GM’s Supplier-Squeezing Days Gave Birth to Flawed Models

http://www.bloomberg.com/news/2014-03-21/gm-s-supplier-squeezing-days-gave-birth-to-flawed-models.html

The cars at the center of General Motors Co. (GM)’s February recall were still on the drawing board when a top engineer gathered more than a dozen managers and delivered a fateful message: Build them for less.

At the time, around 2000, GM’s profit margins were shrinking as worker- and retiree-benefit costs rose and its U.S. market share leadership was eroding. GM’s grand plan to make money on small cars, by developing them jointly with Fiat SpA (F), was crashing.

As it became clear that GM’s planned Chevrolet Cobalts and Saturn Ions wouldn’t get made on a money-saving global design, Gary Altman, the models’ chief engineer, told the group they needed to find other ways to reduce costs, including a suggestion to pull parts from existing models, said a person who was at the meeting in the automaker’s suburban Detroit technical center.

Those same Cobalts and Ions are among 1.6 million vehicles that GM recalled last month over an ignition-switch flaw the company says is behind 12 deaths. U.S. investigators and regulators want to know what went wrong, who knew about it and why the nation’s largest automaker took so long to mount a recall of models made a decade ago.