GM News: GM's Top Lawyer, Delphi Exec Get Grilled By Senate

[William Maley]

Another day, another senate hearing into the General Motors ignition switch recall. Today, two new people were grilled by the committee about their knowledge in this mess.

First up was Michael Millikin, GM's General Counsel. Millikin testified that he didn't know about the issue till February of this year. He also testified that lawyers working for GM during April 2013 had information pertaining to this from a case they were working on. However, they failed to notify engineers about the problem.

"That was tragic. If they had brought it to my attention at that time, I certainly would have made sure that they had done something," Millikin said.

Lower-level lawyers were among those fifteen people who let go a couple months ago.

However, many of the senators were wondering why Millikin was still employed with the company.

"I do not understand how the General Counsel for a litigation department that had this massive failure of responsibility, how he would be allowed to continue in that important leadership role in this company," said Senator Claire McCaskill, chairwoman of the Senate Commerce subcommittee.

The senators said Millikin should be held responsible for the actions of the lower-level lawyers.

“My view is the team has to change,” said Senator Richard Blumenthal.

Millikin testified that the company has brought in an outside law firm to review the litigation department.

Also testifying today was Delphi CEO Rodney O'Neal. Delphi was the company who manufactured the switches and was being called in to explain their role in the recall. O'Neal testified that the company followed the specifications given by GM when making the switch. That included the low resistance turn because GM wanted it to turn smoothly.

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

GM CEO Mary Barra who was at the hearing said that it was GM's fault for the design of the part, not Delphi.

Source: Reuters, The Detroit News, (2)

William Maley is a staff writer for Cheers & Gears. He can be reached at [email protected] or you can follow him on twitter at @realmudmonster.

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[David]

About time Delphi was grilled on this and NO I do not buy it was just GM's fault. Delphi knew this was not good and should have built the part to the original spec not a lower spec. Also my gut tells me Delphi probably came back to GM and said you could build it at this lower spec and it would save X amount per part equaling millions that can go to executive bonuses for saving money.

[William Maley]

About time Delphi was grilled on this and NO I do not buy it was just GM's fault. Delphi knew this was not good and should have built the part to the original spec not a lower spec. Also my gut tells me Delphi probably came back to GM and said you could build it at this lower spec and it would save X amount per part equaling millions that can go to executive bonuses for saving money.

 

I would disagree with that latter part. Especially when you consider this story from The Detroit News in April - Bad blood cited between GM, ignition switch supplier Delphi

 

A couple of key quotes: 

 

 

At the same time, GM was looking for ways to cut costs to cover an ever-widening cost gap with its foreign competitors. Squeezing suppliers for pricing concessions was a lot easier than addressing its own inefficiencies and uncompetitive business model.

 

“They had Delphi over a barrel and they knew it. GM just went after them and put on all sorts of pressure to reduce costs,” said John Henke, president of Planning Perspectives Inc., which tracks relations between automakers and their suppliers. “The two companies hated each other. If you were a Delphi engineer and you worked with GM, you didn’t want to get out of bed in the morning.”

 

Henke and other analysts believe the caustic relationship between General Motors and Delphi led to substandard parts being shipped by the supplier. And they say the dysfunctional state of Detroit’s automobile industry in the years leading up to its near-death experience in 2008 and 2009 helps explain why GM would have accepted them and installed them on its vehicles. 

 

 

Henke has been asking suppliers to rate their relations with automakers since 1992. From 2002 to 2007, GM was consistently rated the worst company to do business with in his annual survey.

 

“Relations with GM were definitely the most contentious,” he said. “They were so cost-oriented; price took precedence over quality. Suppliers were threatened with loss of business if they didn’t reduce the cost of their components. They had to be incredibly creative to meet GM targets.”

 

 

Competing with other suppliers for business was often a brutal process at GM, according to Henke, who says the automaker routinely summoned parts manufacturers to its headquarters, put the representatives of each company in a different room and then asked them to name their lowest price for a given component. The GM purchasing reps would then take the lowest figure and challenge the other companies to beat it. And they would keep doing that until none of the suppliers was willing to go any lower.

 

That sometimes resulted in suppliers bidding so low that they had to cut corners to meet the promised price. And that, says Henke, is one reason why GM ended up receiving parts that did not meet its own specifications, as the company now says happened with the ignition switches from Delphi. And he said GM was willing to accept those parts because the alternative — delaying production — was too costly.

 

Should Delphi get some of the blame? Sure. But all roads lead back to GM.

[David]

Very interesting to read this. This information is what the news needs to be sharing about the problems in the culture of the company and how bean counters and lawyers tend to affect and play games with peoples life all over a few cents.

 

Did they ever look at their own stupidty for over paying assembly line labor, over paying executives and the wasteful bonuses plus not having cleaned up their own product lines. It was hard on this country but the near death was a good thing I think in forcing the company to clean up its act. Hopefully this will force them to continue to do the right thing and get better.