Bailout task force unaware of GM faulty switches, report says
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NEW YORK -- The task force President Barack Obama set up to manage General Motors' bailout and bankruptcy in 2009 wasn’t aware of the faulty ignition switches linked to 13 deaths in small cars, people familiar with the matter told Bloomberg.
Had it come up, the task force would have considered setting aside more money for the GM estate left behind after the automaker filed for bankruptcy in June 2009, said the people, who asked not to be named because their meetings were confidential. At the time, GM’s board and the task force based their projections for product-liability claims on a report that the GM estate would face about $414 million for pre-bankruptcy crashes, according to court papers.
While members of the task force met frequently in early 2009 with GM executives to discuss product-liability claims and determine how they should be handled in bankruptcy, the ignition switches or safety problems with the Chevrolet Cobalt weren’t brought up, said the people.
CEO Mary Barra is confronting the company’s biggest crisis since the bankruptcy as lawmakers seek to find out who knew what and when, and what actions GM should have taken to probe and repair a flaw that has prompted the recall of 2.59 million small cars. The recall includes the 2005-2007 Cobalt, 2007 Pontiac G5 and 2003-2007 Saturn Ion.
At the time of the bankruptcy, as GM sought to transfer assets to a new company, while leaving liabilities behind, the task force had “significant leverage” and made the final decisions, according to a 2013 report by a special inspector general for the Troubled Asset Relief Program.
Steven Rattner, who headed the task force for the Obama administration, declined to comment on the matter when reached by phone Wednesday. A GM spokesman didn’t have an immediate comment.
At a Senate panel hearing Wednesday, Barra was questioned about what the task force knew regarding the faulty ignition switches.
“I would like to know whether GM actually notified the administration’s auto industry task force, which helped administer the taxpayer bailout about the ignition switch,” said U.S. Sen. Kelly Ayotte, R-N.H.
Her question came after asking Barra if any lawsuits had been filed at that point in 2009.
“I can’t answer that question,” Barra said. “I don’t know.”
The task force had looked broadly at the product-liability claims that were already known and didn’t drill into future claims or specific vehicle issues, said two of the people involved in the talks between GM and the administration. More time was spent in those meetings looking at issues such as health care and pension obligations, what brands should be kept or eliminated, and whether to sell operations in Europe, said the people.
Of the $82 billion in assets and $172 billion in liabilities that the bankruptcy estate reported, global product liabilities were an estimated $934 million, according to court papers.
Barra, who’s had less than three months in the top job after 34 years at the company, this week more than doubled recall-related charges to $750 million after saying faulty power steering in 1.5 million other vehicles needs to be fixed.
Barra and other top executives are trying to remake the image of the automaker after last year shedding the last traces of U.S. government ownership linked to its bankruptcy.
TARP, initially aimed at financial firms, was broadened to housing and autos as the 2008 crisis unfolded. The federal government spent $80 billion to bail out the auto industry, including more than $63 billion on GM and Chrysler.Contact Automotive News