NHTSA worried about confidential agreement GM made with some Lyriq buyers

Jamie L. LaReau
Detroit Free Press

The National Highway Traffic Safety Administration is in talks with General Motors over concerns it has with GM's new program requiring some customers to sign a confidentiality agreement when they bought or leased a 2023 Cadillac Lyriq all-electric SUV. 

GM is in the midst of launching the Lyriq, an EV that is crucial to Cadillac's future as the brand transitions to all-electric by 2030. 

On Wednesday, NHTSA spokesperson Lucia Sanchez told the Detroit Free Press the agency is "in communication with GM regarding" the nondisclosure agreements and whether they would inhibit someone from reporting safety issues with the agency. 

"NHTSA relies on reports from consumers as an important source of information in evaluating potential safety defects," said Sanchez in an email. "Any agreement that may prevent or dissuade consumers from reporting safety concerns to NHTSA is unacceptable."

An NDA typically would prohibit a person from talking about their experience with the vehicle to third parties and that's what raised concerns at the government agency, especially if other automakers follow GM's lead and add similar programs.

As the Free Press first reported last week, to help ensure the Lyriq launch is flawless and any kinks are addressed quickly, Cadillac offered about 20 select customers in metro Detroit, New York and Los Angeles a $5,500 discount on a Lyriq in exchange for them signing the confidentiality  agreements. The customers also agreed to let GM track how they use their Lyriq.

The 2023 Cadillac Lyriq is among the first electric luxury SUVs to go on sale.

“As we transform our business, the launch of our first all-electric vehicle, Lyriq, provides Cadillac some unique learning opportunities," Cadillac spokesman Mike Albano said of the program. He added, "We're doing everything possible to get the launch right."

More:GM offers rebate on Cadillac Lyriq if drivers sign NDA, agree to be tracked

NDA could be 'unacceptable'

This program is a first. No other automaker has recruited customers to do initial studies on a vehicle rather than what is usually done: Employees drive company-owned preproduction vehicles and report any issues.

Albano said Cadillac did use employees, but added, "There's a lot we can learn from customers beyond the physical vehicle. We can see their charging behaviors, driving behaviors and how they use the vehicle."

GM will use "a variety of ways to gather information from the customers," including direct phone calls, dealer contacts and a dedicated EV concierge team. Albano did not provide specifics, including how long the NDA lasts, what the penalty is for violating it and whether GM will monitor vehicle software to gather data. 

Description: Production of the 2023 Cadillac Lyriq begins at GM’s Spring Hill, Tennessee, assembly plant.

GM defends the NDA

GM spokesman Dan Flores said NHTSA does not need to be concerned and "we have advised them of this fact."

In a statement emailed to the Free Press, Flores said: "Cadillac created a small-scale Ambassador program to provide some early learnings from the first vehicles sold. ... This includes handling, performance, safety, comfort and any other feedback the Ambassadors wish to share as Cadillac enthusiasts. While the program agreement contains provisions designed to protect GM confidential and proprietary information, it is not intended to, and does not, prohibit or preclude participants from reporting any issue, safety or otherwise, to NHTSA or any other regulatory body."

To the contrary, Flores said, "We encourage Ambassadors to advise GM if they encounter any such issue while driving their all-electric Lyriq.”

To be sure that's understood by participants, GM will be sending a written communication, Flores said, to make clear that they are not prohibited from reporting any concern to NHTSA or any other entity. He did not know the timing for when drivers would be contacted.

GM said Wednesday it believed it had cleared up the matter with NHTSA, but when the Free Press asked NHTSA for clarity, the agency maintained that it was still in conversations with the automaker.

The Lyriq is being built at the Spring Hill Assembly plant in Tennessee. Cadillac opened the order banks for the Lyriq on May 19, but in two hours it stopped taking orders, saying it sold out. GM will not quantify what sold out means, but GM has told suppliers to prepare to produce 25,000 Lyriqs this year.

Don't disrupt the flow

Neither NHTSA's concerns nor GM's response surprises Erik Gordon, a professor at the University of Michigan's Ross School of Business and a lawyer who's followed this program. 

GM just wants some breathing room to get some feedback and make corrections so that the launch is a success, Gordon said.

But he understands that NHTSA would worry.

"We're talking about automakers interfering with the flow of information to NHTSA and that is something they cannot do," Gordon said. "No. 1: NHTSA will win. But it's also a big PR disaster to have a headline that says 'an automaker interferes with consumer safety reporting.' "

Gordon said a car owner is not required by law to report any safety problems they have to NHTSA. So therein would lie the concern among regulators about an NDA. Regulators want people to know their rights to report any issues and be assured that nothing will "interfere with the flow of information," he said.

Gordon said he has read and drafted many NDAs over his career and there is usually a boilerplate that carves out exceptions to the nondisclosure stipulations in the contract. 

But regulators don't want consumers to be discouraged by language in any agreement that might prevent them from "exercising their right to talk to you," he said. "You can't assume that a consumer is a lawyer and knows there's an exception to an NDA."

Gordon said he would advise GM to do exactly what they are doing, "send those 20 people a separate notice ... that spells out that if there is something wrong with the vehicle, they should contact regulators."

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Contact Jamie L. LaReau at Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletter. Become a subscriber.