General Motors, NHTSA under scrutiny over recall
The Detroit automaker recalled 1.6 million vehicles last month -- several years after a deadly problem was discovered.
General Motors (GM) and the National Highway and Traffic Safety Administration are under scrutiny for taking years to address an ignition switch problem that is tied to 13 deaths.
Last month, the Detroit automaker recalled 1.6 million vehicles. NHTSA has launched an investigation into how long it took GM to admit there was an issue and take action.
GM learned about at least one incident of ignition switch problems in the 2005 Chevrolet Cobalt around the time of the vehicle's launch, according to a chronology report submitted to NHTSA.
The report says GM employees were able to replicate the ignition switch issue, where the key moved out of the "run" position when the driver accidentally contacted the key or steering column. An engineering inquiry was opened to investigate the issue. Although there were potential solutions, the inquiry was closed without action "after consideration of the lead time required, cost, and effectiveness of each of these solutions," according to the report.
The Wall Street Journal says that GM's chronology of events surrounding the issue shows the company is "burdened by bureaucratic complexity" to the point that it wasn't able to decide how to address a fatal defect in its vehicles.
"Texas billionaire H. Ross Perot once said that where he came from, if you see a snake, you kill it. But at General Motors, if you see a snake, you hire a consultant on snakes, then you form a committee on snakes, and then you discuss it for a couple of years," the WSJ article says.
GM announced Monday it hired Jenner & Block Chairman Anton Valukas to help lead an internal investigation into how the company handled the ignition switch failures, Bloomberg reports.
NHTSA's actions are also being examined. Despite receiving more than 260 complaints over 11 years, federal safety regulators never investigated the problem, the New York Times reports.
A Times analysis of consumer complaints submitted to NHTSA found that complaints about potentially dangerous shutdowns due to faulty ignition switches were received roughly twice a month since February 2003, but the agency repeatedly responded that there wasn't enough evidence to launch an investigation into the issue.
The New York Times says the complaints involved six of the models currently being recalled by GM.
Senior Kelley Blue Book analyst Jack Nerad told Benzinga the fact that the complaints on the ignition issue occurred across several different brands might have masked the scope of the problem.
"NHTSA relies, in part, on reporting by vehicle manufacturers and typically engages in very frank exchanges with manufacturers in determining if there is a safety issue, how big the issue is and what can be done to rectify it," Nerad said in an email. "To do its job effectively NHTSA needs to communicate with auto manufacturers. Both NHTSA and the individual auto manufacturers have the same goal – providing safe transportation to the buying public. At times the two sides do differ on what is required to obtain that result."
Watchdogs and revolving doors
The issue could also be how GM and NHTSA work together. Automotive News suggests that the federal agency is getting too cozy with the automaker, referring to NHTSA as the "watchdog that didn't bark." The article cites a Sherlock Holmes story where the detective observes that the watchdog didn't bark on the night of a murder, indicating the murderer must have been someone friendly with the dog.
Automotive safety expert Byron Bloch told Benzinga an ongoing problem for NHTSA is its revolving door between the government and the automotive industry.
"I think it's important to realize that NHTSA is frequently politicized to the point that decision-makers inside have come from the auto industry directly," said Bloch.
When reports of ignition switch issues began trickling in around 2005, Jacqueline Glassman was the acting administrator of NHTSA. Glassman had previously worked as a senior counsel for Chrysler. Jeffrey Rosen was the general counsel for the U.S. Department of Transportation. Before that, he worked for Kirkland & Ellis, who has represents GM.
"If you want to put it in this framework, the top two decision makers were from Chrysler and GM, respectively," said Bloch. "Might their decisions be gently or more overtly influenced because of these affiliations?"
More from Benzinga
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
After enjoying a smooth rise in stock prices since May, investors are about to be hit with another bout of volatility.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.