GM’s crisis: don’t blame the engineers

Mary Barra’s ride as CEO of General Motors has been hair-raising. Toast of the business world just three months ago, the former head of product development and supply chain is now getting grilled by the United States Congress in a fantastically public trial. Demands for truth about exactly what was known, when and by whom, can be heard from the press, politicians and even the public. Barra is suddenly the face of corporate villainy.

A bug in the BOM

The issue is all about ignition switches that turn off too easily, rendering some vehicles (the Chevy Cobalt and Saturn Ion) dangerous owing to a loss of power to brakes, steering and, most critically, air bags.

Parts maker Delphi Automotive, which supplies the switch, is justifiably in the clear because it told GM engineers early on (in 2002) that the switches didn’t meet the company’s performance specifications. The low part cost, however, seems to have been enough to carry the day with Detroit’s beleaguered auto maker, whose thirst for savings was then insatiable.

GM engineers dealing with early reports of problems in 2005 investigated and determined that the cost of tooling and part changes was too high given the low rate of failure and decided to continue using the existing parts.

E-mail trails obtained by Reuters show that some GM product development staff questioned the wisdom of this call, but in the end a decision was taken not to issue a recall but instead a “service bulletin” to dealers suggesting that car owners avoid using heavy key chains. For those who died as a result of this quality issue, such a palliative was obviously inadequate. But from a cost-benefit standpoint it passed muster.

In 2006 engineers tried again, with a design change including a stiffer spring. However, this change seems to have happened with a hazy and incomplete “validation sign off” document and, incredibly, no new part number.

For anyone familiar with engineering change management practices, this is tantamount to sweeping the dirt under the rug.

Few things are more unacceptable to engineers than allowing bill of material changes without proper version control. To me, this smells of a business decision with a dash of legal ass-covering and an unlucky lead engineer (Ray DeGiorgio, according to Reuters) set up as the scapegoat in case something went wrong.

Truth be told, Mary Barra is being completely honest when she blames GM’s “cost culture” for the crime.

Russian roulette with product safety

Sometimes engineers know that at least a percentage of users will suffer, but given a risk-adjusted net present value analysis of paying off the injured versus fixing the problem in the first place, the business occasionally decides to go forward anyway.

It’s rarely the engineers, scientists, chemists or inventors who lean this way, since by nature they are usually driven to perfection. The villain is not really any one person or even function, but instead a collective willingness to take risks that we institutionalise in the legal construct of the publicly traded corporation.

We are the enemy

Corporations are meant to isolate executive officers’ fiduciary responsibilities to shareholders from any personal concerns they may feel as people. Stripped to its basics, this means that officers have an actual duty to make dispassionate decisions that always and exclusively maximise shareholder value.

If, after analysing the costs of compensation as factored for the chances of injury, such an officer sees more money in a lower cost but occasionally faulty part, he or she owes it to Wall Street to make that tough call. Sometimes it goes wrong, as in this case, but on average it works well enough that it keeps happening. Nasty, but true.

Corporations fight regulation because it costs shareholders in the short term. Business leaders, in contrast, usually want regulation because it levels the playing field and lets them face their friends and neighbours with pride.

Corporations are fine with killing a few customers or poisoning the occasional lake as long as they don’t get caught breaking the law or are slapped with costly penalties. Business leaders honestly want to delight their customers and be loved by their communities.

Corporations don’t have hearts, but business leaders do. And they hate this latest GM story because they know how easily it could be about them.