How GM Can Recover From Recalls
The history of U.S. auto recalls is replete with unnecessary delays, refusals to make needed disclosures and managerial bungles. General Motors Co.'s recent recall of 1.6 million small-car models exhibits all three forms of corporate dysfunction.
Mary Barra, GM's new chief executive officer, could prove her mettle -- as an engineer, a longtime GM employee and a thoroughly modern car executive -- by breaking with the industry's tradition of obfuscation and handling this latest recall differently. By coming clean sooner rather than later, Barra may be able to prevent a downward spiral of reputational loss followed by revenue and profit declines, which can take years to reverse.
She has until April 3 to respond to more than 100 questions posed by the National Highway Traffic Safety Administration, including why fixes proposed by GM engineers in 2004 and 2005 weren't made. The agency wants to know the names of engineers, managers and members of its own staff involved in meetings when a defective ignition switch was discussed yet no action taken. It also wants to know what GM meant when it said in a news release that the "process employed to examine this phenomenon was not as robust as it should have been."
For full accountability, Barra should make the company's responses public. Sure, that may give plaintiffs' lawyers ammunition, but they will get the information one way or another. For GM consumers, though, it will be a sign that the new GM isn't, well, your father's Oldsmobile.
From the faulty suspensions in Corvairs in the early 1960s to explosive Pintos in the 1970s, sudden acceleration of Audis in the 1980s to tipsy Explorers in the 1990s, as well as stuck gas pedals on Toyotas in the 2000s, auto companies have shown little regard for consumers over the decades. Recalls were resisted years after problems became apparent. Engineers were unduly pressured to produce new models on time and at a specified cost. Consumers were often the last to know about flaws, resulting in preventable deaths.
The issue this time is the ignition switch in some Chevrolet Cobalts and other Opel, Pontiac and Saturn models, all made in the mid-2000s. The switch can be turned off when the key is jostled -- sometimes all it takes is the driver's knee hitting the steering column -- or weighed down by heavy objects on the keyring. The result is that the engine suddenly turns off, which cuts power to the airbags. GM says 12 deaths have occurred because of the flaw; many more deaths from airbags that didn't deploy in the models involved could turn out to be related. The switch in question costs about $5 and is easy to replace.
GM has apologized, but saying sorry isn't enough. It took the company 13 years to admit to a potentially deadly defect. It has yet to determine the extent of the problem. The delayed response has led to a federal criminal investigation and two congressional probes, all of which add to reputational erosion.
The company redesigned the ignition switch in 2007. The question now is whether Barra can redesign a culture that prefers to hide problems -- and to delay fixing them when uncovered. Just yesterday, Barra quickly recalled another 1.5 million sport utility vehicles, Cadillacs and vans because of side-impact restraint, brake wiring and instrument panel problems. She could further demonstrate that the new GM doesn't mean business as usual by making public an internal investigation. The cost of keeping everything under cover, not to mention the danger to consumer safety, could be far more than the cost of coming clean.
--Editors: Paula Dwyer, Clive Crook.
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