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From Products Liability Law Daily, July 18, 2014

Senate puts GM and its attorneys under microscope during accountability hearings

By Pamela C. Maloney, J.D.

Members of the Senate Committee on Commerce, Science, and Transportation’s Subcommittee on Consumer Protection, Product Safety, and Insurance called into question General Motor’s accountability and response to consumer safety since the release of the Valukas report on May 29, and the June 30 announcement of the GM Ignition Compensation Claims Resolution Facility program administered by Kenneth R. Feinberg. Among the witnesses testifying during the July 17 hearing was Michael P. Millikan, the head of GM’s legal department, and Rodney O’Neal, CEO and President of Delphi Automotive, the company responsible for designing and manufacturing the defective ignition switch. Other witnesses included Mary Barra, CEO of GM, Kenneth R. Feinberg, and Anton Valukas

The hearing focused on the role GM’s legal department played in the mismanagement of the quality issues surrounding the defective ignition switches which have led to at least 13 deaths. Sen. Claire McCaskill (D-Mo.), Chairman of the Subcommittee, expressed great respect for the workers at GM, employees who McCaskill described as victims of outrageously incompetent management. The Chairman also commended GM CEO Mary Barra, who the Senator said had stepped up and with courage and conviction confronted the corporate culture issue head on. However, after reviewing the Valukas report, which she found thorough and damming, she condemned GM’s management culture as exhibiting “incompetence and deceit among engineers in positions of responsibility,” and added that “it is clear that the culture of lawyering-up and whack-a-mole to minimize liability killed innocent customers of GM.” McCaskill demanded to know how GM’s Executive Vice President and General Counsel Michael P. Millikin managed to continue in his important leadership role after the massive failure of his legal department to recognize troubling litigation patterns and to meet obligations to employees, shareholders, and customers in the delayed recall. She went on to characterize the failure of the legal department “stunning.”

Millikin’s statement. In prepared remarks, Millikin stated that he first learned about the ignition switch defect during the first week of February, 2014, taking action immediately. He added that there were lawyers at GM who did not do their jobs and that those lawyers were no longer with the company. He then outlined steps he has taken in response to the recommendations set forth in the Valukas report in order to improve the company’s legal staff and to enable it to serve a greater role in meeting GM’s commitment to safety. These actions include: (1) supplementing existing legal resources with attorneys from two outside law firms to assure the proper level of engagement, and (2) appointing a well-respected outside law firm to conduct a zero-based review of GM’s litigation practices. Millikin also told the Subcommittee that he has directed the GM legal staff that before any case involving a fatality or serious bodily injury, the case must be brought to him for review with a focus on any open engineering before settlement or trial.

Barra’s response. Barra also presented prepared remarks and when challenged by McCaskill on why Millikin still had a job, Barra defended her general counsel telling the Chairman, “I need the right team ... and [Millikin] is the person I need on this team. Citing Millikin’s high integrity and tremendous global experience, Barra blamed senior lawyers who were no longer with the company for failing to bring these issues, as well as the warnings that the company was facing potential punitive damages, to Millikin’s attention.

GM’s response to NHTSA reports. Several other members of the subcommittee, including Senators Kelly Ayotte (R-N.H.) and Barbara Boxer (D-Calif.), condemned GM and Millikin for what they called a “cover-up” in failing to respond to NHTSA’s so-called “death reports” regarding deaths associated with airbag non-deployment and ignition switch defects. These two Senators along with the rest of the subcommittee members and the Chair vowed to fully investigate NHTSA’s role in this matter during upcoming agency budget hearings.

Compensation plan. After presenting his prepared remarks, Kenneth Feinberg also was subject to rigorous cross-examination on the compensation program, which was announced on June 30 (for full details, see Products Liability Law Daily June 30, 2014 analysis) and is set to begin accepting claims on August 1. Feinberg was questioned about the limitations on participant eligibility for the compensation program and the effect of GM’s bankruptcy on recovery. Feinberg stressed that the plan is limited to death and physical injury and does not cover economic loss or diminution of value claims. All occupants in the affected GM vehicle are eligible to file claims under the program as are pedestrians and occupants of other vehicles involved in these accidents. He also emphasized the protocols set forth in the program guarantee payments for those losses stemming from cars manufactured by GM prior to its bankruptcy, stressing that GM has agreed to cover losses that would otherwise be barred by the bankruptcy. Finally, Feinberg reminded the Subcommittee that the program was designed and would be administered independently from GM and that GM has no right to challenge or appeal any of the compensation determination made pursuant to the program.

Ignition switch maker’s role. The Subcommittee heard for the first time from Rodney O’Neal, CEO and President of Delphi Automotive, the company responsible for manufacturing the defective ignition switches. In his prepared remarks, O’Neal recounted his company’s cooperation with GM in all aspects of the ignition switch recall and investigation. O’Neal also summarized Delphi’s review of its product safety policies and procedures, informing the Subcommittee that after thorough review of those procedures, the company concluded that while the procedures are robust, the company will work continuously to improve them. Finally, O’Neal stressed that the ignition switch component supplied by his company met the design requirements approved by GM and that his company bore no responsibility for the defect that ensued when the switch became part of the ignition switch system. When pressed further on this issue by Dean Heller (R-Nev.), Ranking Member of the Subcommittee, Mary Barra stepped up and took full responsibility for any failure in the Delphi switch.

Companies: General Motors; Delphi Automotive

MainStory: TopStory IndustryNewsStory MotorVehiclesNews

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