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On the Point

The Cover-Up

Da Man suspects General Motors’ multi-million dollar recall settlement won’t be the last the industry hears of manufacturers hiding defects that could potentially harm customers.

January 19, 2016

We as Americans have always thought of ourselves as the good guys. That’s because our nation is founded on principles like truth, justice and the American way. So why is it that big companies and government officials seem to be blatantly violating this nation’s laws with little to no consequences?

We saw it when Wall Street came crashing down in 2008. And now we’re seeing an epidemic of criminality and cover-ups by automobile manufacturers. Is this behavior new? Is it some breakdown in decency that just recently began to happen, or has this been part of the accepted culture for a long time?

Of course, the latest in this long series of dubious activity resulted in General Motors (GM) agreeing to pay $900 million in what was labeled a “criminal settlement” over a cover-up of ignition switch defects. Those defects are linked to 124 deaths.

In the settlement, GM admitted it had hidden the defects from both consumers and the government. I am going to assume GM officials knew these switches were killing their customers. The question is, did they value money over the lives of the people who bought GM vehicles? It sure seems so.

What we’re talking about here is a known defect in the ignition switches that caused vehicles to stall at any speed, preventing airbags from deploying in an accident. When the ignition switches failed, they also shut down the power steering and stopped the power brakes from working. Records show that GM officials knew about it and covered it up for many years.

Picture your wife (or husband) and kids driving down the Interstate. Suddenly, the car is out of control, the brakes don’t work, and your loved ones can’t steer out of trouble. When the car inevitably crashes, the airbags don’t deploy. GM was aware this could happen and knew it would only cost a few dollars per vehicle to fix, yet it didn’t act.

 “The mistakes that led to the ignition switch recall should never have happened,” GM CEO Mary Barra said in a statement after the company reached its settlement with the U.S. Attorney’s Office last month.  “We have apologized and we do so again today. We have faced our issues with a clear determination to do the right thing, both for the short term and the long term. I believe that our response has been unprecedented in terms of candor, cooperation, transparency and compassion.”

Those words may sound good now, but they’re similar to what a convict would say to the parole board after being caught red-handed.

The recalls in 2014 have cost GM an estimated $4.2 billion already, and now the company must allocate another $575 million to settle the remaining 200 lawsuits related to the defects. Remember, GM already paid a $35 million fine in 2014 for stalling the investigation.

Personally, I am outraged that no one is going to be prosecuted over this. If a person did something that they were reasonably certain would cause people’s deaths, and then made elaborate efforts to erase the associated paper trail, that person would be prosecuted or even jailed for premeditated manslaughter. So what is different about this situation? GM showed 15 executives the door, but I wonder if they got to keep their benefits?

In a similar case last year, Toyota paid a $1.2 billion settlement for misleading consumers and regulators about “sticky” accelerator pedals and floor mats in its vehicles. But I don’t think this is the last we’ve heard of these kinds of settlements.

I believe the other shoe is going to drop hard when the government zeroes in on Takata Corp. and the monumental defects in its airbags, which were recently recalled. It wouldn’t surprise me if officials knew about the problems and continued to install the product, regardless.

When a manufacturer builds a technologically complex product, there are bound to be defects and glitches. The problem is not in the defects, but in the deception. Once a defect is uncovered, the manufacturer cannot be allowed to carry on as normal and then write a big-ass check when that defect goes unchecked and inevitably causes harm.

So next time you’re being grilled by some self-righteous factory representative because a customer gave your dealership a bad customer satisfaction survey score, just look that person in the eye and say, “Well at least we didn’t kill them.”

Jim Ziegler is the president of Ziegler SuperSystems Inc. Email him at [email protected].

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Author Bio

Jim Ziegler

President & CEO of Ziegler SuperSystems

Jim 'Da Man' Ziegler joined the magazine in 2011 to deliver his On-the-Point message about the car business to dealer principals and store managers. He'll offer strategy advice on everything from sales and F&I to marketing in the digital age. Catch him every month at www.fi-magazine.com.

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