(Adds details on law firm hired by GM)
By Ben Klayman and Eric Beech
July 17 U.S. senators on Thursday demanded to
know why General Motors Co did not fire its top lawyer
after it was revealed this year that the automaker's litigation
department knew of a widespread and deadly ignition flaw but
failed to escalate the safety issue.
GM Chief Executive Mary Barra defended General Counsel
Michael Millikin as "a man of incredibly high integrity" during
the Senate Commerce subcommittee hearing at which both appeared.
But senators said Millikin should be held responsible for
lower-level lawyers who for years worked on private lawsuits
involving deadly crashes in which a vehicle's ignition switch
could slip out of position, causing the car to stall, disabling
air bags, power steering and power brakes.
"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.
GM has attributed a total of 16 deaths to ignition-switch
failures across its product lines, including at least 13 deaths
and 54 crashes stemming from the specific defect discussed at
Thursday's Senate hearing and which was found mostly in Chevy
Cobalts and Saturn Ions.
Millikin responded repeatedly that he did not know about the
safety risks posed by the ignition switch until early February
of this year, shortly before the company issued its first public
recall for the issue.
Millikin admitted that GM lawyers who worked on an April
2013 case involving a fatal crash had enough information to
alert GM engineers, but they did not take action.
"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," he said.
Lower-level lawyers are among the 15 people GM has dismissed
in the safety debacle that has resulted in millions of recalled
Barra said she disagreed with the notion that Millikin
should be fired. "He's the person I need on this team. He had a
system in place," she said. "Unfortunately, in this instant it
wasn't brought to his attention frankly by people who brought
many other issues forward."
Prior to the series of ignition-related recalls that began
in February, GM attorneys had permission to settle lawsuits for
up to $5 million without notifying Millikin. GM changed that
policy after the recall crisis.
GM has also hired large law firm Quinn Emanuel Urquhart &
Sullivan, primarily known for litigating business matters, to
review the automaker's litigation practices, according to one of
the firm's managing partners, John Quinn.
Millikin told senators he has already reorganized the legal
staff to report directly to him, and that he will personally
review for engineering issues any case involving a fatality or
serious injury that goes to trial or a settlement.
DELPHI DODGES BLAME
Also appearing before the committee on Thursday was Rodney
O'Neal, the chief executive of Delphi Automotive, the
maker of the defective part. It was his first public appearance
Delphi has so far largely avoided the harshest criticism
from lawmakers, and O'Neal on Thursday said his company should
not shoulder the blame for the ignition-switch flaw.
O'Neal said Delphi followed the requirements dictated by GM
in making the part, which was designed with low resistance
because GM wanted it to turn smoothly.
"GM knowingly approved a final design that included less
torque than the original target," O'Neal said in prepared
testimony. "In our view, that approval established the final
GM CEO Barra accepted that the part's design was the fault
of her company and not Delphi's.
The Justice Department is not targeting Delphi in its
criminal probe of GM's handling of the safety defect, according
to sources familiar with the investigation.
O'Neal said Delphi has four production lines running to make
replacement ignition switches. He said Delphi has shipped more
than 1 million new switches and is on track to deliver more than
2 million by the end of August.
Senators also pressed GM officials and outside lawyer
Kenneth Feinberg about how the automaker plans to compensate
victims. GM has appointed Feinberg to set up and administer a
fund for victims.
Millikin told the senators that GM would not consider
waiving bankruptcy protection outside of the fund.
That protection was granted to the automaker by the terms of
its 2009 exit from bankruptcy, which created the so-called New
GM and left liability for accidents that occurred prior to its
bankruptcy exit with what remained of "Old GM."
GM has asked the Manhattan judge who oversaw that bankruptcy
to rule on whether certain claims are blocked by those terms, in
a pre-emptive move aimed at holding off dozens of lawsuits from
customers who say they suffered financial losses from the
Barra said GM sees no need to expand the compensation fund
to cover other cars with bad switches outside the initial
(Reporting by Eric Beech in Washington and Ben Klayman in
Detroit; Additional reporting by Jessica Dye and Casey Sullivan
in New York and Annika McGinnis in Washington; Writing by Julia
Edwards; editing by Matthew Lewis and Karey Van Hall)