GM 2014 Recalls

GM Vs Melton’s

• Fatal Accident due to an Ignition malfunction.• Settled out of court.• Later found that GM did not disclose full

information.• Case reopened.• GM knew about the issue for the last 10 years.• GM struggle to provide convincing answers.• 13 deaths, 40+ accidents.

Allegations & Clarifications

• "When we have answers, we will be fully transparent with you, with our regulators and with our customers.” – Mary Barra, CEO

• "You don't know anything about anything," and that "If this is the new GM leadership, it's pretty lacking” – Barbara Boxer, Senator.

• GM for not conveying "critical information" to regulators - David J. Friedman, NTHSA

• GM CEO confirmed that their engineer had lied under oath.

GM’s recall spree

• As of June 30, 2014, GM has issued 45 separate recalls.

• Involved nearly 28 million cars worldwide and over 24.6 million in the United States

• $1.2 billion against its second quarter earnings as a result of its ongoing recalls, and the charge could get worse as lawsuits and investigations continue.

GM in India – Tavera Recall (2014)

• Falling market shares.• Tavera contributes substantially to revenues.• June: Reports BS-3, BS-4 compliance issues on

Tavera.• Stops production• Recall and Fix – 114,000 cars recalled.• CFO loses job.• Awaiting approval from authorities on design

changes to restart production.

• Produces vehicles in 37 countries under 10 brands• World’s largest car manufacturer from 1931 to 2007• Currently at fourth place behind Volkswagen, Toyota

and Daimler• Operates in India as a Joint Venture between GM and

SAIC• Discontinued ‘Opel’ branded vehicles by 2006• Currently produces only ‘Chevrolet’ branded cars• Chevrolet Tavera produced since 2003

Company Overview

• GOI’s standards to regulate emissions produced by vehicles

• Based on European standards (Euro 1, Euro 2 etc.)• Standards enforcement is usually a two stage process• Initially enforced in NCR and some major cities followed

by nationwide enforcement some time later• Bharat Stage II adopted in NCR and 13 cities from 2003.

Nationwide from 2005• Bharat Stage III adopted in NCR and 13 cities from 2005.

Nationwide from 2010

Bharat Stage Emission Standards

• In 2004, company was readying to move from BS II to BS III norms

• Tavera used Isuzu engine that did not meet new BS III norms• Options

– New fuel injection pump. Expensive, but safety margin of 30%– Better catalytic converter. Cheaper option, safety margin of 15%

• Company chose the cheaper option with lower MoS. Vehicle was in the borderline with respect to latest emission norms

• Tighter control and tolerance required for engine as any variance in manufacturing could result in higher emissions

• Variations caused due to manufacturing inefficiencies resulted in Tavera units that did not meet BS III norms

Tavera Troubles

• To cover up, inspectors were provided with cars having engines that were pre-tested to ensure BS III compliance

• Once necessary certifications were received, production of ‘BS III compliant’ Taveras began in 2005

• Christian Schoenherr, Head of Engineering at GM Technical Centre, Bangalore, discovers malpractice during June 2013

• Informs GM USA and responsible employees are fired

• Company notifies requisite authorities

• Rs 11 crore fine slapped on GM India after investigators prove corporate fraud

• 1,14,000 Taveras produced between 2005 and 2012 are recalledThe solution that backfired

• The recalled Taveras also included ‘BS IV compliant’ Taveras while the malpractices were found done for the BS III variants. Was the company selective in its relevations?

• Was a Rs.11 crore fine sufficient?

• Was the company’s act of owning up of its own accord proof of its responsibility to customers or was it to protect itself against future lawsuits?

Some questions

Thank you!