By Paul Lienert and Marilyn Thompson
DETROIT/WASHINGTON (Reuters) - The 2003 Saturn Ion was supposed to be a pivotal car for General Motors Co. Instead, it came to represent the compromises and corner cutting that almost destroyed GM and now find the company in a global recall of some of its most popular models.
The Ion debuted two years before the Chevy Cobalt, the model most associated with the current recall of 2.6 million vehicles, and it was the first car with the defective ignition switch linked to at least 13 deaths, when engines turned off, disabling airbags.
Priced from $12,000, it was the automaker's answer to the class-leading Toyota Corolla and Honda Civic, a small car that could finally be built at a profit to GM, which at the time was losing up to $2,000 on every compact it sold.
The all-new Ion was to be a standard bearer for GM's import-fighting Saturn brand, as well as the advance guard for a new family of compacts, code-named "Delta," that eventually would include the 2005 Cobalt.
Instead, the Ion, and the safety of its ignition switch, were compromised by GM's determination to cut its bloated costs, fractious relations with parts maker Delphi Automotive, and pressure to stick to a schedule, a close look at GM documents released to Congress and interviews with former GM executives show.
In many ways the problems with all of the cars affected by the recall are reflected in the Ion's troubled start.
Delphi alerted GM that the switch did not meet the automaker's standards by early 2002, the parts maker told Congress. The switch cost less than $1 to produce.
But changing it just before the start of production would have cost hundreds of thousands of dollars in factory retooling and caused an expensive and embarrassing delay in the Ion's introduction, former GM officials told Reuters.
GM decided to proceed with the sub-par switch in February 2002, only five months before the first Ions were expected to roll out of a Tennessee factory, Delphi told Congress. The decision would have far-reaching consequences over the next 12 years.
GM, which is pursuing its own investigation of the recall, said it would not comment on specifics "until our internal review is complete." Delphi declined to comment.
The Ion was one of the first products developed under the watch of industry veteran Bob Lutz, who rejoined GM in September 2001 as vice chairman in charge of product development and was sometimes compared by insiders with the tough-talking judge who is the title character in Elmore Leonard's novel, Maximum Bob. Then-Chairman Rick Wagoner had lured Lutz to the automaker to revitalize its tired vehicles, as well as its product development organization.
There is no evidence that Lutz played any role in the switch decision or knew about its problems. But Twelve years ago, corporate pressure to keep the 2003 Ion on schedule was intense, former GM executives told Reuters.
"Would you want to be the guy who told 'Maximum Bob' that his baby was going to be late?" asked a retired GM purchasing manager familiar with the small-car program.
Lutz declined to comment.
A SWITCH IS BORN
The lead designer for the Ion ignition switch was Ray DeGiorgio, a GM engineer who testified in a deposition last year that he developed the project jointly with a small team of Delphi engineers. The Ion switch was DeGiorgio's first project as a lead designer, he testified.
DeGiorgio was one of two GM engineers on Thursday who were placed on paid leave for undisclosed reasons as part of GM's ongoing investigation of the switch-related recall. [ID:nL3N0N243F] It is not clear what role, if any, he played in the 2002 decision not to change the switch, and Reuters attempts to reach him were unsuccessful.
A former GM subsidiary that had spun off in 1999, Delphi, based in Troy, Michigan, still relied heavily on GM business. A number of Delphi officials, including CEO J.T. Battenberg, were former GM executives.
The relationship was complex from the start. The U.S. Securities and Exchange Commission in 2004 began investigating the automaker's accounting practices in the early 2000s, including how GM had handled some transactions with Delphi, and eventually reached a settlement with the automaker in 2009. The SEC also investigated Delphi's accounting practices, including certain transactions with GM, settling most charges in 2006.
Relations between the carmaker and its supplier were often strained by issues involving money, one former executive said.
The supplier "was blamed for many of the product problems GM was experiencing in the field," according to the retired GM finance manager who helped monitor product quality at the time.
"Since executive bonuses were partially pegged to profitability and quality metrics, Delphi and other suppliers became convenient scapegoats," the manager said. GM people would look at recall costs in terms of the effect on their pay. They "were constantly score-carding bonus payout thresholds and the adverse impact of potential product recalls."
Both companies were struggling with high labor and material costs and eventually declared bankruptcy later in the decade. In the early 2000s, cost reduction was a mantra at both companies.
Vehicle teams at GM, such as the one designing and engineering the Ion, were given strict cost targets, as were suppliers like Delphi. To meet them, "cheaper, less robust components were approved for new vehicles," according to the retired finance manager. He declined to be more specific.
Against this backdrop, the Ion development program rolled on. Delphi told House investigators last month that it informed GM the switch didn't meet the automaker's requirements for torque, the rotational force needed to keep the switch in the "run" position. But GM signed off on use of the switch in February, 2002, Delphi said.
Six months later, the first Saturn Ion, a sporty silver-blue model, rolled off the production line in Spring Hill, Tennessee, applauded by top GM and union officials.
The car was panned almost immediately by consumers and critics alike. Car and Driver magazine proclaimed it "the most disappointing all-new American car in a decade."
Problems cropped up almost immediately with the Ion's ignition switch. GM sent a service bulletin to Saturn dealers in December 2002, when the Ion had been on the road for just four months, telling technicians how to replace the ignition lock cylinder.
Another service bulletin in June 2004 addressed issues with engines failing to start. A third bulletin in March 2005 advised technicians about "inadvertent turning" off of the switch, which caused engine stalling.
GM already had updated the switch for the launch of the Ion's sibling, the Cobalt, and recommended to Saturn dealers that it replace older ignition switches with the newer one. Even then, owners complained about keys accidentally switching off the ignition and engines stalling. Crash fatalities mounted.
The first Ion crash fatality occurred in December 2003, according to GM and NHTSA records, followed by seven more deaths in five more Ion crashes by June 2005. Neither GM nor NHTSA has said if those deaths were potentially linked to the defective ignition switch. But GM last month acknowledged four switch-related deaths in Saturns, all of them 2004 Ions.
All models of the recalled cars, including Ions, had a second ignition-related problem, GM revealed on Thursday: keys coming out of ignitions while the engine is running, that caused at least tone non-fatal injury.
A brand-new ignition switch was considered, then rejected in September 2005 by GM engineers working on the Ion and Cobalt, because the new switch would have required $400,000 in new tooling and added 90 cents to the cost of each car, GM emails released to Congress show.
Instead, yet another ignition switch revision for the Ion and other cars was approved in April 2006 by GM's DeGiorgio, according to a GM document. DeGiorgio authorized Delphi to change the switch's internal workings by replacing two tiny parts that helped control how much force it took to turn the switch.
Delphi officials told congressional investigators last month that the redesigned switch approved by DeGiorgio provided "a significant increase in . . . performance, but the values were still below GM's original specifications."
House Democrats in late March said Delphi told them GM's original torque specifications called for a range of 15 to 25 Newton-centimeters, but testing of the original switch in 2002 showed actual torque between 4 and 10 N-cm in most cases. The redesigned switch in 2006 showed test results of 10 to 15 N-cm, Delphi told investigators.
DeGiorgio, questioned about his approval during a 2013 court deposition in a switch-related lawsuit against GM, denied that he was aware of or approved any change.
Neither GM nor federal regulators told the public until early this year about the faulty switch, although there were plenty of warning signals over the past decade.
Saturn Ion drivers in complaints to the National Highway Traffic Safety Administration described putting their lives at risk when engines inexplicably stalled. There were more than 550 complaints for the 2003 Ion alone.
One owner of a new 2003 Ion reported being "nearly killed in the vehicle twice" when the car stalled on a freeway. Another told NHTSA "on three different occasions, my knee has accidentally hit the keys, causing the engine to shut off," including two incidents at highway speeds.
The federal agency has repeatedly said it did not have enough evidence to show a defect trend.
In late February, the carmaker recalled its entire five-year production run of Saturn Ions and said it will replace the faulty ignition switches with a newly manufactured version.
That upgrade will apply to the estimated 475,000 Ions still on the road.
(Additional reporting by Eric Beech and Richard Cowan in Washington and Nick Carey in Chicago, editing by Peter Henderson)