May 17 2014, 8:48am CDT | by Forbes
Talk about can’t-win scenarios. After being hoisted innumerable times by the petard of sloppily worded memos from low-level drones, GM management instructed its employees to write precisely about product-safety issues.
And then that memo blew up beneath the carmaker as well. Apparently it’s hiding the truth to avoid terms like “rolling sarcophagus,” “horrific,” “Kervorkianesque,” and “you’re toast” in official company correspondence. Under the terms of GM’s $35 million consent agreement with the government, the company will re-retrain employees to “encourage discussion of safety issues,” “and such training will expressly disavow statements diluting the safety message” as detailed in the now-infamous memo urging employees to avoid phrases “this is a lawsuit waiting to happen.”
The New York Times featured the memo prominently in its coverage of the GM settlement today, but even a Times writer knows what’s really going on here. GM wrote a completely sensible memo to its employees reminding them what happens when incautiously written statements end up in the hands of trial lawyers.They play sensationally with the jury.
Take one of the examples GM provided in its now-disavowed memo in which GM urged its employees to “state only facts.” Trial lawyers had introduced a memo by Antonius Brenders, an official in DaimlerChrysler’s vehicle safety office, urging caution before conducting a survey urged by the National Highway Transportation Safety Agency into transmission problems. One downside of such a survey, Brenders wrote, is it could lend “product liability credence to a hypothesis we have long ignored.”
That choice of words helped lawyers at Lieff Cabraser to win a $54 million verdict against DaimlerChrysler, believed to be one of the largest single-person victories against a car manufacturer. (Since Chrysler was by then bankrupt, the family of the accident victim had to settle for $24 million.)
Left unsaid in this memo is why Chrysler might have ignored the hypothesis. Perhaps because it is nonsensical, the creation of the same sort of expert witnesses who dreamed up the Toyota sudden-acceleration scare (which faded, as if on cue, as soon as Toyota entered settlement negotiations with the lawyers). Could it be that “product liability credence” leads to insane verdicts like the $240 million in punitive damages a Montana jury ordered Hyundai to pay parents of two boys killed in a head-on collision? Plaintiff lawyers blamed a faulty knuckle joint in the car’s steering system, while Hyundai presented eyewitness testimony and physical evidence that the 19-year-old driver was distracted by the fireworks his cousin was blowing off in the car. Neither occupant was wearing seat belts, and the driver of the car their Hyundai rammed into also was killed.
The smoking-gun memo at GM also urges drivers of company cars to avoid generating smoking-gun memos when they describe the cars they are using. Since 34% of such reports contained subjective comments and opinions, GM urged writers to only include “information that could be helpful to a problem solver.” Instead of the phrase “lawsuit waiting to happen,” GM told employees to be specific: “Windshield wipers would not work properly.” Apparently the government prefers the first term, which may lack in detail but more than makes up for it in jury-convincing oomph.
The government’s solution to all this skullduggery is more intense government oversight. GM safety officials are to meet with NHTSA representatives monthly to go over safety issues and provide a complete list of every model that is under consideration for a potential recall. GM will also turn over all relevant records to the government, providing a convenient paper trail for plaintiff lawyers to follow should they want to sue the new, bankruptcy free GM.
The whole approach would be comforting for consumers except for the fact the government isn’t the best entity for enforcing safety and compliance. The space shuttle Challenger disaster was brought to you by government bureaucrats operating under strict guidelines and tight oversight. The Veterans Administration is enduring Congressional hearings over patient-queuing practices that are themselves the result of previous government directives mandating maximum wait times for specialist consultations. When bureaucrats dictate rules that are difficult or impossible to comply with, the standard response is to figure out a way to make it look like you’re complying instead of fixing the underlying problem.
In a competitive car market, automakers who make crappy products should be driven out of business. Bringing in the helpful oversight of the government, and urging employees to take flight with the prose in their internal memos, isn’t going to make GM a better company. It might make for some more spectacular jury verdicts in the future, though.
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