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General Motors Embraces Biden’s Environmental Push

General Motors Co. said it would both comply with a costly federal recall it has long resisted and abandoned the Trump administration in its legal fight against California's power to set its own emission standards.

by Riley Beggin and Kalea Hall, The Detroit News / November 24, 2020
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(TNS) — In just a few hours Monday, General Motors Co. said it would both comply with a costly federal recall it has long resisted and abandoned the Trump administration in its legal fight against California's power to set its own emission standards.

The moves reposition the company to work with a more environmentally focused Biden administration, analysts say, one that many automakers expect will provide more stability and support for the industry's push toward electric vehicles.

The Detroit automaker said it would accede to the National Highway Traffic Safety Administration's demand that GM recall and repair nearly 6 million full-size pickups and SUVs fitted with Takata airbags — a $1.2 billion recall it has battled for years.

Shortly afterward, the company said it would pull out of a lawsuit challenging California's right to set its own standards for greenhouse gas emissions and fuel economy rules. It instead would work with the Biden administration and California to "collaboratively find the pathway to an all-electric future," GM CEO  Mary Barra  said in a statement.

The decisions appear to be an effort to clear the slate for the automaker as it prepares for a new administration expected to be more supportive of electric vehicle investment and harder on safety issues, said  Ivan Drury , senior manager of insights at Edmunds.com Inc., an automotive information website.

"By going along, you might actually get something from it whereas before it was a no-win situation," he said. "You weren't going to suddenly change the Trump administration's mindset towards EVs, tax credits, infrastructural help."

A long-resisted recall

After fighting for four years to prevent a recall of a product it didn't make, but which went into millions of its vehicles, GM decided to end the battle when NHTSA demanded that it recall nearly 6 million trucks and SUVs to replace Takata air bag inflators.

The move — which GM could have chosen to fight — will cost GM $1.2 billion. But agreeing to the settlement also puts the issue in the rearview mirror as the automaker tries to make progress on its electric vehicle plans and prep itself for a new occupant of the Oval Office.

The recalled Takata air bags generated a small explosion in order to inflate during a crash, but NHTSA found that the inflators can deteriorate over time and create larger explosions that can injure drivers. Twenty-seven people worldwide have been killed by the air bags, including 18 in the U.S. These recalls involve 19 vehicle manufacturers and more than 60 million Takata air bag inflators in tens of millions of vehicles just in the U.S.

In a statement, GM said: "The safety and trust of those who drive our vehicles is at the forefront of everything we do at General Motors. Although we believe a recall of these vehicles is not warranted based on the factual and scientific record, NHTSA has directed that we replace the airbag inflators in the vehicles in question."

GM estimated in SEC filings that the recall would cost the company around $1.2 billion — about a third of its 2020 income so far. In its dispute with NHTSA, the Detroit automaker claimed, among several points, that the vehicles built on the "GMT900" platform underpinning its full-size pickups and SUVs had differently designed inflators.

GM argued there "are multiple unique design differences" used in the GMT900 vehicles "that result in a reduced risk of rupture," according to NHTSA's response to GM issued Monday. It also argued that the larger cabins in these vehicles, "solar-absorbing glass windshields and side glass," result in lower vehicle temperatures, reducing the risk of inflator rupture.

GM expected the inflators in question would "continue to function properly without risk of rupture for at least 30 to 35 years of service in the field." NHTSA argued there was "no persuasive evidence" that GM's claimed "unique" design advantages lead to a reduced risk of inflator rupture.

The agency noted the findings of  Harold R. Blomquist , a consultant hired to review scientific issues for the faulty Takata airbag investigation. He concluded that GM's claims of design and environmental features rendering the inflators less likely to rupture as "unfounded."

"It's just best to get this taken care of," Drury said. "Nobody wants to hear about Takata air bags anymore. That's customers. That's dealers. That is everyone under the sun, so honestly for GM's best interest going forward, especially when they've got such good news coming around the corner" to have this Takata issue out there "it's just not worth it."

Dropping lawsuit

In 2019, GM and 12 other automakers — including Fiat Chrysler Automobiles NV and Toyota Motor Corp. — intervened in a federal lawsuit brought by environmentalist groups hoping to stop the Trump administration's plans to bar California from setting its own tailpipe emission standards and requirements for electric vehicle sales.

Ford Motor Co.Honda Motor Co. and Volkswagen AG had struck a deal with California on emissions requirements and did not side with the Trump administration.

Officials within GM said they intervened in the lawsuit to have a voice in the regulations affecting their industry. They've always been supportive of a national standard and wanted to avoid a system with two different requirements, they say, even if they'd prefer that national standard to be more environmentally rigorous.

When the company announced it would be abandoning the lawsuit, they called out the Biden administration as a clear indicator change is ahead.

"We believe the ambitious electrification goals of the president-elect, California, and General Motors are aligned to address climate change by drastically reducing automobile emissions," Barra said in a letter to the plaintiffs in the suit. She added they're confident the industry, state of California and Biden administration can "collaboratively find the pathway that will deliver an all-electric future."

"We believe there is now a path to achieve an agreement on a national standard and complementary policies to accelerate the electrification of the light-duty transportation sector," she said. "This effort is critical to addressing climate change, and we look forward to working together."

Barra called upon the other automakers that had sided with the Trump administration to also pull out of the litigation, and some experts estimated that they will. However, Toyota released a statement Monday saying it is "assessing the situation, but remain committed to our goal of a consistent, unitary set of fuel economy standards applicable in all 50 states."

Democratic lawmakers, including Biden, praised the decision. Biden released a statement calling Trump's lawsuit a "shortsighted" effort to "erode American ingenuity" and its defenses against climate change. He said GM's decision will have "a positive ripple effect."

"Perhaps most importantly, GM's choice to work with the Biden-Harris Administration and California to advance these goals demonstrates a promising path forward for how industry, labor, government, and environmental organizations can come together to tackle big problems and make vital progress on behalf of the American people," Biden said in the statement.

James Hewitt , a spokesman for the Environmental Protection Agency — the agency that announced in 2019 it would be revoking California's waiver under the Clean Air Act that allows it to set stricter standards — said in an email to The Detroit News: "It's always interesting to see the changing positions of U.S. corporations."

A new sheriff in town

GM hasn't been shy about its electric-vehicle plans.

Just last week, the automaker said it will spend $27 billion through 2025 on autonomous and electric vehicle technology, up from the $20 billion it previously confirmed, and more on EV technology than gas and diesel powertrains. It will offer 30 all-electric models globally by mid-decade, and it plans to make 40% of its U.S. entries battery-electric vehicles by the end of 2025.

Barra and other executives have consistently said they want to see federal emissions guidelines rather than a state-by-state patchwork, as well as government support to help with consumer adoption.

Automakers expect the Biden administration to be more helpful to those plotting for an electric future. It's not yet clear whether his administration would push for a nationwide standard for emissions and fuel economy, but the president-elect has pledged to build out charging station infrastructure, offer consumers incentives to buy electric and potentially subsidize American companies that are investing in electric vehicle technology.

While it wouldn't be convenient to have multiple state standards, continuing to side against California could cause GM "political damage from looking like they're fighting an earth-friendly policy, especially if a new administration comes in and changes the standards back to what California would want anyway," said  Karl Brauer , executive analyst at iseecars.com.

Other experts agreed.  Brett Smith , technology director at the Center for Automotive Research, said GM's decision to drop out of the lawsuit is a signal the company is finally putting its money where its mouth is.

Investors appeared to agree Monday. GM shares rose 4% to close the day at $44.77, an indicator that Wall Street is warming to the idea that a legacy Detroit automaker still rooted in pickups and SUVs can develop the technology to power an electrified transportation future.

"Some of it is driven, I think, by the concern that people aren't taking them seriously as an electric vehicle company because they're still fighting the (zero-emission vehicle) mandate," Smith said. That was in automakers' best interest, he added, "because it's a really tough hurdle for the industry."

But the time is coming for automakers to make that leap — electric vehicles are cheaper to make than they ever have been before, and regulations in Europe and China mean automakers have to increase their environmental sustainability if they want to compete on the global stage.

GM sees the handwriting on the wall," said  Michelle Krebs , an analyst for Autotrader. The company is "betting the farm on EVs. That was always the irony of the lawsuit — they aren't going to invest a ton in gasoline engines anymore."

It's also likely that the environmental groups who brought the suit against the Trump administration will drop it against the Biden administration if it's clear they are aligned with their goals, experts said, making the continued stand against California's outlier status practically moot.

But GM's decision to drop out of the suit with two months left in the Trump administration (rather than days before inauguration) leaves them open to blowback from a president who is not shy about publicly criticizing Barra, Smith said.

"This is, in some ways, a credit to General Motors to stand up for what they claim to believe in at a point when it could have been done easier."

(c)2020 The Detroit News. Distributed by Tribune Content Agency, LLC.

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