GM’s Billion Dollar Week In Washington

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Two weeks ago, Toyota agreed to a record $1.2 billion settlement with U.S. regulators for the company’s alleged mishandling of its recall during its unintended acceleration crisis. Now it’s General Motors’ turn under the government’s harsh spotlight.

GM CEO Mary Barra goes before Congress this week to answer questions about the company’s sluggish response to faulty ignition switches linked to numerous accidents and at least 12 fatalities. Specifically, lawmakers want to know why it took more than 10 years for GM to recall more than 2.2 million Chevy Cobalts and other small cars after the defect was first noted by internal safety officials in 2001.

Since taking the helm in January, Barra has focused on safety matters, personifying the image of a modern, transparent and forward-thinking GM.  She has implemented a number of enhancements, boldly demonstrating her commitment to resolving the issues that created problems in the first place. Perhaps the most notable example is her appointment of a fully empowered Safety Czar who reports directly to the company’s top brass.

We can expect this “new day” narrative to play a central role in GM’s messaging this week. Barra has insisted on transparency throughout the current investigation, providing legislative and regulatory investigators with unprecedented access to internal documents and reports. That should lend at least some credibility to the company’s effort.

GM’s strong political presence and close ties to lawmakers may help as well. But even with that, Barra’s refreshing approach still may not be enough for GM to avoid a fate similar to that of Toyota’s, given that the public has lost patience for any company perceived to have swept safety issues under the rug.

There may have been a time when companies could delay a recall and take the chance that there would no repercussions, but as independent auto analyst and author Maryann Keller told Reuters last week, “In this day and age, to think that stuff like this can be kept quiet or forgotten is ridiculous.” As Toyota learned firsthand, Ms. Keller is spot on in her assertion that automakers are operating under a new paradigm of accountability.

Today, any company that opts for obfuscation is just asking lawmakers, regulators and journalists to make an ugly example of it. The penalties include headline-grabbing fines, litigation and significant loss of the trust and credibility consumers placed in the brand.

Under Barra’s leadership, GM has made the right responsive moves. And that may mitigate some of the penalties GM will almost certainly have to pay for its alleged past sins.

The good news for GM is that Barra seems to understand well a central fact of modern reputation management: Companies aren’t judged so much by the inevitable crises they face, but rather by how well they manage those crises.

Gene Grabowski is a Senior Strategist at LEVICK and a contributing author to LEVICK Daily.

Topics:  General Motors, Settlement, Toyota

Published In: General Business Updates, Products Liability Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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