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Ignored Rental Car Warnings To GM Result Of Poor Managerial Communication

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Ignored Rental Car Warnings To GM Result Of Poor Managerial Communication
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Should General Motors (NYSE: GM) have paid closer attention to information from rental car companies?

Information about accidents, some deadly, involving some of their models; accidents that, it turned out, were linked to a long-standing ignition switch defect?

According to an extensive investigation published last week by Bloomberg, several rental car companies had questioned GM about a potential defect in its Chevrolet Cobalt after the vehicle's air bags failed during several routine crashes.

Defective ignition switches in several models of GM cars have been linked to at least 13 deaths, as well as tens of thousands of vehicles being recalled. A report by an independent investigator, meanwhile, found the company had been aware of the defect for years.

Industry analysts say the fact the rental car companies' crash reports were not properly monitored and considered was just another example of the lack of managerial communication within General Motors about the ignition switch problem.

“This was true whether feedback was coming from engineers, safety agencies, rental car customers, dealers or private owners,” Karl Brauer, a senior analyst at Kelley Blue Book, told Benzinga.

According to Bloomberg, Avis Budget Group (NASDAQ: CAR), Hertz Global Holdings (NYSE: HTZ) and Enterprise Holdings all had Cobalts in their rental car fleets that crashed, and that Enterprise reportedly contacted GM about a potential defect in the Cobalt.

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“If there is a canary in the coal mine, it’s the rental car companies,” industry consultant Maryann Keller told Bloomberg. “They were the first users of the vehicles en masse.”

However, Brauer notes, “while the fatalities at rental car agencies seem like a serious and obvious clue today, remember that 30,000-plus people die in traffic fatalities every year, and the overwhelming majority of those are caused by driver-error, not vehicle defects.”

Brauer said GM has responded to the issue with new efforts to quickly recognize and identify mechanical failures –- and with the company's leadership recently tripling the number of internal safety investigators, as well as appointing a global safety chief, “as part of this massive recall effort.”

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