DETROIT — The legal case against General Motors involving faulty ignition switches could turn in part on a seemingly innocuous word deep in an investigator’s report about a Maryland teen who died in 2005 after speeding away from a party.
Amber Marie Rose, after arguing with a boy, got into her Chevrolet Cobalt, jammed down the accelerator and lost control in a nearby cul-de-sac, slamming into a tree. The impact crushed her against the steering wheel. She wasn’t wearing a seat belt. She’d been drinking, too.
Despite the crash, the air bags didn’t go off, triggering an investigation ordered by federal regulators. Buried in the report, now nearly a decade old, was a curious fact: The ignition switch was turned to “accessory” — the setting a driver uses when he or she wants to listen to the radio or lower the windows without the engine running — and not “run,” as would be expected for a moving car.
GM was told directly about that report in 2007. Seven years later — nine after the crash — GM now says it is possible if the key is inadvertently jostled from “run” to “accessory” in a defective ignition, it could disable the air bags in cars like Amber’s.
Despite the questions that raises about the safety of certain model year Cobalts, GM is shielded from civil liability because the old GM, which made the car, declared bankruptcy in 2009. But lawyers and consumer advocates want to use it and other accidents to knock down that liability shield by proving GM intentionally withheld information it knew about the ignition switch problems during the bankruptcy proceedings.
They say a decade-long record is full of red flags — Amber’s crash being one of them — that should have tipped off GM and federal regulators to potentially lethal problems with the ignition switches way before GM’s bankruptcy.
“There’s no question they have enormous liability potential here,” said Clarence Ditlow, head of the Washington, D.C.-based Center for Auto Safety, which has raised the specter of more deaths and crashes due to the defect. “The only question is how much.”
GM says it did not understand the full scope of the danger until well after the bankruptcy. And CEO Mary Barra has apologized and commenced an internal probe using an outside investigator.
The company — which has linked the ignition switch defect to 12 deaths and 31 crashes — has promised to cooperate fully with regulators but remained mum on whether it will use its liability shield.
GM has recalled 1.6 million vehicles globally, including 2005-07 Cobalts and 2003-07 Saturn Ions, Pontiac G5s, Pontiac Solstices and Chevrolet HHRs, promising to replace an ignition switch that a driver’s knee or heavy key chain can inadvertently move out of position, potentially disabling the power steering, air bags and other equipment.
A time line GM provided federal regulators appears full of warning signs over the years.
■ In 2004, GM learned of “at least one incident” when a Cobalt lost power when the key moved out of the run position because of inadvertent contact with the steering column.
■ In 2005, a GM engineer proposed a new ignition switch design, but that redesign was later canceled. That same year, two newspaper stories mentioned “unplanned engine shutdowns” in reviews of the Cobalt.
■ In late 2007, a GM investigating engineer learned of four crashes where the key was found to be in the “accessory” mode instead of in the correct “run” position.
“The truth is they knew they had this recall (coming),” said Shelby Jordan, a partner with Jordan, Hyden, Womble, Culbreth Holzer in Corpus Christi, Texas. “There is no question that GM knew that this was a problem. They even told their dealers privately about it (before bankruptcy).”
Harvey Miller, GM’s bankruptcy attorney, said the shield should stay in place, even if it can be proved that GM knowingly withheld information. Under the bankruptcy code, he said, there’s a six-month deadline to revoke it.
It’s a point on which automotive safety experts and attorneys familiar with GM’s recall vehemently disagree, saying the long paper trail shows various GM engineers and technicians knew about the problem for more than a decade before agreeing to a recall.
“How can you be bound by a six-month time frame if you have no possible way of discovering the fraud?” asked Bob Hilliard, a partner with Hilliard Muñoz Gonzales in Corpus Christi and the lawyer who has filed a class action against GM.
On April 1, Barra and others will testify before a House subcommittee on Capitol Hill. The committee said it wants to know whether “this tragedy could have been prevented and what can be done to ensure the loss of life” doesn’t happen again.
Strictly speaking, the question of whether GM should or shouldn’t be liable is not a central focus of congressional committees looking into the recall, but the documents and testimony they dig up could provide courtroom fodder and have a bearing on whether the company’s bankruptcy protection holds up.
Last week, the House Energy and Commerce Committee staff got a briefing from members of GM’s legal team. This week, GM and the National Highway Traffic Safety Administration, which regulates auto safety, will provide documents to congressional investigators that may help explain why it took so long for a recall to be ordered.
At the same time, the Justice Department, which last week fined Toyota $1.2 billion for misleading consumers, regulators and allegedly committing wire fraud, is investigating the GM recall as well. Taken together, the investigation will determine the exposure, legally and otherwise, to a resurgent GM’s reputation and bottom line.
The automaker says that despite complaints, numerous internal reports, dealer service bulletins and even a design change for the ignition switch approved by a company engineer, it wasn’t until late last year — well after bankruptcy — that the information started coming together.
Senior executives, the company also has said, weren’t informed until the end of January this year. If that proves to be true, lawyers say, it could limit liability.
What is clear from a review of records, however, is that GM personnel were aware of problems associated with the Cobalt and Ion ignition switches early on in the models’ lives. It’s less clear how high up the corporate ladder that information traveled.
As early as 2004, GM was looking into solutions to better ensure keys weren’t jostled out of position. But after considering the time, cost and effectiveness, those changes were shelved. In 2005, dealers were told to offer inserts for keys to keep the weight of key rings from moving the switches.
There was even a change to the switch — signed off on by a GM engineer — for some 2007 model year cars and those thereafter that apparently solved the problem. Safety advocates say that should have prompted a recall of earlier models that were still using the old type of ignition switch.
Timothy Logsdon, a former GM engineer and accident reconstruction specialist for Peter R. Thom and Associates, finds it hard to fathom that others at GM didn’t know about the design change to the switches, as the company maintains now.
“That change was made knowing they had this issue of the key going from ‘run’ to ‘accessory,’ ” he said. “GM processes are absolutely button-down. … It’s difficult for anything to go unnoticed.”
What’s unclear is whether anyone at GM before 2013 linked the issue with air bag deployment.
“They knew what they needed to know to take action to institute a recall,” said former NHTSA Administrator Joan Claybrook. “That’s very damning. That’s a long period of time.”
It wasn’t just GM that seemed to be missing the signals, however: NHTSA was ordering reviews of crashes involving now-recalled vehicles as early as 2004. But as late as December 2010, it told then-U.S. Rep. Barney Frank of Massachusetts, who wrote on behalf of a constituent concerned about a stalling 2006 Cobalt, that it could not “act on isolated problems.”
“(There) is insufficient evidence to warrant opening a safety defect investigation,” the regulator said.
GM’s protection from its pre-bankruptcy liabilities isn’t unusual. U.S. bankruptcy law is designed to encourage companies that are failing to find a way to restructure and continue to stay in business.
To make that possible, bankruptcy law allows a company to emerge as an entirely new legal entity. In GM’s case, it was no different. In fact, Chrysler has even more comprehensive protection from pre-bankruptcy claims.
“It’s a really important concept to bankruptcy … to put it all behind them and move the new company along,” said Jay Westbrook, a business law professor at the University of Texas. “The new GM literally is the new GM.”
But Westbrook says he believes GM’s liability shield could be on shaky ground if attorneys can show GM officials knew about the defects and concealed it from the bankruptcy judge.
Proving that, however, would mean asking U.S. Bankruptcy Judge Robert Gerber to reopen the automaker’s historic bankruptcy case and proving fraud — a high hurdle to clear.
Hilliard, in Corpus Christi, is preparing at least four lawsuits against GM involving accidents that occurred before the automaker filed for bankruptcy. Amber Rose’s mother, Laura Gipe Christian, is a potential client. She has created a Facebook site, “GM Recall Survivors,” to link families who lost loved ones in crashes with information about the company and the now recalled vehicles.
“They were fraudulent. They didn’t disclose the information they had,” said Christian. “They knew about it prior to filing bankruptcy and they did not disclose it to my knowledge.”