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1
TEACHING NOTE:
GENERAL MOTORS AND THE IGNITION SWITCH RECALLS1
This case illustrates the following themes and concepts discussed in the chapters listed:
Theme/Concept Chapter
Corporate social responsibility and citizenship 3
Ethics and ethical reasoning 5
Organizational ethics 6
Government regulation of business 7
Consumer protection 14
Managing the corporate reputation 19
Case Synopsis:
In early 2014, GM ordered a series of recalls that eventually affected 2.6 million vehicles whose
model years ranged from 2003 to 2011. The reason for the recalls was a faulty ignition switch
that easily shifted the key from “run” into the “off” or “accessory” position. When the key was
not in “run,” the cars lost power, including to the steering, brakes and protective airbag system,
company faced numerous individual and class action lawsuits and investigations by the National
Highway Traffic Safety Administration (NHTSA), the U.S. Congress, and the Justice
TEACHING TIP: WHERE TO USE THE CASE IN THE COURSE
This case is integrative, in that it draws on many themes of the text. It may be used at the end of
1 Teaching note by Debra M. Staab.
2
TEACHING TIP: VIDEOS
Several videos may be used in conjunction with this case. They include:
Better Ignition Switch Would Have Cost GM 90 Cents, at
www.youtube.com/watch?v=op4UlpNo0D0
Dangerous Product Recalls: Ignition Switches, Faulty Airbags and Others
(generic overview of all 2014 recalls), at www.youtube.com/watch?v=3KXNycFUqlA
Discussion Questions and Answers
1. Who or what was responsible for the ignition switch defect and the resulting deaths and
injuries? In your response, please consider the roles of General Motors and its
managers and employees, U.S. auto safety regulators, and the drivers of the vehicles
themselves.
Students may make the following arguments regarding who or what was responsible:
GM Managers/Company Culture:
• The “GM salute” and the “GM nod”.
GM Employees:
• Engineering staff approved parts that did not meet specifications.
• DeGiorgio denied making any part changes.
3
o Counter: GM truly believed drivers could control a vehicle without power.
Regulators:
• NHTSA was too “soft” on GM (because of the government bailout) in three separate
investigations.
o Counter: NHTSA did not understand GM’s 2nd generation airbag algorithm.
Drivers:
• Some drivers did not wear seatbelts and may have exceeded the speed limit or driven
while impaired.
• Drivers had access to GM customer service.
• Drivers could follow the advice of the Technical Service Bulletin and remove heavy
items from their keychain.
2. What would you do as a GM employee who had witnessed safety issues? If your
manager told you to ignore the problem, would you go outside the company to blow the
whistle? What might be the cost of keeping silent?
TEACHING TIP: DEFINING TERMS
One way to launch this discussion is to define for the class (or ask students to define) what is
meant by the term “whistle-blowing.” The text defines the term as follows:
Students may make the following suggestions for employee actions:
• Conduct enough research to confirm that there is an undisputable issue.
• Raise the issue externally (whistle-blowing).
o Contact the regulator(s). Talk to the media. File a lawsuit.
• Choose to keep silent.
o Eventual costs to the company may increase if the issue is not addressed in a
3. If you were the CEO of General Motors, what changes would you implement to avoid
similar problems from arising in the future?
TEACHING TIP: VALUKAS REPORT RECOMMENDATIONS
The Valukas Report identified 90 suggestions that GM could implement to create an
environment of safety and integrity. (CEO Mary Barra subsequently committed to enacting all
90 recommendations.) The long list can be found in section VIII of the Valukas Report starting
on page 258.
Students might suggest many of the 90 recommendations made by the Valukas report, including:
5
• Expand cross-functional communications, including clear escalation processes. Train
to avoid information silos and group think.
• Improve accountability by creating policy that assigns responsibility to one
individual within every committee and group. Validate the approval processes in all
departments. Consider changing the organizational design as appropriate.
• Expand employee training.
4. What actions do you recommend that policymakers and regulators take to avoid
similar problems from arising in the future?
5. As a consumer, what can you do to ensure safety in your own vehicle, before and
after purchase?
6
Epilogue:
The following events have occurred since the last GM recall hearing in June 2014 (profiled in the
case).
• Congress investigated NHTSA’s role in the recall delay. Following the April 2014
hearing, the U.S. House of Representatives Committee on Energy and Commerce
examined the effectiveness of NHTSA’s oversight of GM. The September 2014 results
• GM implemented the Valukas Report Recommendations. At the June hearing, GM
committed to implementing all 90 recommendations identified in the Valukas Report, and
started with the appointment of Jeff Boyer, a 40 year veteran of GM, as the company’s
• Consumer groups criticized the Valukas Report. In June 2014, the Center for Auto
Safety (CAS) sent a derogatory letter to Mr. Valukas. The letter accused the law firm of
“… constructing what amounts to a corporate defense against criminal charges.”2 The
• GM compensated the victims. As part of the recall, GM established a compensation fund
of $400-$600 million administered by attorney Kenneth Feingold. Fund administrators
2 “Letter to Mr. Valukas.” Center for Auto Safety. 17 June 2014.
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Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without
the prior written consent of McGraw-Hill Education.
were still under review. The fund had approved 107 death claims, 12 category one
(major) injury claims and 187 category two (minor) injuries.3
• Previously settled lawsuits against GM were reopened. In June 2014, in a precedent-
• Criminal charges against Anderson were dropped. In November 2014, a Texas court
• GM issued more recalls in 2014. By the end of 2014, GM had ordered a record total of
83 different recalls for over 30 million vehicles. Approximately 13 million of these
• The courts upheld GM’s bankruptcy protection. In April 2015, U.S. Bankruptcy Judge
• A class-action lawsuit against GM was created. Due to fund restrictions, and delays that
could compromise statutes of limitation, thousands of cases against GM alleging
• Criminal investigations into GM’s delayed response continued. In 2015, investigations
by the U.S. Justice Department into potential criminal activity within GM were on-going.
Federal Prosecutor Preet Bharara discussed the importance of criminal investigations
saying:
3 “Detailed Overall Program Statistics.” GM Ignition Compensation Claims Resolution Facility.
8
• GM worked to repair its tarnished reputation. Response to Ms. Barra’s leadership was
generally positive, as she publicly displayed remorse for the company’s past actions and
• GM curried favor with the United Auto Workers (UAW). In April 2015, GM agreed to
• The President recommended an increase to NHTSA’s funding. In May 2015, President
Obama proposed an increase to NHTSA’s ODI budget from $11 million to $31.3 million.
6 “Why do some people love GM’s CEO Mary Barra?” Fortune. 9 August 2014.
9
Timeline Summary of Events
Date
GM
Leadership
GM Workers
Suppliers
Government
Customers
1997
• CEO John
F. Smith, Jr.
(11/2/92-
5/31/2000)
1998
1999
2000
• Ignition switch design finalized
2001
• CEO G.
Richard
Wagoner, Jr.
(6/1/00-
3/30/09)
• Staff
reductions
and cost
cutting
measures
introduced
• Pre-
production
tests for 2003
Saturn Ion
report ignition
switch issues
• Root cause:
low contact
force and low
detent plunger
force
• March -
Delphi
Automotive
Systems
acquires Eaton
Mechatronics
2002
• February - Supplier Delphi &
GM approve switch design
despite failure below GM
specification
2003
• Dec. Crash:
Jean Averill
2004 Ion
Connecticut
2004
• November –
Engineering
notes 2005
Cobalt
“vehicle can
be keyed off
with knee
while driving”
• NHTSA &
GM decide
that stalls are
not a safety
issue
• Nov. Crash:
Erickson
2004 Ion
Texas
2005
• February –
Engineering
recommends
changing key
• March –key
issue closed
due to “no
• August –
NHTSA
Special Crash
Investigation
the airbags did
not deploy and
key was in
“accessory”
• July Crash:
Amber Marie
Rose
2005 Cobalt
10
Date
GM
Leadership
GM Workers
Suppliers
Government
Customers
acceptable
business case”
• May –notes
2005 Cobalt
“ignition will
turn off while
driving”
• Quality team
requests help
with customer
complaints
• Eng.
recommends
changing key
slot to hole
(approved but
later
cancelled)
• December –
Turning Off
of Key
Cylinder, Loss
of Electrical
System and
No DTCs” &
mode (case
CA05-049
Amber Marie
Rose)
2006
• April – DeGiorgio & Delphi sign
off on changes to ignition using
longer plunger and tighter spring
with no part number change (a
violation of GM policy)
• WIS. Trooper
Young reported
power mode as
“accessory”
and related the
issue to the
Technical
• October
crash:
Rademaker
& Weigel
2005 Cobalt
Wisconsin
11
Date
GM
Leadership
GM Workers
Suppliers
Government
Customers
vehicles to
TSB (2007
Ion, Sky,
HHR,
Solstice, G5)
hired Indiana
Univ.
Transportation
Research
Center to
investigate Wis.
crash
2007
• March – GM
and NHTSA
met regarding
general airbag
deployment
and started
tracking front
impact
crashes
• April - Indiana
Univ. provides
draft SCI report
to NHTSA
noting power
mode as
“accessory”
• September –
NHTSA’s ODI
propos an
investigation
into pattern of
airbag non-
deployments
• November –
ODI reports no
pattern and
closes study
• August – GM met with
Continental (maker of SDM) to
examine black box data in Wis.
crash
2008
2009
• CEO
Frederick A.
“Fritz”
Henderson
(3/30/09-
bankruptcy
• February –
GM starts
another study
of ignition
issues and
• GM suspects
that power
• May – PA.
crash
Continental
(maker of
SDM) gave
• May - SCI
investigated
Elliot/Matthews
case and
reported no
deployment;
power mode
• April crash:
Elliot &
Matthews
2005 Cobalt
Pennsylvania
