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Morning Commentary

News is Slow; Truth May Never Arrive

By Charles Payne, CEO & Principal Analyst
4/2/2014 6:35 AM

Bad news doesn't always travel fast.

In addition to bad news not always traveling fast, we should add honesty, which seems to trail even further behind.  We are in the midst of both ends of this conundrum this week.  On the one hand, the White House gloated about signing up 7.1 million people to healthcare plans, but in the same breath, the White House said they do not monitor how many people have actually paid.  It is even tougher trying to get an honest reply of the number of  Americans that did not have healthcare before the law passed, who are now blessed to be covered.

Premium hikes, large deductibles, and fewer options are the kinds of boondoggles that slowly erode the base and retard any good points of the law, which is still roundly rejected in opinion polls. Remarkably, we watch mounting disasters like the healthcare law, the mountain of government debt, and the Fed balance sheet that is like an economic Yucca mountain, because they move so slowly. The risks are clear, but the hammer is not coming down tomorrow. (I have always thought it a mistake for conservatives to talk about America collapsing tomorrow as if we are Greece.  The Greek turmoil should serve as a cautionary tale; it took thirty years of socialism before they slipped into the Mediterranean, only to be bailout twice.)

On that note, I think there is time to reverse or mitigate the worst damage, although if current ideology continues to 2020, we will probably hit the point of no return, or the ultimate hard landing.

If America, as a people, suspends disbelief long enough to become a lumbering giant, incapable of returning to greatness then that is our (collective) fault. There is a difference between that and woeful indifference, however. Moreover, there is also a difference between all these things and criminal neglect.

That is the situation General Motors and the National Highway Transportation Safety Administration find themselves in. Yesterday, it was Mary Barra's turn to face the music.

Right out of the gate, Barra replied "yes" when asked if the company knowingly used parts that did not meet their own specifications. Making matters worse, it was revealed that a replacement switch to fix the problem would cost $0.57, but it was deemed too expensive (management called it an 'unacceptable cost increase'). There are so many layers of deceit with this story; first selling the Cobalt and Ions that were subpar to begin with, to avoiding scandal, to only helping those people who complained about problems. As well as having a redesigned part that inexplicably was never assigned a parts number.

After eight years of quietly sweeping it under the rug, GM recalled millions of vehicles.

It is too late for the 13 victims and their families.

Furthermore, it is not too late to find the underlying cause of this whole fiasco. GM hired Ken Feinberg, who put together compensation plans for families of 9-11 victims and the BP oil spill. While there is a legal loophole that allows the "new" GM to avoid large fines and costly legal settlements, there is no doubt that victims of this man-made tragedy will walk away with lots of money. The civil part is not what interests me as much as finding out the truth.

GM engineers checked-off on the car, and management pushed the car and the flimsy fixes through 133 warranty claims, and somehow looked the other way for more than a decade. This is more egregious that the BP disaster, but may never get that kind of treatment. Yet I wonder as the public learns more, if even the PR machine that's working overtime trying to convince the world that the healthcare law is great, would be able to cover this up. There are important questions and considerations here.

Where was the National Highway Transportation System Administration? Was the problem swept under the rug, because the government was in the midst of an unpopular and expensive bailout? Why did the government take a loss on GM stock when it was clear the overall demand was returning to the space and the stock, which had a greater chance of moving higher? Would anyone be surprised government officials knew, but looked the other way while it bailed out unions through a bankruptcy riddled with controversy?

Finally, it is remarkable that Americans are being told to forgo money, power, and its place in the world, to head off a one-degree change in the temperature over the next one hundred years. There are so many issues involving our very own government that cannot honestly be addressed today.


Comments
It is too bad that most Americans deem the Tea Party people as crazy, but they are the ones trying to wake them up to the upcoming financial disaster. We end up reacting to disaster instead of trying to prevent it in our culture.

Jeannie F. on 4/2/2014 1:40:34 PM
I watched a part of the questioning of Barra during lunch yesterday. What amazed me were not the issues you raised. I have some knowledge of the issue, as I was an engineering manager at a supplier of electronics to GM and I worked specifically on automotive products for several years.

It is normal operating procedure to use parts which may be outside the GM specifications at times. There are several reasons for this, but the primary motivation is to keep the assembly line running. Cars get VERY expensive if the assembly line is stopped due to a missing component. GM has a large contingent of engineers and quality experts to find interim solutions for parts which may be outside the specification, but are still reliable and meet the intended purpose. Specification waivers and alternate specifications are both used to cover these issues. Using those tools to keep the assembly line running is NOT bad engineering or unsafe.

The issues that concerned me are different.
1) This issue went on for several years. Out of spec parts should only be used when a correction plan is in place, and that should be a matter of a few months.
2) The issue of known field failures with dire consequences was ignored. That should never happen. (There is a process called FMEA which weights potential and real failures based on the consequences, and a consequence of death should have brought this to the top of the priority list for solution).
3. Barra made 3 ridiculous statements that should have been called to task if the persons holding the hearing had any real understanding of business:
A) That GM had changed from a cost culture to a customer culture and that she spoke for every GM employee in that regard. Anybody should understand that such a change in such a large organization would take years of dedicated effort by the CEO and her direct report staff. This obviously has not occurred, and the way she speaks of it proves she has little awareness of what is happening throughout GM.
B) She says that the problem of the switch and the organization which allowed the problem to exist is solved, but also that she has no idea how it happened. Duh? If you don't know what went wrong, then you can't know that it is fixed.
C) The fix she speaks of is to put one person in charge at an executive VP level. Most such fixes are real only in the minds of the CEO and the board, because the reports on the results of the new organization come only from the guy running it, who has a vested interest in lying. I would have been much more impressed of possible success if she had said she appointed a watchdog to ferret out problems within the existing organization, and make that work right, rather than a new organization with all new failure modes and incentive to cover them up.

Bob G on 4/2/2014 7:18:12 PM
 

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