UPDATED: 7/17/14 4:17 pm ET
General Motors has not done enough to overhaul its legal department in the wake of its recall crisis, several U.S. senators said today as they pressed GM CEO Mary Barra to fire the automaker’s top lawyer.
But Barra said she intended to keep Michael Millikin, GM’s general counsel since 2009, defending him as “a man of incredibly high integrity” whose subordinates failed him. At least five of the lawyers on Millikin’s staff are among the 15 employees GM fired in June after an internal probe into why the automaker delayed the recall of 2.6 million vehicles.
Millikin, 65, who testified alongside Barra, disclosed several new changes he has enacted, including hiring an outside law firm to review GM’s litigation practices and requiring that any lawsuits or trials involving deaths or serious injuries be brought to his attention for review.
Sens. Claire McCaskill and Richard Blumenthal, who have been two of GM’s biggest congressional critics since the recalls were first disclosed in February, said GM needed to do more than that.
“I don’t get how you and Lucy Clark Dougherty still have your jobs. Can you explain that to me?” Sen. McCaskill, D-Mo., told Millikin. Dougherty, GM’s general counsel for North America, recently was assigned to work with GM’s new safety chief, Jeff Boyer, to help identify and handle future safety defects.
Without waiting for an answer, McCaskill turned to Barra: “This is either gross negligence or gross incompetence on the part of a lawyer -- that he can say, ‘I didn’t know.’”
McCaskill said GM customers died because the company had “a culture of lawyering up and Whac-a-Mole,” including the years under Millikin.
“He’s the person I need on this team,” Barra said. “He had a system in place. Unfortunately, in this instant it wasn’t brought to his attention, frankly, by people who brought many other issues forward.”
Millikin, responding to questions from Sen. Blumenthal, D-Conn., said GM would not waive its pre-bankruptcy liability shield, would not release documents that were part of GM’s internal probe of the recalls and would not move to unseal confidential settlements related to deaths and injuries linked to the recalls.
Blumenthal responded that unless Millikin came back with different answers, “this company is not well served by your continuing.”
McCaskill cited four occasions from 2010 through 2013 when, an internal probe by former federal prosecutor Anton Valukas revealed, members of Millikin’s staff discussed the possibility that a court could require the automaker to pay punitive damages.
But Millikin said he wasn’t aware of the problem until after a recall had been approved this year and would have taken action sooner if he had known about it.
The hearing was conducted by the Senate Committee on Commerce, Science & Transportation’s consumer protection subcommittee.
It was the first time GM’s top lawyer has spoken publicly about the company’s recall of 2.6 million vehicles for faulty ignition switches.
Legal under fire
Millikin and GM’s legal department came under repeated fire during more than three hours of questioning.
Millikin faced particularly pointed questions over how his department settled numerous legal claims linked to the switches beginning in 2006 and how it responded to federal regulators’ requests for more information about certain crashes. Some of the actions occurred before he became general counsel, but he offered few answers about any of them.
“There was a clear understanding in terms of my expectations of the kinds of issues to bring to my attention,” Millikin told the panel. “For some reason that did not happen here and that’s very troubling to me.”
The National Highway Traffic Safety Administration sent what are known as “death inquiries” to GM on some of the fatal crashes now linked to the recalls.
GM either opted not to respond to questions about what caused the crashes or said it didn’t know how they happened, even after its engineers had studied them and reached some conclusions, according to documents obtained by The New York Times.
Barra said the people who gave those responses to NHTSA are among those dismissed, without identifying them.
Millikin said GM provided additional compensation packages to some of the 15 employees it dismissed for their role in the company’s handling of the faulty switches. Millikin did not identify who received exit packages or what they received. None of the employees who were let go is challenging his or her termination, he said.
Besides lawyers, GM fired Ray DeGiorgio, the engineer who approved the switch in 2002 even though it failed to meet GM’s own torque specification, then authorized a redesign in 2006 without changing the part number and apparently without notifying anyone else at GM. Keeping the same part number delayed detection of the defect for years, the Valukas report concluded.
DeGiorgio has since claimed that he doesn’t remember making the 2006 change. McCaskill compared DeGiorgio during today’s hearing to Sgt. Schultz from the 1960s’ TV sitcom “Hogan’s Heroes.” The character was an inept German soldier known for the catchphrase “I hear nothing, I see nothing, I know nothing.”
Delphi Automotive CEO Rodney O'Neal told the Senate panel that GM was responsible for approving the faulty ignition switch that has been linked to at least 13 deaths.
“GM knowingly approved a final design that included less torque than the original target,” O’Neal said in prepared written testimony he presented to members of the subcommittee. Later he added: “Our product met the requirements of the customer.”
It's the first time an executive at Delphi, which was formerly owned by GM, has publicly commented on the switches and related recall crisis that has rocked GM for months.
Barra agreed that Delphi shared no responsibility for the problem because it was GM’s duty to ensure the part worked in the vehicle correctly.
“We’re the company that’s responsible to integrate the parts in the vehicle, so it’s our responsibility,” Barra said.
So far, GM has attributed 13 deaths and 54 crashes to the specific defect, in which the ignition switch can slip from the “run” position to the “accessory” position, causing the engine to stall, airbags not to deploy, and a loss of power brakes and power steering.
O’Neal said Delphi has four manufacturing lines operating to make replacement ignition switches under the GM recall. He said Delphi has shipped more than one million new switches and is on track to deliver more than two million by the end of August.
The Senate panel also heard from Kenneth Feinberg, the lawyer who is administering a compensation plan for crash victims or their families on behalf of GM.
Feinberg said people who are offered compensation will have 90 days to decide whether to accept a payout. They won’t be able to wait longer than that to see whether they can get more money through a lawsuit.
He said claims would be processed in as little as 90 days after being submitted.
“The whole key to this program,” he said, “is getting money out the door as fast as possible to eligible claimants."
Feinberg, whom GM has authorized to determine victim payouts without its oversight, plans to accept claims from Aug. 1 through Dec. 31.
Several senators told Feinberg that the program should be expanded to include other vehicles that GM has recalled for ignition flaws. Feinberg said the list of eligible vehicles -- 2.6 million Chevrolet Cobalts, Saturn Ions and other small cars with the same ignition switch -- is one of the few parts of the program that GM decided.
Asked about the difficulty some victims and their families could have finding documentation related to crashes that happened as much as a decade ago, Feinberg said he would help them locate the evidence needed. He noted that making a case through his program would be far easier and faster than trying to prove GM’s culpability in court.
In a statement before the hearing, longtime consumer safety advocate Ralph Nader called on GM to create an independent ombudsman to ensure that potential safety issues are reported quickly and that employees could do so without fear of reprisal from supervisors.
Such an independent watchdog would receive reports of safety concerns from engineers and other GM employees, report directly to GM’s CEO and operate outside GM’s chain of command, Nader said in a statement.
He called an ombudsman “the simplest solution to avert the culture of avoidance or coverup inside GM regarding their discovery of product defects.”
Nader sat with the main audience at today’s hearing with a copy of his seminal book skewering GM over car safety, Unsafe at Any Speed, resting on his lap.
GM faces federal and state criminal investigations into the delayed recalls. Blumenthal said he believes an ongoing probe by the U.S. Justice Department could find evidence of criminal liability within GM’s legal department.
After the hearing, Barra told reporters she has not met with federal prosecutors.
Congress and the Department of Transportation’s inspector general are also examining NHTSA’s handling of the recalls to determine how the agency could have better tracked and identified the defective switches.
McCaskill confirmed today that the subcommittee plans to hold another hearing that will focus on NHTSA.
Sen. Ed Markey, D-Mass., said NHTSA’s failure to demand a recall sooner is a concern as well.
He compared NHTSA’s inaction to two company practices identified in the Valukas report: The “GM nod,” when employees agreed to a plan without any intention of following through, and the “GM salute,” when employees gestured that problems were someone else’s responsibility to address.
“What we have at NHTSA is the ‘NHTSA shrug,’” Markey said. “NHTSA didn’t think reports of cars stalling posed a safety problem.”
Ryan Beene contributed to this report.