GM revises way legal staff handles safety suits

Outside legal firm retained to review company's litigation practices

Millikin: “We had lawyers at GM who didn't do their jobs; didn't do what was expected of them.”

UPDATED: 7/16/14 5:53 pm ET

WASHINGTON -- General Motors has hired an outside legal firm to review the company's litigation practices and has revised the way it handles civil lawsuits so that cases involving serious injuries or deaths will be reviewed by the company’s general counsel and engineering staffs, GM’s top lawyer plans to tell a Senate panel on Thursday.

Michael Millikin, general counsel for GM, will tell the panel that he will review "any settlement or trial of a case involving a fatality or serious bodily injury ... with a focus on any open engineering issues.”

The changes were reported today by The Detroit News and Reuters. The News published transcripts of Millikin's remarks prepared for Thursday's hearing on GM's delayed recall of 2.6 million vehicles with faulty ignition switches.

GM lawyers, before February, could settle cases for up to $5 million without notifying the company's general counsel.

Millikin said he has revamped the company's legal staff “to foster sharing of information and the identification of emerging trends, including elevating a senior attorney to be the Chief Legal Advisor to Jeff Boyer, Vice President of Global Vehicle Safety, with a direct reporting line to me and a dotted reporting line to Mark Reuss, Executive Vice President of Global Product Development,” according to testimony obtained by the News.

Millikin said his staff made mistakes in handling an ignition-switch defect and delayed recall that spurred U.S. government investigations. Some lawyers failed the company, Millikin said in written testimony to be delivered to the Senate Commerce, Science and Transportation subcommittee.

Advance copies of remarks of five witnesses, including Millikin and GM CEO Mary Barra, were also obtained by Bloomberg News.

“We had lawyers at GM who didn’t do their jobs; didn’t do what was expected of them,” Millikin said in his statement. “Those lawyers are no longer with the company.”

GM has recalled almost 26 million cars in the U.S. so far this year, an all-time annual record that took shape in February when the company announced an ignition-switch defect that engineers had known about for years. This week’s hearing is GM’s fourth since April 1 and will be more comprehensive, featuring Kenneth Feinberg, who is administering a victim-compensation program, and Anton Valukas, who led GM’s internal investigation.

Rodney O’Neal, CEO of Delphi Automotive, is also appearing alongside Barra and Millikin.

In her testimony, Barra reiterates that the company’s employees won’t forget the lessons of the recall, and they’re working hard to address the underlying issues.

“I have been inundated with calls and e-mails from employees telling me that they are more motivated than ever to make GM the best possible company for customers,” Barra said.

At least 13 deaths in crashes have been blamed on a flawed ignition switch, which can be inadvertently shut off when jarred, cutting power to the engine and deactivating air bags. It was later revealed that deliberations about the flaw were occurring as far back as 2005, though no formal recall actions were taken until this year.

That delay has led to investigations by the Transportation Department, both chambers of Congress and federal prosecutors.

More documents, more questions

A New York Times report published Tuesday raises questions about how forthright GM was with federal investigators looking into the crashes.

The Times, citing information obtained through the Freedom of Information Act, reported that the automaker did not answer regulators' questions about the Saturn Ion crash that killed Gene Erickson in 2004. However, according to documents obtained by the Times, a GM engineer had concluded a month prior to investigators’ inquiries that the car likely lost power, disabling the airbags.

The report says that GM repeatedly avoided questions about crashes, even though the company was aware of sudden power loss in models involved in the crashes.

• In at least three cases, GM said it hadn’t assessed the cause.

• In another fatal crash, the company said that that attorney-client privilege may have prevented it from answering.

• In other cases, it wrote “GM opts not to respond.”

Carl Tobias, a University of Richmond law professor, told the Times, “It does sound like they didn’t give NHTSA everything they should have. That could make them vulnerable to the Justice Department’s investigation.” He also told the Times that “NHTSA was not being as rigorous about these inquiries that it should have been.”

McCaskill questions

In a related matter, the chairwoman of the Senate panel holding Thursday's hearing told The Detroit News on Tuesday she may broaden an examination beyond GM's safety problems to determine whether there are systemic recall issues at other automakers.

In an interview Tuesday with the News, Sen. Claire McCaskill, D-Mo., also said she planned to hold another hearing on the role of the National Highway Traffic Safety Administration and its handling of consumer complaints over several years into faulty ignition switches.

“We have to have another go-round with NHTSA,” McCaskill told the News. “Are [NHTSA officials] getting all the technical information? Do they have the proficiency and the resources to absorb it and understand it?”

McCaskill, a former county prosecutor, has been one of GM's toughest critics during the congressional probes.

“It may be we need to look at the recall procedures in other manufacturers, and if there are these kinds of flaws in this process [at GM], then it might be helpful to at least make an inquiry into the other major manufacturers about their processes,” McCaskill told the News. “We’ll figure out next steps about other manufacturers and whether we need to be taking a look at them.”
McCaskill told the paper she plans to focus on problems at GM’s legal department during her questioning on Thursday, saying “legions of lawyers at GM and the engineers that supported them were clueless.”
McCaskill criticized “the dysfunction that allowed this to happen, and a lot of it sits at the feet of the legal department and so I’ve got a lot questions about that,” according to the News.
She also pointed at the failure of GM lawyers to “connect the dots,” and that GM sent dealers safety bulletins “and the legal department didn’t even know about it,” the News said.
McCaskill also questioned why the role of some senior GM lawyers were “not really in the Valukas report,” the paper reported.

Barra announced the ousting of 15 employees last month, without naming names, after the company released the results of an internal investigation into why it took GM more than a decade to identify problems with a defective ignition switch.

The probe, led by Valukas, blamed a lack of urgency in the engineering and legal departments yet didn’t reveal any conspiracy to cover up facts. The investigation confirmed that neither Barra nor Millikin knew about the faulty switches.

The Valukas investigation found that Millikin hadn’t been informed of the lengthy review of the Cobalt switch until the recall decision was made in 2014 and that he was also unaware of litigation involving fatal accidents.

Switch feel

Some of the ousted executives included Lawrence Buonomo, the administrative head of in-house litigation, and Bill Kemp, a senior lawyer who was responsible for safety issues within GM’s legal department, people who asked not to be identified because the matter is private have said.

O’Neal emphasized that Delphi supplied the switch, not the key or lock cylinder. The parts company, based in suburban Detroit, didn’t supply the steering column or determine where the lock- cylinder would be located, he said.

The “feel” of the switch, the amount of torque required to turn it, was “very important to GM,” O’Neal said.

“GM knowingly approved a final design that included less torque than the original target,” O’Neal said. “In our view, that approval established the final specification.”

Delphi began working on a redesigned switch in January 2006 at GM’s request to address warranty concerns, O’Neal said.

Bloomberg and Reuters contributed to this report.

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