If Guinness had a category for creating the world-record lowest level of customer trust in its industry, General Motors would leave all other vehicle manufacturers far behind. The company has recently announced five more recalls, covering almost 3 million vehicles. Added to the 7+ million recalls during the first quarter of 2014, this brings their total – just for this year – to a staggering 11 million. And, GM’s total vehicle recalls count, for cars, SUVs and trucks manufactured since 2004, has now reached 30 million. This is another industry world record, but not one to which GM can point with any sense of pride.
Thusfar, much of GM’s response has been more aggressive recalling (bringing in a new head of safety and adding 35 more staff to oversee this), trying to identify performance defects early to avoid the negative publicity which accompanies them. Part of the recall ‘binge’ is the company’s response to pressure from multiple Justice Department investigations, and the threat of numerous owner lawsuits. One of these involves a defective ignition switch, which GM apparently knew about for over a decade before issuing a recall. During this period, several fatalities and scores of accidents were directly linked to this significant quality problem.
Special Note: As of Friday, May 16, GM was slapped with a $35 million Federal fine by the National Highway Traffic Safety Administration because of faulty ignition switches and air bag warning lights. Per the statements released by the government, the company was aware of the problems, having been informed by suppliers as far back as 2009, and it further reported that employees at GM were discouraged from speaking up about these issues or using terms like “dangerous” or “safety related” with respect to the defects. Future fines could go as high as $300 million. GM’s response: A press release saying that the company will produce enough replacement parts to repair the majority of the impacted vehicles – – – by next October.
Ignitions and air bag deployment are just two examples of performance defects. Other reported problems include software failures with power brakes, loss of low-beam headlights, tie-rod deterioration, non-working windshield wipers, malfunctioning traction and stability control systems, potential loss of steering due to suspension part detachment, brake light corrosion (which the company knew about six years ago, but, as with other defects, took no action).
One of the notable issues impacted 300,000 Saturn Ions, which had power steering issues going back almost ten years. Accidents and owner deaths were directly connected to these problems. GM, trying to avoid the expense and bad publicity associated with recalling this many of a single model, instead issued what is known as a “technical service bulletin”, indicating something much less serious was involved. Although GM was repeatedly warned by the NHTSA about using these bulletins in place of full recalls for dangerous defects, the warnings went unheeded. There’s a lot more, with new revelations being reported almost daily, but you get the idea.
New safety executives at General Motors have stated they are going to be considerably more proactive about both identification and resolution of manufacturing and performance defects; but, much of the strategic damage to GM’s image and reputation – for both quality control and communication candor – has already been done. And, apart from apologies by senior GM execs, a shake-up in the company’s engineering ranks, and promises of greater safety diligence, little in the way of real reputation recovery or repair seems to be happening.
As reported in previous posts, reputation damage can have long-lasting consequences. Colleagues at leading PR firm Weber Shandwick (www.webershandwick.com) released a report in 2012 – The Company Behind the Brand: In Reputation We Trust – where, based on image and reputation, the potential for behavioral impact was studied among 1,375 adult consumers in the U.S., U.K, China and Brazil. It also included 575 executives in companies with revenue of $500 million or more. Study fieldwork was in October and November, 2011.
The results of the study were absolutely eye-opening. From the insights, Weber Shandwick identified six new realities of corporate reputation, each serving as a reminder that reputation and image matter – a great deal.
1. Corporate brand is as important as the product brand(s)
2. Corporate reputation provides product quality assurance
3. Any disconnect between corporate and product reputation triggers sharp consumer reaction
4. Products drive discussion, with reputation close behind
5. Consumers shape reputation instantly
6. Corporate reputation contributes to company market value
About two-thirds of consumers said they avoid buying a product if they don’t like the company behind the product. For an organization like GM, where the emotion associated with quality is so important, and the per-item expenditure and length of commitment is so high, these kinds of results are, at least potentially, extremely consequential.
So, the big and important question, and also the title of this post: What will General Motors do about its disgraceful and image-damaging world record? If GM follows the approach taken by British Petroleum, they will pour billions of dollars into public relations advertisements and media expenditures (only to see that effort largely compromised by the company’s highly visible legal challenges to Gulf damage claims).
To date, GM has spent over a billion dollars to correct the performance flaws of their vehicles; however, there is no evidence through traditional or social media that this, the forcing out of engineers associated with the recall issues and the more aggressive approach to safety, has changed many minds. If GM does nothing more than what they’ve done so far, for my part they’ve made a grossly insufficient effort to rebuild public confidence on an emotional level; and I’d have no trust or degree of assurance that their vehicles would be any more safe in the future. Would you?
