HIGH MARKS CLARIFICATION The Nissan Versa Note’s cargo area can be modified by using a shelf that creates a level surface with the folded rear seats. A sto- ry on Page 3 of the April 14 issue comparing the 2015 Honda Fit with its competitors didn’t men- tion that feature. HOW TO REACH US Web site: autonews.com Editorial staff: 313-446-0361, e-mail [email protected]Advertising: 313-446-6031 To locate information that has been published in Automotive News, call 313-446-0406. To start or renew a subscription or to report an address change or a delivery problem, e-mail [email protected]or call 877-812-1584 (in the U.S. or Canada). Mike Colias [email protected]DETROIT — Michael Millikin, General Motors’ top lawyer, was conspicuous in his silence this month during a U.S. Senate panel grilling of CEO Mary Barra over the company’s ignition-switch recall. Millikin sat stone-faced, lips pursed, as several senators won- dered aloud why his legal team wouldn’t have known about problems long be- fore this year’s recall of 2.6 million cars for a faulty ignition switch that has been linked to 13 deaths. Barra declined to confer with her general counsel even when invited to do so by the pan- el’s chairman. But behind the scenes, Millikin, a 65-year-old former federal narcotics prosecutor, is anything but a passive bystander. Few GM insiders will play a more central role in the company’s re- sponse to the biggest crisis since its government- led bankruptcy five years ago. Millikin is co-leading the internal investigation into how GM let the defect linger for a decade. He’s steering GM’s response to at least four fed- eral probes, including one by the Justice Depart- ment. He’ll likely help determine whose heads see MILLIKIN, Page 31 Millikin guides recall response, inside and out Chrysler’s big show What: CEO Sergio Marchionne and top executives will present Chrysler Group’s 5-year product and business plan to journalists and analysts. When: 8 a.m. to 6 p.m., May 6 Where: Chrysler headquarters, Auburn Hills, Mich. Coverage: Go to autonews.com for blogs, tweets and analysis of the 2015-19 plan. Chrysler: No rest despite success Larry P. Vellequette [email protected]DETROIT — Chrysler Group has rebounded from bankruptcy and the Great Recession, a feat many deemed impossible in 2009. But expect no victory lap. Chrysler’s reward will be five more years of hard labor. On May 6, CEO Sergio Marchionne and his team will outline the compa- ny’s five-year product and business plan for analysts and the media. Here are three key challenges the plan is likely to address: 1. Fuel economy. Chrysler’s fleet mileage lags those of other major automakers in the United States. 2. Earnings. Chrysler’s profit mar- gins are well behind those of Ford Motor Co. and General Motors. 3. Production capacity. Chrysler’s plants are largely maxed out for key vehicles such as Jeeps and some Ram full-sized pickups. Chrysler’s last five-year plan dealt mostly with restoring sales and profits. The new product and business plan likely will tack- le obstacles that continue to vex the automaker, such as: Chrysler’s corporate average fuel economy for see EVENT, Page 30 Larry P. Vellequette [email protected]ETROIT — In late 2009, Fiat- Chrysler CEO Sergio Marchionne and his team laid out an auda- cious five-year plan to rebuild Chrysler Group. The verdict is in: It worked. Today, as company executives prepare to unveil on May 6 a new five-year plan that comes near the fifth anniversary of the au- tomaker’s bankruptcy, Chrysler is prof- itable. Its products and marketing are vastly better. Its dealers are making more money than they have in decades. Sales continue to grow. Neither the U.S. government nor the UAW holds an ownership stake. There have been stumbles and setbacks, to be sure — the Fiat brand relaunch and the half-baked Dodge Dart spring to mind. But Chrysler deserves a strong B+ for its performance during the last five years. Chrysler expended a herculean effort to improve the products it inherited from Cerberus Capital Management and Daim- ler AG. The best work was done where it was needed most: vehicle interiors. Beginning with the 2011 Jeep Grand Cherokee, Chrysler’s designers excised the lineup’s hard plastic and rat-gray interiors one by one. They placed pleasing, soft plastics almost every- where a consumer would touch. They added handy storage spaces, such as under the passenger seat in the Dart, 2014 Jeep Cherokee and 2015 Chrysler 200. They installed a well regarded 8.4-inch touchscreen Uconnect infotainment sys- tem in most of the lineup. Chrysler has made great strides with its large cars, crossovers, pickups and SUVs, thanks in large measure to the 3.6-Penta- star V-6 and an eight-speed transmission for rear-wheel-drive vehicles that it li- censed from ZF Friedrichshafen. The powertrain combo gave much of Chrysler’s lineup either competitive or class-leading performance and fuel econ- omy, especially in profit-rich products such as the Ram 1500 pickup, Jeep Grand Cherokee, Dodge Durango and Chrysler 300. Chrysler in 2014 closely resembles what Marchionne said it would 5 years ago B Financial Steady profits now, but margins lag A Sales Market share was 8.9% in ’09; now it’s 12.6% A Existing products Existing vehicles vastly improved C New products Miss on Dart; hits with Cherokee, 200 B Manufacturing Improved quality and efficiency C Dealer relations Stair-steps vex some dealers; Fiat dealers still struggle A Marketing Super Bowl spots are the envy of industry B Powertrain V-6, V-8, diesels, trannies all score; mediocre I-4 B Engineering Innovation boosts mileage; small cars, quality lag A Design Bold risks on Ram 1500, Cherokee rewarded A Purchasing Trust restored with suppliers A Jeep Firing on all cylinders; capacity issues paramount A Ram Pickups win new customers; ProMaster van slow so far B Dodge Refreshed Durango, Challenger, Charger score B Chrysler Redesigned 200 promising; 300, minivan redos are overdue C Fiat More product needed for struggling dealers B Overall Strong rebound from bankruptcy + + + + _ _ + _ Chrysler Group report card for 2009-14 NEWS ANALYSIS ■ Alfa Romeo will become stand-alone company, sources say. | PAGE 30 | D Marchionne succeeded with one five-year plan. Now he’s poised to unveil the next. ’15 Chrysler 200: Improvement showcase NEWS ANALYSIS APRIL 28, 2014 • 3 Good grades ■ FIVE YEARS LATER April 2009 timeline | PAGE 30 | see GRADES, Page 30 GM’s top lawyer is no potted plant Introducing Automotive News’ General Motors Recall Resource Center. Featuring: A timeline of events, whom to watch as events unfold, significant documents and insights from key players and experts. Go to autonews.com/GMrecall Senators grill General Motors CEO Mary Barra on whether the legal department, headed by Michael Millikin, left, should have acted earlier. C-SPAN ■ Engineer shake-up at GM | PAGE 31 |
Transcript
HIGH MARKS
C L A R I F I C A T I O N
� The Nissan Versa Note’s cargoarea can be modified by using ashelf that creates a level surfacewith the folded rear seats. A sto-ry on Page 3 of the April 14 issuecomparing the 2015 Honda Fitwith its competitors didn’t men-tion that feature.
H O W T O R E A C H U S� Web site: autonews.com� Editorial staff: 313-446-0361, e-mail [email protected]� Advertising: 313-446-6031� To locate information that hasbeen published in AutomotiveNews, call 313-446-0406.� To start or renew a subscription or to report an address changeor a delivery problem, [email protected] call 877-812-1584 (in the U.S. or Canada).
DETROIT — Michael Millikin, General Motors’top lawyer, was conspicuous in his silence thismonth during a U.S. Senate panel grilling of CEO
Mary Barra over the company’signition-switch recall.
Millikin sat stone-faced, lipspursed, as several senators won-dered aloud why his legal team
wouldn’t have known about problems long be-fore this year’s recall of 2.6 million cars for afaulty ignition switch that has been linked to 13deaths. Barra declined to confer with her generalcounsel even when invited to do so by the pan-el’s chairman.
But behind the scenes, Millikin, a 65-year-oldformer federal narcotics prosecutor, is anythingbut a passive bystander. Few GM insiders will
play a more central role in the company’s re-sponse to the biggest crisis since its government-led bankruptcy five years ago.
Millikin is co-leading the internal investigationinto how GM let the defect linger for a decade.He’s steering GM’s response to at least four fed-eral probes, including one by the Justice Depart-ment. He’ll likely help determine whose heads
see MILLIKIN, Page 31
Millikin guides recallresponse, inside and out
Chrysler’s big show� What: CEO Sergio Marchionne
and top executives will presentChrysler Group’s 5-yearproduct and business plan tojournalists and analysts.
� When: 8 a.m. to 6 p.m., May 6
� Where: Chrysler headquarters,Auburn Hills, Mich.
� Coverage: Go toautonews.com for blogs,tweets and analysis of the2015-19 plan.
DETROIT — Chrysler Group hasrebounded from bankruptcy andthe Great Recession, a feat manydeemed impossible in 2009.
But expect no victory lap.Chrysler’s reward will be five moreyears of hard labor.
On May 6, CEO Sergio Marchionneand his team will outline the compa-ny’s five-year product and businessplan for analysts and the media.
Here are three key challenges theplan is likely to address:1. Fuel economy. Chrysler’s fleetmileage lags those of other majorautomakers in the United States.2. Earnings. Chrysler’s profit mar-gins are well behind those of FordMotor Co. and General Motors.3. Production capacity. Chrysler’splants are largely maxed out for keyvehicles such as Jeeps and someRam full-sized pickups.
Chrysler’s last five-year plan dealtmostly with restoring sales and
profits. The new product andbusiness plan likely will tack-
le obstacles that continue tovex the automaker, suchas:� Chrysler’s corporateaverage fuel economy for
ETROIT — In late 2009, Fiat-Chrysler CEO Sergio Marchionneand his team laid out an auda-
cious five-year plan to rebuildChrysler Group.
The verdict is in: It worked.Today, as company executives prepare to
unveil on May 6 a new five-year plan thatcomes near the fifth anniversary of the au-tomaker’s bankruptcy, Chrysler is prof-itable. Its products and marketing are vastlybetter. Its dealers are making more moneythan they have in decades. Sales continueto grow. Neither the U.S. government northe UAW holds an ownership stake.
There have been stumbles and setbacks,to be sure — the Fiat brand relaunch andthe half-baked Dodge Dart spring to mind.But Chrysler deserves a strong B+ for itsperformance during the last five years.
Chrysler expended a herculean effort toimprove the products it inherited fromCerberus Capital Management and Daim-ler AG.
The best work was done where it wasneeded most: vehicle interiors.
Beginning with the 2011 Jeep GrandCherokee, Chrysler’s designers excised thelineup’s hard plastic and rat-gray interiorsone by one. They placed pleasing, softplastics almost every-
where a consumer would touch. They added handy storage spaces, such
as under the passenger seat in the Dart,2014 Jeep Cherokee and 2015 Chrysler 200.They installed a well regarded 8.4-inchtouchscreen Uconnect infotainment sys-tem in most of the lineup.
Chrysler has made great strides with itslarge cars, crossovers, pickups and SUVs,thanks in large measure to the 3.6-Penta-star V-6 and an eight-speed transmissionfor rear-wheel-drive vehicles that it li-censed from ZF Friedrichshafen.
The powertrain combo gave much ofChrysler’s lineup either competitive orclass-leading performance and fuel econ-omy, especially in profit-rich productssuch as the Ram 1500 pickup, Jeep Grand
Cherokee, Dodge Durangoand Chrysler 300.
Chrysler in 2014 closely resembles what Marchionne said it would 5 years ago
might roll as a result of the internal review,people familiar with the company’s proce-dures say. And he’ll have a big say inwhether GM establishes a fund to compen-sate victims of prebankruptcy crashes.
‘Tell me now’The recall poses a big late-career test for
Millikin, a Battle Creek, Mich., native whojoined GM in 1977 after two years as an as-sistant U.S. attorney in Detroit going afterdrug kingpins. He was named chief counselfive days after GM’s emergence from bank-ruptcy in July 2009.
GM declined to make Millikin available foran interview.
People who have worked with him de-scribe Millikin as a no-nonsense lawyer andmanager who strikes an imposing presencearound GM headquarters. He demands anunusually fine level of detail from those whoreport directly to him, sources say.
“He’s extremely hands-on,” says one for-mer attorney who worked with Millikin formany years. “Mike’s management style is,‘Tell me now. I need to know.’”
Another former colleague describes Mil-likin as “street smart” and “intense.”
“He has a way of making very intelligentpeople stammer,” the former colleaguesays. “You realize that, when you’re talkingto him, he’s listening, but he’s also readingfor what you’re not saying.”
He also has a reputation as a by-the-bookoperator and a hawk on ethical matters. Afew years ago, as some GM executives await-ed a flight to China, they were handed giftbags from the airline that included a pair ofBose headphones, says a person who wasthere. A few of the execs glanced at Millikinto check whether their general counseldeemed accepting the schwag a conflict ofinterest. (He didn’t.)
John Quinn, a partner at business litigationfirm Quinn Emanuel Urquhart & Sullivan whohas worked with Millikin on GM cases for 20years, says he has seen Millikin be “very criticalof people who get out of line” within GM.
“He’s not starry-eyed about GM. Heknows there can be bad apples, and hedoesn’t tolerate it,” Quinn says.
Millikin applied that ethos in the mid-1990sto what would become a defining case in hiscareer: He was the architect of the company’shigh-profile legal pursuit of former GM pur-chasing boss J. Ignacio Lopez, who stole plan-ning documents, purchase contracts and oth-er trade secrets from GM when he left thecompany in 1993 for Volkswagen.
Then head of GM’s in-house litigationpractice, Millikin campaigned for the com-pany to go after Lopez while suing VW in theprocess, Quinn says.
“Not everyone at GM was in favor of it, butMike advocated for it,” Quinn says. “Fromthat point, he remained heavily involved inthe nitty-gritty of shaping the case, the dis-covery and the ultimate negotiation and set-tlement.”
The companies eventually settled in Janu-ary 1997, with VW agreeing to pay GM $100million in damages, plus agreeing to buy $1billion in components from GM over sevenyears.
“That’s the sort of case that could get startedwith a big bang and then fade,” said EugeneDriker, a partner at Barris, Sott, Denn & Drikerin Detroit who also worked with Millikin onthe Lopez case. “But that’s not Mike’s style.He’s not easily pushed off the path.”
Today, Millikin leads a team of about 85in-house lawyers in the United States, most-ly based at GM’s headquarters here, and
roughly 140 more overseas, according to aperson familiar with the department’sstructure.
One of the largest practice areas consistsof about a dozen litigators who handle prod-uct liability lawsuits, says another personwith knowledge of the department. Theygenerally are assigned cases based on thevehicle type or geography.
They often specialize in a vehicle system,such as brakes or transmissions, and inter-face with GM engineers on specific cases,the source says.
Hot seatThe litigators often handle more than 100
civil cases at a time, with help from outsideattorneys, the source says. They generallyhave the authority to settle cases on theirown of up to a few hundred thousand dol-lars. Larger settlement amounts require au-thorization from higher up, the source says.
At the April 2 Senate subcommittee hear-ing, Millikin found himself in the hot seat
along with Barra. Lawmakers questionedhow multiple settlements with families ofvictims who died in crashes linked to thefaulty switch wouldn’t have triggered a clos-er review by his department.
Of the 13 deaths that GM has linked to thefaulty switch in 2004-07 Chevy Cobalts andSaturn Ions, GM reached settlements withfive victims’ families over the years, the firstcoming in 2006, according to reporting byAutomotive News.
Lawmakers also pointed to several deposi-tions from GM engineers in spring of 2013 aspart of a civil lawsuit brought by the familyof Brooke Melton, a Georgia nurse who diedin a 2010 crash of her 2005 Cobalt.
In the depositions, one engineer acknowl-edged that the switch problem wasn’t fixedbecause of cost considerations. Trial lawyerLance Cooper revealed that the switch’s de-sign had been changed in 2006, but the en-gineer responsible for the part deniedknowing about it.
“I find it shocking that something like that… wouldn’t have gone directly up throughthe leadership of GM,” Sen. Kelly Ayotte, R-N.H., told Barra, while asking: “Does thegeneral counsel report directly to the CEO?”
GM has said Millikin learned of the igni-tion switch issue after Jan. 31.
GM settled with Melton’s family in Octo-ber. GM recalled 1.6 million cars for the de-fective ignition switch in February, expand-ing it twice in March, to 2.6 million cars.
Peter Henning, a professor at Wayne StateUniversity Law School, says the generalcounsel at a company as large as GM wouldnot normally “wade into the minutiae” ofindividual cases. But a pattern of settle-ments eventually should raise red flags.
“That’s a key question in this case: Whatdid the legal department know, and howhigh up did it go?” Henning says. “That ulti-mately may be unknowable. But it’s worthasking.” c
Nick Bunkley contributed to this report.
Michael MillikinAge: 65Title: General Motorsexecutive vicepresident andgeneral counselAppointed: July2009Education: B.S. from
Michigan State University (1970), J.D.from Washington University School ofLaw (1973)Before GM: Assistant U.S. attorney inDetroit, concentrating on narcoticscasesSource: GM
DETROIT — A shake-up ofGeneral Motors’ vehicle engi-neering operation will nearlytriple the number of “productinvestigators” in charge of de-tecting patterns in crash re-ports, customer complaints,lawsuits and other data thatmight point to a safety problem.
Under a restructuring an-nounced last week, the investi-gators will work as part of a newproduct integrity division thatwould routinely monitor vehi-cles for safety compliance asthey are being developed andaim to eliminate communica-tions barriers that could allowmajor safety issues to go unde-tected.
GM product chief Mark Reusssaid the moves are a direct out-growth of GM’s review of an ig-nition-switch problem that hasbeen linked to 13 deaths andled to the recall of 2.6 million2004-07 vehicles. The companyhas acknowledged that its engineersflagged the problem as early as 2001, butit did not recall the cars until February.
Reuss said engineers will takea more holistic approach toidentifying the root cause ofproblem parts and examinemore closely how flaws in indi-vidual components could affectother systems in the vehicle.
The new structure splits vehi-cle engineering into two divi-sions: the product integrity unitand a components and subsys-tems group. Ken Morris, 47,who was executive director ofchassis engineering at GM, isheading the product integrityunit. Ken Kelzer, 51, who hadled powertrain engineering inEurope, is in charge of the com-ponents group. The changes areeffective immediately.
Morris’ division will includethe new global safety group GMcreated in February, led by JeffBoyer, who will oversee a teamof 55 product investigators, upfrom 20 before.
John Calabrese, 55, vice presi-dent of global vehicle engineer-ing since April 2011, will retire,
GM said. Reuss said Calabrese’s depar-ture isn’t connected with the switch in-vestigation.c
GM beefs up its staff of product investigators
Morris
continued from Page 3
MILLIKINGM’s top lawyer is keyplayer in recall response
Kelzer
Calabrese
Penske said. “We’re building an in-frastructure,” he said, “to stay in thebusiness and be competitive.”
Noting that cost is an issue, headded, “AutoNation has come outand said, do they need to have anoutside provider? We have partnerswe’re using, but we’ll keep looking atthose to make sure it makes sense.”
Sonic won’t drop its lead providersbut is working to bolster its own leadcapabilities.
“We’re not solely relying on ourlead providers to drive traffic to ourstores,” said Jeff Dyke, Sonic’s exec-utive vice president of operations.“We’re relying on our store Websites as well.”
Sonic expects its percentage of self-generated leads to increase substan-tially once it rolls out its One Sonic,One Experience initiative, whichlaunches in July at a Toyota store inCharlotte, N.C. The Sonic name andlogo will go on its stores and beprevalent in its advertising.
Sonic also will remake its onlineexperience to dovetail with the newin-store experience, Dyke said. Acustomer will be able to select a car,initiate a purchase online and
choose whether to have the car de-livered at a store location, home oroffice, he said.
Unless retailers have a singlebrand to advertise, it’s hard to getenough leverage to internally driveconsumer traffic, Sonic PresidentScott Smith said. Sonic plans a
branding effort following AutoNa-tion, which put its own moniker onmost stores last year.
“Since they’ve put their brand upon their dealerships, they’ve beenadvertising now for several monthsas AutoNation,” Smith said. “I seetheir point of view, and if you’re go-ing to spend $200 to $300 a car witha lead provider, why not just spend$200 to $300 per car on your ownbrand.”
Despite efforts to reduce reliance,retailers acknowledged that leadproviders can provide value.
Sonic uses AutoTrader.com andCars.com and doesn’t plan to backaway. Dyke called them “great part-ners.” But Sonic dropped TrueCar
in January after TrueCar sued Sonicfor trademark infringement overthe retailer’s use of the term “TruePrice.” “If we weren’t getting a re-turn for the investment that wemake in AutoTrader, we’d alreadynot be using them,” Dyke said.
Asbury Automotive Group Inc.CEO Craig Monaghan said Asbury is“very dependent” on its vendors forits success. The company will contin-ue to use TrueCar, AutoTrader.comand Cars.com, but the vendors mustcontinue to deliver, he said.
“We’ve got to always be better to-morrow,” Monaghan said. “Wehave to be more cost efficient, andwe work with them to try to do thattogether.”c
continued from Page 8
RETAILERSSonicaimstobolsterits lead capabilities
Dyke: Revampedonline experience
Penske: Buildingan infrastructure
❝“He’s not starry-eyed about GM. He knows
there can be bad apples, and he doesn’t tolerate it.”John Quinn, partner at Quinn Emanuel Urquhart & Sullivan, who has worked with Michael Millikin on GM cases for 20 years
