A New Model for Government-Big 3 Relations? : Car safety: The GM dispute had the potential to poison the goodwill Clinton has nurtured with the auto industry.
On Oct. 18, John F. Smith, chief executive of General Motors Corp., snubbed President Clinton by refusing to attend a ceremony celebrating the one-year anniversary of the government-industry effort to build a “super car.”
The reason: He was upset by Transportation Secretary Federico Pena’s “initial” decision the day before that GM’s C/K 1973-87 pickup trucks had a safety defect and should be recalled.
On Friday, Pena backed away from that earlier finding and signed an unprecedented agreement with GM. Under the settlement, the government will drop its recall effort and GM will provide $51 million for safety programs.
A recall could have cost the nation’s No. 1 auto maker more than $1 billion, seriously damaged its reputation and resulted in more lawsuits and higher settlements in the 50 or more cases already pending.
“This was a clear win for GM,” an industry official in Washington said. “Pena backed down.”
Pena, however, portrayed the decision as a victory for the public, arguing that GM’s money will be used to save more lives immediately than could have been accomplished if he just closed the case or pursued a costly and uncertain recall in the courts.
Pena also said the decision was his alone. But industry and government sources said there almost certainly was pressure from the White House, which had received a flood of complaints from Congress and industry.
Indeed, the safety dispute had the potential to poison the good relations Clinton has for the past two years nurtured with the auto industry, which is creating the jobs and revenue fueling the economy. And in the wake of strong Republican gains in the midterm elections, the White House can ill afford to alienate an industry that has backed its health care and trade policies.
“The Pena thing cast serious doubts about whether the very-much-improved relationship with the Administration would continue,” a GM spokesman said.
To the surprise of many, Clinton has pursued cooperation over confrontation with the auto industry in his first two years in office. Most important, industry officials feel they are being heard and understood in Washington for the first time in decades.
A year ago, the Big Three and the federal government committed themselves to a 10-year effort to work together to produce a super car--an affordable non-polluting vehicle that could get up to 80 miles per gallon of gas.
While the super-car research is going forward, the Administration appears to be satisfied to not push for higher fuel-economy standards. The Administration is also seeking an industry-backed compromise on electric vehicles in the Northeast.
The auto industry is a strong backer of Clinton’s ill-fated health care reform package. In trade, Detroit was disappointed that recent talks did not produce an agreement with Japan on auto and auto parts, but believes that the Administration’s efforts will result in progress next year.
Although there are disagreements on some things, none is as controversial as the safety dispute between GM and Pena. The industry united on the issue, which it believed could create a bad precedent and regulatory turmoil.
The concern was evident at the super-car ceremony as top officials of the Big Three talked with Clinton and Vice President Al Gore as they stood on the dais before the proceedings began.
“They were asking what the hell happened,” an industry lobbyist said. “The President seemed surprised and was apologetic.”
The dispute is one of the most complex and emotional to face the National Highway Traffic Safety Administration since its creation in 1966, a year after consumer activist Ralph Nader wrote his seminal book “Unsafe at Any Speed.”
The agency began a defect investigation in 1992 after the Center for Auto Safety asked for a recall. The center said the vehicles were defective because the gas tanks were located outside the frame rails and could explode when involved in side-impact crashes.
GM steadfastly maintained that the pickups were safe and met all federal safety standards. Under the Chevrolet and GMC nameplates, the company sold 9 million C/K pickups with side-mounted tanks before the vehicles were redesigned in 1988 with the tanks inside the frame. About 5 million C/K pickups with side-mounted gas tanks are still on the road.
The battle became a brawl in which GM aggressively took on not only the nation’s top transportation official, but also trial lawyers, consumer advocates and the media.
Most safety issues involving autos are resolved between the manufacturer and regulators without litigation. Since the NHTSA’s creation, only eight recall orders have been challenged, with the agency winning in all but one.
The GM case has been highly publicized since late 1992, when a federal judge in Texas unsealed 70,000 pages of GM documents submitted in a product-liability case. Among them was a memo that Clarence Ditlow, Center for Auto Safety president and one of GM’s sharpest critics, argues proves that GM knew the dangers of the design in the early ‘70s but resisted changing it until 1988.
Not long afterward, the TV program “Dateline NBC” aired a critical report that purported to show GM pickups erupting into flames when hit in the side. The next month a Georgia jury awarded $105 million to the parents of Shannon Moseley, who died at 17 when his C/K pickup burst into flames after being broadsided. The award included $101 million in punitive damages, which jurors later said was intended as a message to GM to recall the vehicles.
Instead, the auto maker went on the offensive. In a bravura performance at a January, 1993, press conference, GM Executive Vice President Harry Pearce methodically showed how “Dateline NBC” had rigged crash tests by using toy rockets to ignite fires. The network retracted the story.
The company also appealed the Moseley decision, and an appeals court overturned it in June, 1994, saying the plaintiffs’ attorney had improperly introduced evidence of other deaths and the NHTSA investigation. The case was returned to the lower courts for a retrial.
GM refused a NHTSA request for a voluntary recall in April, 1993. The agency continued its investigation, with engineers reviewing more than 400,000 pages of documents, conducting crash tests and doing extensive statistical analyses. By September, 1993, the agency’s staff had decided that the vehicles should not be recalled.
Charles Gauthier, former director of NHTSA’s office of defect investigation, said his staff concluded that although GM pickups posed a slightly greater safety risk of fire-related fatalities than Ford or Chrysler pickups in side-impact crashes, the risks were not “unreasonable” when compared to the performances of other cars and trucks. They recommended that the case be closed.
No action was taken by Pena for more than a year.
In his initial decision, Pena rejected the NHTSA recommendation and instead found that C/K pickups were defective and did pose an unreasonable safety risk. Pena said 150 people had died in fiery collisions in the C/K pickups and that 32 more would die in subsequent years. He said that even though GM knew the side-mounted fuel-tank design was dangerous, it placed “sales over safety.”
Pena also said that even though the GM pickups met all federal safety standards, the manufacturer still had an obligation to produce vehicles that operate safely in real-world conditions.
GM was outraged by the decision. Spokesman Bruce MacDonald declared the decision “totally unjustified” and called the suggestion that GM put sales of ahead of safety “outrageous and wrong.”
Company officials said statistics show that C/K pickups are as safe as comparable Ford and Chrysler trucks and that all are about twice as safe as the average passenger car. They note that more than 50 other vehicles also use designs that place the gas tank outside the frame.
Besides the legal and scientific arguments, there was an emotional side to this debate that GM feared. NHTSA had scheduled a public meeting for Dec. 6 on the C/K pickup at which more than 30 burn victims or their relatives planned to appear.
GM sought to have the meeting canceled, and when that failed, it negotiated with the agency over the format. It was during those discussions last week that the settlement talks began. The agreement was reached early Friday and the meeting canceled.
“This settlement will save hundreds of lives--far more than ever have been saved by proceeding with a recall or closing the case,” Pena said in a press conference in Washington.
But consumer groups harshly criticized the agreement as “unprincipled and irresponsible.” They vowed to fight it in court.
The agreement requires GM to help fund a government fire safety research laboratory; contribute to research for burn and trauma victims, crash-test dummies and drunk-driving, and to expend $8 million for child safety seats for the poor.
Pena said the settlement is an opportunity to improve auto safety through government and industry cooperation, and he took great pains to absolve Smith and other current GM executives of any taint in this case.
“I have said a number of times the new management team in Detroit is a far more thoughtful group of leaders perhaps than many, many years ago, when safety wasn’t as high a priority as it is today,” Pena said.
