Toyota's $1.2bn mea culpa, GM in damage control mode

A gut-wrenching 9-1-1 call from an off-duty California Highway Patrol officer with three family members pleading for help in a runaway Lexus made headlines Aug. 28, 2009. The 2009 ES350 sedan, a loaner from the dealer in El Cajon, took off suddenly at up to 100 mph as they headed north on state Route 125 in Santee and all four occupants died in a crash when the driver was unable to halt the unintended acceleration. The emergency call ended in the sounds of crushing metal. Then more reports of sudden acceleration involving Toyota vehicles began to emerge. Toyota blamed the sticky accelerator on improperly installed floor mats that could bunch up depressing the gas pedal -- but said it found no problem with the engine electronics. About 9.4 million vehicles were recalled as the problem grew and in October 2013 an Oklahoma jury found Toyota's electronic throttle system at fault in a 2005 Camry involved in a sudden acceleration crash that killed a woman in 2007, the New York Times said. "Toyota put sales over safety and profit over principle," said a federal prosecutor in the Southern District of New York, which spearheaded the government's four-year criminal investigation. Toyota paid more than $1.6 billion to settle lawsuits, more than $66 million in fines for not reporting safety defects to the National Highway Traffic Safety Administration in a timely manner -- and Wednesday the Japanese auto giant agreed to pay $1.2 billion to settle the criminal investigation. "Put simply, Toyota's conduct was shameful, said U.S. Attorney General Eric Holder at a Washington news conference, adding the Japanese automaker had "intentionally concealed information and misled the public about the safety issues behind these recalls. "When car owners get behind the wheel, they have a right to expect that their vehicle is safe. If any part of the automobile turns out to have safety issue, the car company has a duty to be upfront about them, to fix them quickly, and to immediately tell the truth about the problem and its scope." Back on top as world's No. 1 car company in 2014, Toyota will take $1.2 billion in after-tax charges against earnings in the fiscal year ending March 31 to pay the largest criminal penalty ever imposed on an automaker in U.S. history. Under the settlement, an independent monitor will follow Toyota's internal handling of accident reports and safety communications, including technical bulletins. "Entering this agreement, while difficult, is a major step toward putting this unfortunate chapter behind us," Toyota's chief legal officer Christopher Reynolds said in a statement. "We remain extremely grateful to our customers who have continued to stand by Toyota. Moving forward they can be confident that we continue to take our responsibilities to them seriously." Federal officials appeared resolute in promising to crack down on auto defects. "Other car companies should not repeat Toyota's mistake," said Holder. "Safety is our top priority," Transportation Secretary Anthony Foxx said. GM's damage control General Motors Co. Chief Operating Officer Mary T. Barra knew the job would be tough when she took it. Now she has to show she can handle adversity. When she appeared in public at January's North American International Auto Show in Detroit, a beaming Barra was trailed by scores of cameras and reporters as she showed off GM's latest models to Vice President Joe Biden. Her rise a month earlier as the first woman to head a major U.S. car company was hailed as breaking the glass ceiling in the male-dominated auto business. Fast forward two months and a sober Barra is on television and the Internet apologizing for GM recalls of more than 3 million vehicles, including 1.6 million that have a possibly faulty ignition switch linked to 12 deaths and 31 crashes. The 51-year-old mother of two said she learned of the ignition switch issue in December and took personal responsibility -- adding she is concerned about the safety of her family and the families of those who ride in GM vehicles. GM knew about the ignition switch problem for more than decade, but as the new face of the company Barra owns it. "I want to start by saying how sorry I am personally and how sorry General Motors is for what has happened," she said at GM's headquarters overlooking the Detroit River. "Clearly lives have been lost and families are affected, and that is very serious. We want to just extend our deep condolences for everyone's losses." The Center for Auto Safety, a consumer watchdog group, links at least 303 deaths to non-working airbags some possibly a result of the defective ignition switch, which when banged or bumped cuts power to electrical systems and airbags. "Something went wrong," Barra tells GM employees in a four-minute internal company video. "And terrible things happened. We have apologized, but that is only one step in the journey to resolve it." While all of the vehicles in the ignition switch recall were built before her watch -- she knows her reputation and GM's credibility are on the line with the company's response that will cost hundreds of millions. Critics had already derisively said it was "back to business as usual" at GM five years after it was saved by a $45.9 billion taxpayer bailout. Lawyers are circling the now profitable company like sharks in the water -- a class-action lawsuit has been filed -- and the federal government has vowed to be more diligent. GM would be well-served to be transparent about the recalls. Barra last week named long-time executive Jeff Boyer to the new position of global safety chief to revamp safety protocols. A GM lifer with 40 years experience in engineering and safety, Boyer has the job of identifying and resolving product safety issues. Barra has been called to testify before a subcommittee of the House Energy and Commerce Committee on April Fool's Day, and north of the border Transport Canada said it was launching an investigation of 236,000 recalled cars, including one in a fatal June crash in Quebec in which the driver was not wearing a seat belt, the New York Times said. Acting National Highway Traffic Safety Administration administrator David Friedman will also testify before Congress April 1. "Their testimony is critical to understanding what the company and NHTSA knew about safety problems, when they knew it, and what was done about it," full committee chairman Rep. Fred Upton, R-Mich., and Oversight and Investigations Subcommittee head Rep. Tim Murphy, R-Pa, said in a statement. "The problems originated long before Barra and Friedman took the helms of their respective organizations, but their actions and input now, as our investigation proceeds, will be essential to getting answers about what went wrong." Boyer "will have global responsibility for the safety development of GM vehicle systems, conformation and validation of safety performance, as well as post-sale safety activities, including recalls," GM said in a statement. He reports directly to Barra, senior management and the board of directors, and will have his hands full with three new recalls announced for 1.5 million additional vehicles -- 1.18 million 2008-13 Buick Enclave and GMC Acadia SUVs, 2009-13 Chevrolet Traverse models and 2008-10 Saturn Outlook models to repair a seat-mounted side airbag wiring harness. Also included in the recall are 303,000 Chevrolet Express and GMC Savana cargo and conversion vans from model years 2009-14 to install softer material on the instrument panel to meet compliance for unbelted passengers and 63,900 2013-14 Cadillac XTS sedans to repair corrosion on a brake booster that could cause overheating raising the possibility of a fire in the engine compartment. No accidents are blamed on problems in the latest recalls. "Nothing is more important than the safety of our customers in the vehicles they drive," Boyer said. "Today's GM is committed to this and I'm ready to take on this assignment." Parts supplier Delphi Corp. has added a second line to speed up production of replacement ignition switches for the recalled vehicles and GM is taking a $300 million charge against first-quarter earnings to pay for parts and labor. More than 50 GM employees are staffing a call center to field calls on the recalls. Barra vows big changes in product safety reviews. GM's system for "deciding and managing recalls is going to change because of this," she said. "I asked our team to redouble our efforts on our pending product reviews, bring them forward and resolve them quickly," she said. "That is what today's GM is all about." Barra's internal video is available at: http://tinyurl.com/qhwo9np. -0- A smoggy day in Paris Motorists in Paris had a 50-50 chance of being allowed to drive legally last Monday. The city of lights was plagued by five days of heavy smog -- rivaling the heavy air pollution in Beijing -- and French officials limited driving to vehicles with odd-number licenses to cut the number of cars on the road and allow the air to clear. The partial car ban is called "alternating traffic." The odd-even day driving scheme was first employed during near-record smog in 1997 -- and it worked then and last week -- reducing traffic congestion up to 60 percent. French Ecology Minister Philip Martin said 90 percent of Paris drivers respected the ban. But government-backed France 24 reported thousands of drivers with license plates ending in even numbers flouted it. Radio France Internationale said nearly 700 police officers stationed at 60 checkpoints throughout the capital issued more than 5,100 tickets with 22 euro ($30.60) fines. Public transportation was free in the Paris region from Friday until midnight Monday. By Tuesday, people could see the Eiffel Tower clearly and a ban on odd-numbered license plates was rescinded. -0- Sales slump halts Viper production Slow sales of the $100,000 Viper sports car have led Chrysler to order a temporary halt in production. The V-10 super car is only made in one factory -- Detroit's Connor Avenue Assembly Plant. A Chrysler spokeswoman told the Detroit News production of the 8.4-liter, 640-horsepower Viper will be suspended beginning the week of April 14 and resume the week of June 23. All 91 UAW-covered employees at the plant will be laid off during the five-week suspension. In 2013, Chrysler said it hoped to sell around 2,000 SRT Vipers annually but sales of the high-end coupe never reached those numbers and fell after GM rolled out its 2014 Chevrolet Corvette C6 ZR1 and 2015 Corvette Stingray.