomberg television. we will be right back. ♪
>> welcome back to bottom line carried a live coverage of the gm ignition hearing on capitol hill. you are looking at the california democrat as we were in break. michigan republican fred upton asking perhaps the question of the day. why did it take gm so long to issue the recall? we are waiting to hear testimony , the new gm ceo. that should be coming up shortly. over the last month, the f of anotherons disaster have unfolded. general motors has recalled 2.5 million vehicles due to a defective ignition switch. the company hasn't knowledged that these cars have caused dozens of crashes and 13 fatalities.
i know the families of some of are -- it did not meet its own specifications. numerous internal investigations resulted in nothing but a nonpublic service bulletin that partially fixed the problem for fewer than 500 drivers. new analysis released this morning revealed that over the last decade, gm received over 130 warranty claims from drivers and gm technicians who
experienced and identified the defect. drivers reported that their cars shut off after hitting bumps or potholes at high rates beads or they did something as simple as pressing the ignition switch with their need. one gm technician even identifies the exact part causing the problem. a spring that would have caused as much as a few -- cost as much as a few postage stamps. gm did not implement the simple fix when they learned about the problem. at least a dozen people have died in defective gm vehicles. more information the committee received last week suggests that gm still has failed to fully own up to potential problems. gm finally modified the ignition for later models.
they told the committee that the switches installed from 2008-2011 still did not meet gm's own specifications. offinally announced a recall these vehicles last friday. but told the public it was parts installed during repairs, not because of defective parts originally installed in the vehicles. there are legitimate questions gmneed to ask about whether did enough to uncover this problem. in retrospect, it is clear that the agency missed some red flags. it was laboring under handicap that appears to have been a lot of information that gm new that they do not share with the national highway traffic
administration. we need to make sure that the public have access to the same information about safety as auto executives. the motor vehicle safety act of 2014. this bill is modeled on the legislation that the committee passed in 2010 but was never enacted into law. it will make more information on defects available to the public and it will increase civil penalties for manufacturers when companies like gm failed to comply with the law. we should learn as much as we can from this investigation. then we should improve the law to make sure we are not here again after another auto safety tragedy in the near future. i want to yield back my time. thank you. >> i would now like to introduce
the witness for today's hearing. is the chiefa executive officer of general motors company and has been in this role since january 15, 2014 winter became the member of its board of directors. she has held a number of positions in this company from 2008-2009, she served as vice president of the global manufacturing engineering and from 2000 5-2008 she was executive director of vehicle manufacturing engineering. she has also served as the plant manager and director and numerous other positions. i will now swear in the witness. you were a ware that the committee is holding an investigative hearing and has the practice of taking. do you have any objections to testify under oath? >> no. you are entitled to be advised by counsel. do you desire to be advised by
counsel during today's hearing? >> no. >> if you would please rise and raise your right hand, i will swear you in. you swear that the testimony you give is theo truth, the whole truth and nothing but the truth? >> i do. >> you are now under and subject to the penalties of the united states code. you may now give a five minute summary of your written statement. >> thank you, mr. chairman and committee members. my name is mary barra and i'm the ceo of general motors. i appreciate the opportunity to be here today. more than a decade ago, gm embarq on a small car program. sitting in today, i cannot tell you why it took so long for a safety defect be announced for this program. i can tell you that we will find out. situation.extra neri
it involves vehicles we no longer make. but it came to light on my watch, so i am responsible for resolving it. when we have answers, we will be fully transparent with you, with our regulators and with our customers. while i cannot turn back the clock, as soon as i learned about the problem, we acted without hesitation. we told the world we had a problem that needed to be fixed. we did so because whatever mistakes were made in the past, jerk from our response abilities now or in the future. today's gm will do the right thing. that begins with my sincere apologies to everyone who has been affected by this recall. especially the families and friends who lost their lives or were injured. i am deeply sorry. i have asked former u.s. attorney anton deluca is to conduct a thorough
investigation. i have received updates from him and he tells me he is well along with his work. he has free range to go where the facts taken, regardless of outcome. the facts will be the fact. my leadership team and i will do what is needed to help assure this does not happen again. we will hold ourselves fully accountable. however, i want to stress, i am not waiting for his results to make changes. i have named a new vice president of global vehicle safety. a first for general motors. the top priorities to quickly identify and resolve any and all product safety issues. tasks not taken on this alone. i stand with them and my senior leadership team stands with them as well. we will welcome input from outside of gm from you, from our customers, our dealers and
current and former employees. of recallsround demonstrates just how serious we are about the way we want to do things at today's gm. we have identified these issues and we have brought them forward and we are fixing them. to keepsked our chain stressing the system at gm and work with one thing in mind. the customer and their safety are at the center of everything we do. our customers who have been affected by this recall are getting our full and undivided attention. to themalking directly through a dedicated website with constantly updated information and through social media platforms. we have trained and assigned more people to our customer call centers and wait times are down to seconds. we are sending customers written information through the mail. dealers toowered our take extraordinary measures to treat each case specifically. if people don't want to drive a
recalled vehicle before it is repaired, dealers can provide them with a loner or a rental car free of charge. today, we provided nearly 13,000 loner vehicles. is already looking for another car, dealers are allowed to provide additional cash allowances for the purchase .f a lease or new vehicle our supplier is manufacturing the replacement parts for the vehicles that are low longer in production pyramid commissioned two lines and have asked for a third production line. those parts will start being delivered to dealers next week. these measures are only the first in making things right and rebuilding trust with our customers. employeesminded our and getting the cars repaired is only the first step. giving customers the best support possible throughout this process is how we will be judged. i would like this committee to know that all of our gm
employees and i are determined to set a new standard. i'm encouraged to say that everyone at gm, including our board of directors, supports this. i am a second-generation gm employee and i'm here as the ceo but also here to represent the men and women who are part of today's gm and are dedicated to putting the highest quality, safest vehicles on the road. a town halleld meeting to formally introduce our new vp of safety. we met at our technical center in michigan. one of the places where the men and women who engineer our vehicles work. they are the brains behind our cars and also the heart of general motors. it was a tough meeting. like me i'm a they are disappointed and upset. i could see it in their faces and hear it in their voices. they had many of the same questions that i suspect are on your minds. they want to make things better
for our customers and in that process make gm better. they particularly want to know what we plan to do for those who have suffered the most from this tragedy. that is why i am pleased to announce that we have retained kenneth as a consultant to help us evaluate the situation and recommend the best path forward. i'm sure this committee knows he is highly qualified and is very experienced in handling matters such as this. having led the compensation , thets involved with 9/11 bp oil spill and the boston marathon bombing. he brings expertise and objectivity to this effort. as i have said, i consider this to be an extraordinary event and we are responding to it and asked her neri ways. as i see it, gm has civil responsibility and legal responsibility. we are thinking through exactly what this was possibilities are and how to balance them in an
appropriate matter. ringing on mr. feinberg is the first step. i will now be happy to answer your questions. thank you. acknowledgent to that the families are here today. we know we are aware and our we have all of you in our hearts. our committee reviewed more than 200,000 pages of documents. we have found that as soon as the cobalt hit the road in 2004, drivers began to immediately complain to gm about the car's ignition system. is toe how frightening it drive a car that suddenly loses power steering and power brakes. when the cobalt was being built back in 2002, gm knew this which did not meet its specification for pork. am i correct? >> yes.
>> they understood the torque measured below its own specifications. there is a difference between a part meeting or not meeting specifications and a part being effective. >> under what scenario is that affecting parts that don't meet gm specs allowable? specificationt a for steel but because of the different suppliers and availability of steel to make products, you will assess the performance, functionality, durability, the aspects of the to livet is necessary up to what the performance and the durability needs to be. that would be an example of when you would have a part or material that does not meet the ok from aout but is
functionality perspective. >> is that switch acceptable? at what time frame? >> at the beginning. it did not meet the specs for gm. is that acceptable? >> as we know today, it is not. >> in 2006, gm changed its ignition switch supplier. they put a new spring in to increase the torque. >> there was a new part. >> in that binder next to you, 25.ou would turn to tab this is an e-mail exchange between delphi employees in 2005 discussing the changes to the ignition switch. the e-mail notes that a gm engineer is asking for information about the ignition switch because "cobalt is blowing up in their face in regards to turning the car off with the driver's knee."
if this was such a big problem, replaced the switch is in the cars already on the road? what you just said does not match tab 25. >> the bottom of the page. >> clearly, there were a lot of things that happened. there have been a lot of statements made as it relates. that is why we have hired him to do a complete investigation of this process. we are spanning over a decade -- >> you don't know why they didn't just replace the old switches? >> i don't know. >> given the complaints, why wasn't this identified as a safety issue? >> i can't answer specific questions at this point in time. gmin the chronology,
states they did not make the connection between the ignition switch problems and the airbag problems until 2013. when they decided to switch the ignition and 2006, did the company ever examine how a faulty ignition switch could affect other systems like the airbags? >> that is part of the investigation. >> should they? --should we understand >> should they look at how to fix other vehicle systems? >> yes. -- gm when jim concluded concluded that the tooling costs and prices are too high, what does that mean? >> i feigned that statement to be very disturbing. that statement to be very disturbing. if that is why the decision was made, that is unacceptable. that is not how we do business in today's gm. >> how does gm balance cost and
safety? >> we don't. if there is a safety issue, we take action. onwe know there is a defect our vehicles, we do not look at the cost associated with it. we look at the speed in which we can fix the issue. >> was there a culture and gm that they would have put cost over safety? >> we're doing a complete investigation. i would say, in general, we have moved from a cost culture after the bankruptcy to a customer culture. we have trained thousands of people on putting the customer first. we have gone with outside training. if part of our core values -- it is one of the most important cultural changes we're driving and general motors today. >> i'm out of time. defect as about the far back as 2001. 13 years before the vehic recal. >> the investigation will tell
us that. >> you don't know when gm knew about the defect? >take a look at tab seven in yor notebook. this is a gm document. what this gm document talks about is this switch. says kerry down a valuation on this which revealed two causes of failure. low contact force and low lunge or force. this islunger force. >> the first i've seen this document. >> so you don't know how long jim knew about this. >> that's why i'm doing an investigation. informed gm in 2002 that the switch was posted be 15
minimum torque specification. these witches were between 4-10. >> the specification is correct. it was mos supposed to be 20 or more. we know that now. gm was notified by delphi, correct? >> i'm not aware of being notified. i only have five minutes. i'm sorry. as 2004, 10 years ago, gm conducted a problem systemion tracking inquiry after it learned of an incident where the key moved out of the running condition and in a 2005 cobalt. you don't know? you don't know about that? look at tab 8, please.
by the way, i'm getting this information from the chronology that gm provided. back as 2004, gm conducted a problem resolution tracking system inquiry after it learned of an incident where the key moved out of the running condition. is that correct? >> yes. >> thank you. after the prt at inquiry, one engineer advised against further action because there was no acceptable business case to provide a resolution and it was closed. is that correct? >> if that is true, that is a very disturbing fact. in 2000 five, gm received more reports of engine stopping when the keys were jerked out of the running condition. -- proposedovided changes to the keys.
is that correct? >> that is part of our investigation to get that complete timeline. >> much of this i'm taking from the timeline gm has already done. as a result of the investigation, a technical service bulletin was issued to dealers that if car owners complained, they should be warned of this risk and advised to take on essential items from the keychain. this recommendation was not made to the public. no public statements were issued and no recalls set. is that correct? >> yes. contracted with delphi to redesign the ignition a new springse that would increase torque force in the switch. is that correct? >> yes. >> for some reason, the news which was not given a part number and instead shared a number with the initial defective switch. >> yes. >> it also did not meet gm's
minimal torque specifications either. this one was in the range of 10-15. it should have been 15 at a minimum. is that correct? >> i have not seen the test results. >> despite these facts, gm continued to manufacture cars with the same ignition switches for the model years 2008-2011. is that correct? >> yes. 2004-2014, no public notices were issued as a result of gm's knowledge of these facts and no recalls were issued for the over 2.5 million vehicles manufactured with these defective ignition switches. is that correct? >> yes. >> three recalls were made this year. two in february and one last friday. is that right? >> related to this ignition switch? , gmhe first question i have
is intending to replace all of the switches for those cars beginning on april 7? >> we will begin shipping new parts. >> are you going to put a completely redesigned switch or the old switches from 2006 and to those cars? >> a switch that meets -- >> a newly redesigned switch or the old switch from 2006? >> the old design that meets the performance and is required. >> i have more questions. you are saying that there is an ongoing investigation and you cannot comment. are you getting updates on a regular basis? from anybody in the company regarding these proceedings? >> yes, i am. >> i go to mr. upton for five minutes. being here this afternoon. i want to make sure that we ask similar questions of you and --
we want to learn about the documents that were submitted on a timely and appropriate basis. what they do with that information. the documents that we have looked at and produce show that gm received complaints about his cobalt ignition switches for about two years that ultimately resulted in the redesigned ignition switch in 2006. who would have known about the specific complaints? you're getting updates. what is supposed to happen? what should have happened when these reports came in? when you have a product issue
or safety issue or a field incident or any type of issue that comes in, you have a team of engineers that are the most knowledgeable that work on that. if they see there is an issue, the elevated to a cross functional team that looks at it and then it goes to a group for decision. know that the ignition switch was in fact redesigned because it did not meet the specs that were there. is that right? >> yes. >> i would guess that engineering 101 would normally require that when you assign a new parts or replace any part or replace a part with a new part, that newly redesigned part numberhave a different on it. is that right? >> that is correct. >> that did not happen. >> correct. >> who in gm made the decision to move forward with that redesigned switch without a new
part number? >> i do not know the name of the individual. >> will you find that out for us? >> i will. >> is it likely that that same person was the one that decided not to recall the defective ?ersion echo do you know when it was discovered? what year? we are in the timeline it was discovered that the new part number was not assigned? that after aware of we did the recall and the timeline was put together. last that was just in the month or so. when the gm realize that no new part number had been assigned? >> that is part of our investigation. i want to know that just as much as you because that is an unacceptable practice. it is not the way we do
business. you stated publicly that something went wrong with our process. how is the process supposed to work? how are you redesigning the process to ensure that it should work the way it needs to work? investigation -- i have some early findings. as we look across the company, there was information in one part of the company and another part of the company did not have access to that. they do not share information by course of process or did they -- we have announced a new position. the vice president of global vehicle safety. all of this will report to him and he will have additional staff and the ability to cross to cut across the
organization and find out what is happening in the different areas. that is a fixed we have already made. he is operating that way today. >> when gm received complaints about the ignition switches for , it ended upears resulting in the redesigned ignition switch in 2006. when was it that anyone linked up the ignition switch problems to look at the airbags not deploying? around the same time? >> that is something i very much want to understand and no. investigationn that spans over a decade. it is very important -- designing a vehicle is a very complex process -- that we get a detailed understanding of what happened. that is the only way we can fix processes and make sure it never happens again. informedas it that gm
-- did gm informed them that the ignition switch had been redesigned? >> i don't know that. >> i yield back. mr. waxmanize th for five minutes. inwe have heard about how 2002, jim approved the use of faulty ignition switches and cobalt's, ions and other cars. that is what cause many of the problems that led to the recall s from 2003-2007. new ignition switches were designed and approved by general motors. these were switches that were used in the model years 2008-2010. is that right? >> there is a couple of
statements he made a beginning that i don't know if our true. 2002, jim approved the use of faulty ignition switches -- gm approved the use of faulty ignition switches. >> 2003 with the earliest model. in 2002.sts were done the cars were 2003-2007. so we have a recall of those cars. waxman questioning the ceo of general motors on capitol hill. the faulty ignition switch and those gym cars is the subject of this hearing. a telling lawmakers this happened on my watch so i am responsible for resolving it. we don't know why the recall took so long but we will find out. nothing that gm says it will retain ken feinberg as a consultant. he led the compensation efforts
>> it is 56 past the hour and that means bloomberg television is on the markets. i'm alex still. a quick check on where markets are trading. we had the first day of the second quarter and stocks are rising. .&p hitting a record at different story when it comes to gold markets. gold hit a seven-week low. things in a wreck for the past two weeks as economic data in the u.s. continues to improve. i check in on oil. down for a second day. we're waiting for the latest inventory to come out for. aregulf coast inventories 97% of storage capacity. a lot of oil buildup happening on the u.s. gold coast. alling,il is fo
equipment is hitting a 52-week high. it actually has more room to run. he joins me now for today's secula sector report. that's part of the reason why they have some room here. they have taken some good points that i agree with -- the increase in production and oil shale with the gulf of mexico. he cites that, the absolute move towards renewables and natural gas. they come to the conclusion that means oil prices will drop. i don't see that happening at all. what i see is, there is a turnaround in europe. here in the u.s., away from oil. all demand will come
from china, india, the middle east and africa. oil needs to hang out at a certain price level to make shale economical. >> $100 oil has spurred the technologies in oil fracking of shale and deepwater production. dropu get prices that below $80, that production just stops. wherethe equipment area, are we going to see the benefit? you have oil drillers really killing it for a while but not doing so great. you have to look at the onshore drillers. the onshore drillers have been great. especially for 2013 at we had a ramp-up in all of these shale prices. seen -- the have ones that are specialized -- what's good about this etf is they are really small and waited. some of the smaller onshore
service companies that really specialize in this very specialized drilling have had tremendous years and will continue in 2014. the other side is the offshore, which is very much off cycle. we have seen disasters in some of the big -- they are making all of their money on onshore. they are ignoring offshore. they have had a turnover a lot of rigs because of the 2010 deep horizon disaster. -- that is made offshore tough. >> thank you so much for being here. we appreciate your take on oil. around thstreet smart is up nex. ♪ . .