Rough street ahead for GM as U.S. Congress plots security probe

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March 21, 2014 – 4:01 pm ET

WASHINGTON (Reuters) — The congressional investigation into Basic Motors Co. auto defects will deliver aggressive scrutiny to a business with strong lobbying clout and sturdy ties on Capitol Hill.

GM’;s recall of 1.6 million cars, due to an ignition-switch problem linked to twelve fatalities, has place the Detroit automaker in Congress’; cross hairs, with possibly dramatic hearings kicking off in April.

CEO Mary Barra is scheduled to testify on April 1 to a U.S. House of Representatives panel investigating the ignition dilemma. In what could be a preview of such testimony, Barra on Monday declared in a video that “anything went wrong with our process” and “terrible things took place.”

The managing of the defect by GM, which first observed it in 2001, and federal regulators is the top priority of the powerful House Energy and Commerce Committee, according to aides.

Congressional investigations into consumer security troubles usually have the possible of turning out to be a public relations nightmare for firms at the center of the probes.

In early 2010, for example, Congress looked into unintended acceleration issues Toyota owners had been reporting for many years, which had been linked to 5 deaths. Before it was all in excess of, Toyota income fell, its reputation suffered and Congress toughened regulations. Just this week, the firm agreed to a record $ 1.2 billion penalty stemming from a Justice Division criminal investigation that could provide guideposts for the GM probe.

The Residence Power and Commerce Committee will have broad powers to investigate the actions of GM and the National Highway Site visitors Security Administration, including the capability to subpoena witnesses and paperwork. The panel has also invited NHTSA acting Administrator David Friedman to testify at the April one hearing.

The session is the initial in what will probably be a series of congressional hearings.

GM consumers could have dramatic stories to inform, because the ignition issue turned off engines and disabled airbags in vehicles moving at substantial speed, resulting in deadly accidents.

One particular committee aide stated practically a dozen of the panel’;s investigators had been operating on finding out why flawed ignitions in older Chevrolet Cobalts, Saturn Ions and other GM models have been permitted to stay in the cars for so lengthy with owners uninformed.

“The broad query the committee needs to answer is, ‘Is this a dilemma that could have been prevented or detected any earlier than it was?'” mentioned one particular House Vitality and Commerce aide.

GM has extended had allies in Congress, most notably U.S. Rep. John Dingell, D-Mich., the former committee chair. But the hearings will not be the first time the automobile giant has been roughed up by lawmakers.

5 CEOs ran GM for the duration of the time period of much more than a decade given that the ignition issue very first appeared.

Some aides also warn that what might appear in hindsight to be inexcusable missteps by GM and federal regulators could have been complicated and challenging-to-define issues as they were unfolding.

GM and Fred

The House hearings will be run by U.S. Rep. Fred Upton, R-Mich., who sometimes tells reporters, “Just contact me Fred.”

As chairman, Upton has aggressively challenged President Barack Obama’;s administration on its Obamacare wellness prepare and guided his committee by way of a tough investigation of the Solyndra solar-panel organization, which filed for bankruptcy in 2011 soon after getting $ 528 million in loans from the federal government.

Upton also played an crucial function in the 2000 congressional investigation of Ford’;s SUV rollover issues linked with Firestone-made tires.

Soon after emotional hearings, Congress quickly toughened the industry’;s recall process.

Teaming up with Upton is the committee’;s senior Democrat, Rep. Henry Waxman, a dogged legislator who has taken on the U.S. tobacco sector, helped enact Obama’;s landmark healthcare law and won passage of a sweeping climate modify bill in the House in 2009.

Also senior on the Vitality and Commerce Committee is the “dean” of the House, Dingell, who was the panel’;s prime Democrat from 1981 to 2008 and is broadly observed as GM’;s staunchest ally in Congress.

“He was a extremely, really sturdy chairman. He protected the prerogatives of Detroit and the automobile sector,” said U.S. Rep. Eliot Engel, D-N.Y., also a longtime member of the committee.

But Dingell’;s star power faded following Waxman wrested away the committee chairmanship in 2009. Waxman remained the lead Democrat on the committee after Republicans took management of the Residence in 2011. The 87-yr-previous Dingell just lately announced his retirement later on this yr soon after a record 59 many years in office.

Dingell’;s wife, Debbie, who has deep family members ties to GM, intends to run for her husband’;s congressional seat.

Investigation, then legislation?

Joan Claybrook, a former Nationwide Highway Visitors Security Administration head and president emeritus of the watchdog group Public Citizen, said that “from time to time,” Congress had verified it can be difficult on the U.S. car sector.

She noted that during the Ford/Firestone investigation, Congress demanded that the companies “submit all kinds of documents they didn’;t want to submit” and manufactured them public.

Claybrook and fellow consumer advocate Ralph Nader said in separate telephone interviews that the scope and aggressiveness of Congress’; investigation of GM would depend in element on sustained public outrage and stress to act.

“The public is mad as a hornet about this GM coverup,” she explained.

Nader, who would like GM to set up a victims’; compensation fund, stated the hearings would support “maintain the fire under the seat of the Justice Department” as it pursues a criminal probe.

Republicans, who manage the Residence, will not want to ally with GM on a security issue that has enraged the public, extra Nader, who won fame in the 1960s by taking on GM and championing security problems in his guide “Unsafe at Any Velocity.”

If House lawmakers or U.S. Sen. Claire McCaskill, a Democrat who also programs to hold hearings in April in her Commerce Committee panel, determine legislation is needed, GM’;s lobbyists are sure to react.

With 87,000 hourly and salaried workers in 60 plants scattered across the United States, GM and its workers are an critical constituency for lawmakers.

GM invested practically $ 9 million last yr on an army of lobbyists whose work is to advertise the company’;s interests in Congress and during the federal government. One registered lobbyist, Emily Porter, is a former adviser to Home Speaker John Boehner.

Asked about GM’;s sway with Congress, veteran Democratic Representative John Larson of Connecticut informed Reuters: “It usually can make it problematic for Congress” simply because so several of the company’;s jobs are positioned in lawmakers’; house districts.

Nevertheless, House Power and Commerce aides insist GM will get no favorable remedy. “You have a single hearing and you see exactly where the evidence requires you” before choosing subsequent steps, explained one aide.

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