The Ivey Memo: The Original Cold Document That Made GM Squirm

GM CEO Mary Barra faced hostile questions from members of Congress this week, wanting to find a smoking gun into their current recall fiasco. But while no smoking gun exists for the company's current troubles, one definitely did exist for another problem, more than 40 years ago. And it was cold, cruel, and heartless.

The issue that Barra was answering questions over was what GM knew, and when it knew, that an ignition switch in its cars could potentially lead to a fatal flaw. Basically, it boils down to this: if your knee bumped into your key or keychain when it was in the ignition of your car, it could potentially turn the car off. This would disable the power steering, the power brakes, the airbags, and potentially even mess with the seatbelts.

Basically, it turned your Chevy Cobalt into a death machine. And at least thirteen people were killed in this horrifying manner, and possibly many more.

People at GM knew this was an issue at the latest in 2004, and probably a few years before that. What everyone is trying to figure out now is who knew it was an issue, when they knew it was an issue, and why they didn't do anything.

Because the little part that could've saved lives only cost 57 cents, and still, people died. Was it a conscious effort to save money on the part of GM? An attitude of "if we ignore it, it'll go away?" Or was it as simple, and as sad, as nobody caring enough?

We still don't know.

At least 2.3 million cars were recalled to fix the problem in the past month, and in the meantime, GM will provide with you a loaner vehicle, or it recommends you "use a lighter keychain."

That's not much solace to the drivers of Chevy Cobalts, Chevy HHRs, and Pontiac G5s, all affected by the recall.

But this is not the first time GM has been at this macabre rodeo.

In June 1973, one of its engineers wrote one of the worst pieces of purely corporate, analytical, mathematical prose the world has ever seen. In short, it put a price on human life.

And that price was less than three dollars.

The infamous piece of paper is now known as the "Ivey Memo."

The Ivey Memo: The Original Cold Document That Made GM Squirm

Ed Ivey was just two years out of grad school when he was assigned to work on fuel systems at Oldsmobile.

Oldsmobile knew it was making pretty cheap, crappy fuel systems. And they knew they could be a problem in a collision. The force of the impact could knock pieces loose, spraying fuel everywhere, and causing raging infernos in family cars.

Oldsmobile asked Ivey to determine how much it would cost them.

It was dryly titled "Value Analysis of Auto Fuel Fed Fire Related Fatalities."

Ivey carefully laid out the parameters of the issue. There were roughly 500 fatalities a year in GM cars where the victims were burnt to death.

The value of each payout in the event of a death could reasonably be estimated at $200,000, a figure Ivey sourced from a government study.

There were 41,000,000 GM vehicles on the road:

Accident statistical studies indicate a range of 550-1,000 fatalities per year in accidents with fuel fed fires where the bodies were burnt. There has been no real determination of the percent of these people which were killed by the violence of the accidents rather than by fire. The condition of the bodies almost precludes making this determination.

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Based on this statistic and making several assumptions, it is possible to do a value analysis of automotive fire related fatalities as they relate to General Motors.

The following assumptions can be made:

1. In G.M. automobiles there are a maximum of 500 fatalities per year in accidents with fuel fed fires where the bodies were burnt.

2. Each fatality has a value $200,000.

3. There are approximately 41,000,000 G.M. automobiles currently operating on U.S. highways.

Analyzing these figures indicates that fatalities related to accidents with fuel fed fires are costing General Motors $2.40 per automobile in current operation.

500 fatalities x $200,000 /fatality = $2.40/automobile
41,000,000 automobiles

This cost will be with us until a way of preventing all crash related fuel fed fires is developed.

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If we assume that all crash related fuel fed fires can be prevented commencing with a specific model year another type analysis can be made.

Along with the assumptions numbered above the following assumptions are necessary:

1. G.M. builds approximately 5,000,000 automobiles per year.

2. Approximately 11% of the automobiles on the road are of the current model year at the end of that model year.

Value Analysis of Auto Fuel Fed Fire Related Fatalities Page 2

This analysis indicates that for G.M. it would be worth approximately $2.20 per new model auto to prevent a fuel fed fire in all accidents.

500 fatalities x 11% new model autos = 55 fatalities in new model autos

55 fatalities x $200,000/fatality = $2.20/new model auto
5,000,000 new model autos

This analysis must be tempered with two thoughts. First, it is really impossible to put a value on human life. This analysis tried to do so in an objective manner but a human fatality is really beyond value, subjectively. Secondly, it is impossible to design an automobile where fuel fed fires can be prevented in all accidents unless the automobile has a non-flammable fuel.

Put everything together, and literally burning its loyal customers until they died would cost the company $2.40 a vehicle in compensatory payments.

Ivey acknowledged the futility of trying to put a price on life at the very end, and acknowledged that it would forever be impossible to totally prevent vehicle fires as long as they were fueled by gasoline.

He didn't recommend anything, really. He just did the work. It would cost GM a certain amount of dollars to prevent a loss of life, and a certain amount in payouts if they decided to do nothing, and it was up to his managers to make the call.

They decided that $2.20, at most, was too expensive.

The damage was done.

The Ivey Memo stayed quiet for years. Very few people in GM knew about it, and pretty much nobody outside of GM had ever heard of it. It's the kind of thing that was always conjectured, but never proven.

In the 1980s, GM started getting hit with lawsuits pertaining to vehicles fires. People were dying, and families and survivors wanted to know why.

GM did its best to suppress any evidence of the memo's existence. When subpoenaed for documents, it would claim that the Ivey memo wasn't relevant.

In 1997, GM was finally ordered by a judge to specifically disclose the Ivey memo. In an example of the bizarre song-and-dance going on, it sent one of its lawyers, who told the judge the company refused to give him the document.

Eventually the document came out in 1998, and the walls fell. But it was too late for many drivers.

In July of 1999, GM was ordered to pay $4.9 billion in damages to six plaintiffs who suffered severe burns when their 1979 Chevy Malibu exploded.

One child was horribly disfigured, and she lost the fingers on her hand.

And while the Ivey memo was penned over forty years ago, as of 1999, the company was still learning its lesson.

Pretty soon we'll find out how much more it still has to go.