Searing report gives Barra a mandate to reshape GM

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DETROIT -- General Motors employees who showed up at a town hall meeting last week expecting to hear CEO Mary Barra talk about moving on from the company's embarrassing safety crisis were thrown a curveball.

Instead, they heard their new CEO lay down a manifesto for her stewardship of GM and an impassioned vow to sear the "painful" experience "permanently in our collective memories."

She somberly ticked off findings from an internal investigation that revealed a toxic mix of misconduct, incompetence and inaction. And she disclosed plans to cut loose 15 employees, including a few highly regarded attorneys and officials from other historic GM power bases.

"This is not just another business crisis for GM," Barra, 52, told the nearly 1,000 employees in the audience and tens of thousands more tuning in globally for a 15-minute speech that was tinged with anger and resolve.

"We aren't simply going to fix this and move on," she said. "We are going to fix the failures in our system -- that I promise. ... But I never want to put this behind us."

Simply put: Following a Chapter 11 reorganization that wiped out GM's debt, but not its organizational dysfunction, Barra doesn't want to let the latest crisis go to waste.

Mulally's task


It has been five years since a government-appointed task force swooped in to reprogram GM for success after a 39-day bankruptcy. After that, it was outsider CEOs -- first Ed Whitacre, then Dan Akerson -- who took on the burden of knocking down silos and whittling away GM's notorious complexity and bureaucracy.

But the severe indictment of GM's culture woven through the 325-page report released last week by attorney Anton Valukas shows just how much farther Barra, a 33-year GM veteran, will be expected to carry the mantle.

"Mary Barra still has the job ahead of her that Alan Mulally at Ford just finished: eradicating a deeply entrenched corporate culture," says John Wolkonowicz, an independent analyst and automotive historian.

Even in the past three years, a period in which GM executives often spoke as if the "new GM" had been cleansed of its bureaucratic ways, the report cites a maddening pattern of foot-dragging and institutional indifference.

"The failures from 2011 to 2013 demonstrate a lack of urgency" to get to the bottom of the ignition switch problem, "a lack of accountability or leadership in driving the investigations to a conclusion" and "a continued reluctance to elevate" potential problems to senior leadership, reads one of many blunt passages from the Valukas report.

For example, even after GM's recall committee finally met in December 2013 to discuss formally whether to issue a recall -- 21/2 years into GM's investigation and roughly 12 years after a GM engineer first discovered the flimsy switch -- the panel put off the decision for six more weeks, the report says. One reason: The presentation handed to the committee didn't mention any of the fatalities linked to the defect.

Another example: High-ranking attorneys who had known about the ignition switch problem for years settled a related lawsuit for $5 million in September 2013 without notifying their boss, general counsel Michael Millikin, the report says.

Learn from others


Barra used the town hall speech, webcast to GM's 210,000 employees and beamed to the planet via a broadcast feed, to make clear her plan to use the crisis as a catalyst for cultural change. The recommendations from the Valukas report and a far-reaching consent decree reached last month with federal regulators give her both a blueprint and a mandate to effect that change.

"We didn't do our job. We failed these customers. We must face up to it and learn from it," Barra said. "We pledge that we will use the findings and recommendations from this report as a template for strengthening our company."

Barra said she will embrace dozens of recommendations from Valukas' report. While all safety-related, some could help set examples for cultural change and silo busting.

Some suggestions are small, such as plastering posters advertising GM's new "Speak Up for Safety" program in cafeterias and conference rooms. The report also suggests that GM analyze how other automakers conduct their safety recalls, which cuts against GM's historically insular grain.

Others are more complex, including six remedies for "enhancing supplier relationships," long a weak spot for GM amid continued accusations by suppliers of an undercurrent of arrogance among GM purchasing managers. It stresses that GM needs better visibility into the quality of its supply chain, a task complicated by GM's bottom ranking among the six largest automakers in a recent survey of suppliers.

The Valukas report also suggests tighter integration between GM's legal staff and engineering, especially the dozen or so litigators who handle product-liability cases. The report says the legal department must play a "critical and unique role" in identifying and resolving safety problems, in part through more regular meetings to hash over accident trends and lawsuits.

The report concludes: "The lessons learned from this failure can lead to a re-examination of the company's policies, procedures, and culture."

'Not afraid of the truth'


That will be easier said than done, says one former GM attorney who didn't want to be identified by name. Historically there has been "a ton of interaction" between legal and engineering, this lawyer says, adding that top GM safety attorney Bill Kemp, who sources said was let go last week as a result of the investigation, spent nearly all of his time at GM's engineering center in suburban Detroit.

Legal and engineering "were talking to each other all the time," the lawyer says. "It's just that they were making some bad decisions."

The force with which Barra delivered her speech suggested that she knows it will be a tough road.

She took over in January amid questions about how much influence she can exert in an executive structure that includes a nonexecutive chairman and a hands-on president with broad oversight. Her remarks at the town hall struck a take-charge tone, with words such as these: "As I lead GM through this crisis ..." and "I'm not afraid of the truth."

Barra also made clear at a news conference after her speech that it was her call to oust 15 employees and discipline five others. Those shown the door included two highly regarded GM attorneys, underscoring the magnitude of the personnel fallout.

Skeptics will likely question whether a GM lifer such as Barra is the right agent for a period of cultural change. But at her town hall meeting, she connected with her audience in a way no outsider CEO could: through shared anguish with her employees, many of whom she had worked alongside of on her unlikely climb through the ranks.

"I know many of you are saying to yourselves that this problem isn't a fair reflection of the company," she said. "I know it's not. We are better than this.

"But we own this problem," she said. "And we have to have the courage to deal with it in the right way."

You can reach Mike Colias at mcolias@crain.com.

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