This study investigates splitter blade failures experienced during testing of an unshrouded transonic centrifugal compressor. Specifically, when the impeller was deeply throttled using an upstream inlet guide vane to introduce significant pre-swirl, the splitter blades exhibited cracking near the root of the leading edge. The observed failures are of particular interest because the impeller does not exhibit a mode shape typical of this type of failure corresponding to either the upstream IGV or downstream diffuser vane count, nor the anticipated surge frequencies. Accordingly, modal analysis and CFD modeling were performed leading to an understanding of the failure mechanism, and a successful splitter blade cut-back solution was implemented. Specifically, excitation sources developed from a CFD model of the IGV and impeller were used in a blade flutter calculation, in order to determine the aerodynamic damping and unsteady loading on the blade. The CFD model indicates that shockwaves arise near the splitter leading edge for this off-design condition. Due to interactions with the high incidence/separated boundary layer, these shockwaves exhibit streamwise unsteadiness, thereby leading to the observed failure mechanisms. It was determined that by cutting back the splitter blade at the leading edge, the failure could be avoided while minimally affecting the overall stage performance.