For GM, the ruling was only the first of a double blow. Later in the week it reported a $328 million third-quarter loss for its core North American automotive group. Although overall earnings fell only slightly short of stock analysts’ expectations, GM’s shares tumbled 12 percent in just two days to a 52-week low. Executives blamed the loss on a series of strikes and factory shutdowns that ate away at earnings even as total revenues rose. Wall Street immediately slashed its projections of the company’s year-end results.
Until Pena’s announcement, GM seemed to be winning the lengthy battle against charges that its pickups are unsafe. This spring the automaker won a court ruling overturning a whopping $105 million personal-injury judgment involving one of its allegedly defective trucks. It also had forced NBC News to publicly apologize for faking a documentary report on the pickups; a fiery side-impact collision, it turned out, had actually been sparked by small incendiary devices planted by the network’s testers.
GM was apparently winning with Pena’s researchers, too. According to Pena, a two-year study by the National Highway Traffic Safety Administration showed that the trucks’ fuel tanks, which were mounted outside the underbody framework, burst into flames two-and-a-half times as often as those in Ford or Chrysler trucks put through similar tests. But that isn’t the whole story. The NHTSA’s own experts also found that the GM trucks were safer in nonfire collisions than trucks built by Ford or Chrysler, so the overall risk of death in an accident was no higher. What’s more, the big pickups as a class are the safest passenger vehicles on the road. The NHTSA experts recommended that the effort to recall the trucks be dropped.
Pena’s announcement marked the first time a transportation secretary has ever overruled such an NHTSA recommendation. GM, predictably, was livid. Pena’s intervention, said vice president Bruce MacDonald, was ““totally unjustified . . . outrageous and wrong.’’ Detroit was awash in rumors that the recall decision came not from the secretary but from an election-conscious White House – a rumor Pena flatly denies. In any case, Pena’s much-publicized ruling was not the final word. The Department of Transportation will conduct a fuller review in December – providing one more chance for the experts to speak their piece.
