Guilty Motors?

April 1, 2014

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In the first three months of 2014, GM has recalled 6.3 million cars. Among those recalled are all 2005-2010 Chevy Cobalts, whose ignition switches have been faulted for 13 deaths so far.

GM CEO Mary Barra told Congress today that she “cannot tell you why it took years for a safety defect to be announced”.

Heidi Moore thinks the reason lies in the company’s sclerotic and hubristic corporate culture. The company never really changed after its 2009 bankruptcy, Moore says, and “all of that talk – of the reborn American automaker, of bets paid and dollars won – seems like a hollow spectacle”. James Pethokoukis agrees: “There is not much a $50 billion government check can do about a dysfunctional corporate culture except temporarily paper over it”.

GM’s internal safety and quality control procedures certainly look inadequate. The company knew about the ignition switch problem in 2001 and decided not to fix it in 2005 because it would have cost too much. GM was also aware of numerous other other problems with the Cobalt, the NYT reports based on state data. Before the ignition issues became public, “it was already seen as a lemon”: owners reported problems as farcical as windows falling out.

Federal regulators don’t look much more competent. The regulator charged with ensuring that America’s 248 million cars are defect-free has just 51 employees and a paltry $10 million budget. The result, the head of the National Consumer League tellsBloomberg, is ineffective oversight by the National Highway Traffic Safety Administration Office of Defects Investigation:

They’re getting information, and they’re not following up. They’re not capturing the information in a way that’s useful. They’re not responding quickly to a litany of similar complaints.

When the NHTSA does have the time and manpower to look into complaints, it seems to have in the case of GM to have missed a worrying trend in warranty data. NHTSA looked into the issue behind the recall and declined in both 2007 and 2010 to open formal investigations.

GM faces a series of investigations by federal authorities, but its financial liability may be limited. A provision in the company’s 2009 bankruptcy means the so-called new GM isn’t liable for the actions of the old GM. – Ben Walsh

On to today’s links:

Your Retirement Plans
“Make regular, automated investments in boring, low-cost funds. Sell in a similarly bloodless fashion” – Tim Harford

NFL cheerleaders make less than $5 an hour – the Guardian

Primary Sources
Paul Ryan’s 2015 budget: $5 billion in cuts over a decade – WaPo
Paul Ryan’s budget is a “personal manifesto on government austerity” – WaPo

Mandatory motorcycle helmet laws are a good idea – NYT

Mark Zuckerberg forfeits income equal to 0.0019% of his net worth – Bloomberg
It’s time to get rid of the minimum wage for tipped workers – the Nation

Please Update Your Records
Fact-checking Michael Lewis on US stock ownership – Ben Walsh

Movies with women talking to each other (about something other than men) do better financially – FiveThirtyEight

So Hot Right Now
Milk futures are up 23% this year – Bloomberg

The FBI is investigating HFT – WSJ
“Michael Lewis is a lucky guy to have the FBI promoting his book” – Jonathan Weil

Data Points
Detroit has as many local hot dog restaurants as chain fast food outlets – Bloomberg

Right On
“Good explanatory journalism… steers readers away from bullshit” – Andrew Leonard

Just an FYI
Gmail was “the ultimate April Fools’ joke” – Time

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