Exclusive: GM board warned of serious problems by quality manager in 2002

WASHINGTON/DETROIT Fri Jun 20, 2014 9:03pm EDT

The U.S. flag flies at the Burt GM auto dealer in Denver June 1, 2009.  RTEUTERS/Rick Wilking

The U.S. flag flies at the Burt GM auto dealer in Denver June 1, 2009. RTEUTERS/Rick Wilking

WASHINGTON/DETROIT (Reuters) - A former head of General Motors corporate quality audit warned the company’s board in a letter in 2002 that it needed to “stop the continued shipment of unsafe vehicles” and “recall suspect vehicles that were already in customers’ hands.”

The letter from William McAleer shows that GM's directors and top management were told about serious safety defects in vehicles that were coming off the company’s production lines more than 11 years before GM recalled millions of vehicles for faulty ignition switches linked to at least 13 deaths. The contents have not been previously published.

GM spokesman Jim Cain said he was unable to address the details of the events 12 years ago, but that the company would take such concerns seriously today.

"We are conducting what we believe is the most exhaustive and comprehensive safety review in the history of the company, and that includes looking at vehicles that were built in the late 1990s. And if we find anything that is a safety issue, we will act," he said.

McAleer, former head of a group responsible for quality checks on cars shipped in North America, said his unit regularly found serious problems in new vehicles and that when he raised his concerns he was told his team should stay out of safety issues.

He told the board it should stop shipments of unsafe cars, launch recalls, and revise quality controls to make the company “independent of corporate politics and cost-cutting concerns.”

McAleer said he was transferred out of his quality job in late 1998. Court records show he unsuccessfully sued GM at least four times, primarily seeking whistleblower protection.

A copy of the letter was sent to each of the 12 directors at the time – including then CEO Rick Wagoner and then Chairman John Smith.

In it, McAleer accused the highest ranking quality executive in North America at the time, Tom LaSorda, of a “stonewall” that included trying to stop McAleer from contacting higher management. LaSorda, who was then a GM vice president, later became CEO of Chrysler and then CEO of Fisker Automotive. He is currently a venture capitalist at IncWell.

TOOTHPASTE

LaSorda launched a new safety process, based on a Procter & Gamble program for toothpaste, that was intended to document life-threatening defects, McAleer said in the letter to the board. He described that as an inadequate response that allowed defects to continue and amounted to “willful ignorance” of problems by GM.

LaSorda declined to comment on the accusations on Friday. In a 1999 letter from LaSorda to McAleer, which was shown by McAleer to Reuters, LaSorda wrote, “I have taken decisive action with the operating groups and involved senior leadership with a clear process which has been put into place.”

GM spokesman Cain said that board minutes from 2002 did not show any indication that the McAleer letter was discussed, and he said that the letter from LaSorda appeared to have responded appropriately. "The documents we have in front of us suggest we were trying to do the right thing," he said.

Eight days ago, McAleer sent copies of the 2002 document to members of House and Senate committees now investigating GM and its handling of the ignition switch issue. McAleer provided the documents to Reuters along with copies of postal delivery receipts that he said showed copies of the letter to each director were delivered to GM headquarters.

McAleer told Reuters that managers operated in fear of losing their jobs if they raised safety concerns.

He also showed Reuters a letter from January 1999, in which he asked LaSorda for a meeting with "GM Legal" and LaSorda’s boss, saying: “The current situation represents a clear and present danger to both our customers and our shareholders.”

LaSorda responded the next month in his letter but did not address McAleer's request for meetings with other GM executives.

Bloomberg Businessweek this week described a suit by McAleer against GM in a story about another employee, a colleague of McAleer named Courtland Kelley, who also unsuccessfully sued the automaker. Kelley is still employed by GM and the company has said it will reexamine his safety concerns.

Lawmakers in a hearing this week grilled GM CEO Mary Barra and outside lawyer Anton Valukas, who investigated GM’s response to the switch issue. In a report published June 5, he found widespread  incompetence and negligence in many GM divisions, but he said that senior GM officials and its board of directors were unaware of the problems.

The report said that the Valukas team reviewed all board correspondence dating back to 2003. McAleer’s letter to the board is from July 2002.

(Editing By Peter Henderson)