THE GM RECALL

Bailout architects deny knowledge of GM ignition woes

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WASHINGTON -- Leaders of the White House task force that orchestrated the government bailout of General Motors and Chrysler in 2009 said today that they knew nothing about GM’s defective ignition switch at the time from talking to the top executives involved in crafting the company’s turnaround plan.

“We can only know what the management knows and what the management chooses to tell us,” Steven Rattner, the lead adviser on the task force, said in an interview on CNBC today. “As far as I know, none of the management people that we were dealing with knew about it, so of course we didn’t know about it -- nor could we have.”

The defective switch, used in the 2003-07 model years in small cars such as the Chevrolet Cobalt and Saturn Ion, has prompted GM to recall more than 13.8 million vehicles in the United States this year and cast doubt on the company’s handling of safety problems.

The fact that the glitch predates GM’s 2009 bankruptcy has exposed the company to a new round of lawsuits. The White House decided as part of its bailout that GM should not bear liability for accidents or defects that predate the bankruptcy, but owners of the defective cars and families of crash victims have gone back to court.

They are preparing briefs to argue that GM broke the law by not treating owners of defective cars as creditors. The next hearing before U.S. Bankruptcy Judge Robert Gerber, who oversaw the bankruptcy, is scheduled for July 2.

Rattner is now chairman of Willett Advisors, the investment arm for former New York Mayor Michael Bloomberg’s personal and philanthropic assets. He acknowledged the auto task force would have done more due diligence if it had had more time, but “when people choose to hide things, even the most diligent people can’t find them.”

Other task force members echoed the comments during an event today at the headquarters of the Brookings Institution, a Washington think tank.

“We didn’t know anything about this,” said Harry Wilson, a task force member who now leads turnaround firm MAEVA Group. He said information about the defective switch now appears to have been “stuck” in the middle tiers of GM’s engineering department -- a set of employees with whom the bailout task force never spoke when planning the bailouts.

“Given how hard it was to get data out of the company at the time,” Wilson said, “even if we would have asked a point-blank question [about the ignition switch], I doubt that we would have gotten a straight answer.”

He called the delayed recall “inexcusable,” saying that GM “still has a long way to go in its cultural problems.”

You can reach Gabe Nelson at gnelson@crain.com.

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