Accusations in GM Scandal Trickle Down the Supply Chain

General Motors has born the brunt of bad publicity in the wake of the faulty ignition switch scandal. However, as the inevitable lawsuits make their way through the US court system, suppliers will likely share much of the culpability.

Continental and Delphi have already been named in lawsuits since the discovery of GM's faulty ignition switch, which prevented airbags from deploying. The switch has been connected to 13 deaths and a 2.6 million-car recall.

Causes of actions stemming from the airbag malfunction may extend even further down the supply chain beyond Continental and Delphi, but GM will likely continue to bear most of the blame in the public's eyes. After all, millions of customers trusted GM when they purchased their cars. They obviously did not think that the largest US carmaker was knowingly selling them dangerously faulty goods. (GM has officially apologized for the delay in its recall.)

“The overall responsibility in retail channels lies with the automaker, before their Tier 2 or 3 suppliers are blamed,” Thilo Koslowski, an analyst for Gartner, told us. “It is ultimately up to the automaker to test the components and the vehicle to make sure that the car and components meet the specifications.”

However, even if GM is mostly responsible in its customers' eyes, suppliers have much to answer for, especially as defendants in related lawsuits. It is now known that Delphi manufactured the ignition switch, and Continental made the airbag. The airbag unit is supposed to have a power reserve to keep it operable without power for a certain time. That way, if the car loses power, the airbag is still deployed. But when the defective ignition switch shut off the car's power, the airbag did not engage as needed.

Adam Levitt of Grant & Eisenhofer, the law firm representing the plaintiffs in a California case, told Reuters that Continental continued making and distributing the airbags, even though it learned about the defect as early as 2005.

Continental and Delphi did not return phone calls for comment, but there are already many lessons to be drawn from the case, which is tragic by definition because the scenario was avoidable. Better batch testing and sample analysis to weed out bad components could have prevented the faulty components from working their way through the supply chain. Better communication and transparency about the entire lifecycle of the components in question could have prompted a speedier recall by GM (though that still has yet to be established).

“It is not just the widget that you worry about, but the complete lifecycle of the product, from the factory to the scrap yard,” said Paul Fulton, vice president of product for the Internet of Things at Mocana. “The industry is just going to have to work together to make improvements.”

The discovery process associated with the GM, Continental, and Delphi lawsuits will likely reveal if any other GM supply chain partners will join the list of defendants. However, if it is not already obvious, any party involved in the supply chain is potentially liable. The root cause of the faulty ignition switch design and airbag deployment could be attributed to a number of components procured from Tier 3 suppliers. Thus, many other parties are potentially liable in this tragic mess.

“We are still considering all avenues,” Levitt told us. “It is a hard question to answer who is liable for what. Discovery will ultimately determine that.”

Levitt is obviously concerned about proving that Continental illegally failed to take adequate action to prevent the use of its airbags in the GM cars. But as an officer of the court, he has also sworn, among other things, to promote justice.

When asked what should concern supply chain partners about being involved in nightmare scenarios like this one, he said: “When you are involved with any component, especially for cars, the key issue is achieving transparency and taking responsibility for things when they go wrong.”

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1 comment on “Accusations in GM Scandal Trickle Down the Supply Chain

  1. Eldredge
    May 16, 2014

    “When you are involved with any component, especially for cars, the key issue is achieving transparency and taking responsibility for things when they go wrong.”

    This is particularly true when the component in question is itself a safety device that, according to the description, does not appear to be operating in acordance with the original design requirements.

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