General Motors Ignition Recall Incident - Case Study Example

General Motors Ignition Recall Incident (Name) (Institution Affiliation) (Date) Introduction Notably, many organizations often find themselves in profound predicaments because of one major drawback: cultural crisis. A majority of major corporations are still locked in the old mindset associated with hiding the truth from their clients for the fear that the truth might worsen the whole crisis. Hence, they decide to handle the incidents behind closed doors in order avoid raising an alarm. Besides, many corporations have been cultured in a way that when facing a major crisis or something unfamiliar, the management will often rely on the defense ideology or mechanism. Accordingly, the General Motors faced a major crisis in February 2014, which was associated with the production of vehicles with faulty ignition switches hence leading to numerous deaths as well as injuries through road accidents. Consequently, the Company reacted to the incident by recalling 2.7 million vehicles (Valukas, 2014). This incident is evidently linked to the concept of cultural crisis as investigations later indicated that the General Motors knew about the defect for the past few years but did choose to conceal the whole issue. As such, this paper aims at highlighting GM’s switch ignition recall incident, which happened in February 2014. General Motors Company Overview Founded by William Durant in 1902, General Motors Company is known for designing, manufacturing as well selling of automobile parts and trucks to their customers across the globe. General Motors Company has grown over years and at some point before 2009, and it was considered as the leading auto manufacturer with regards to its burgeoning sales. Today, the company is operating in more than 157 countries and sells eighteen automobile brands thus satisfying the needs of various types of patrons located in different parts of the world. General Motors is the largest manufacturer of automobiles in the United States as it has scooped more than 18% of the automotive market share (GM, 2015). Its success can be linked with its profound knowledge in the automobile industry as well as its customers. Headquartered in Detroit, United States, General Motors also provides financial services related to automotive acquisition through its subsidiary known as General Motors Financial Company Inc. The General Motors Company has four segments which include General Motors North America (GMNA), Generals Motors South America (GMSA), General Motors Europe (GME) and General Motors International Operations (GMIO). The firm is also engaged in the selling of cars as well as trucks to fleet customers including renowned rental companies, governments, commercial fleet customers and leasing companies. General Motors Company often sells its cars to fleet clients both directly and through an extensive network of dealers located around the globe. Besides, the fleet of clients can as well obtain a variety of automotive aftersales services as well as products from the company’s designated dealers. Some of the aftersales car services include collision repairs, maintenance, vehicle accessories, light repairs as well as extended service warranties. Furthermore, the firm provided 13 FlexFuel vehicles in America for four models including the 2015 model to fleet as well as commercial patrons who are capable of operating on gasoline, E86 ethanol. Moreover, the General Motors North America is known to offer vehicles, which are manufactured, developed and marketed under the Chevrolet, Buick, Cadillac and GMC brands to its clients in North America. On the other hand, General Motors also offers vehicles to its customers outside North America under the Cadillac, Buick, Opel, GMC, Chevrolet and Vauxhall brands. Apart from selling of automotive, General Motors also has equity ownership stakes both directly and indirectly in various entities through its regional subsidiaries located in different places across the globe, primarily in Asia. Most of these firms are mainly engaged in the designing, manufacturing as well as marketing cars under the Cadillac, Alpheon, Wuling, Buick, Jiefang, Baojun and Chevrolet brands. Besides, General Motors is also involved in the marketing of FlexFuel vehicles in Thailand, Australia as well as other markets more so, where biofuels have emerged in the industry. Additionally, the firm supports the production and refining of biodiesel blend fuels, which are often considered as alternative diesel fuels that can be made from renewable resources. Further, General Motor develops FlexFuel automotive, which can use gasoline-ethanol blend fuels. GM also produces cars that can use compressed natural gas (CNG) as well as liquefied petroleum gas (LPG). Equally, the company is known to produce CNG bi-fuel capable cars such as the Chevrolet Express in the America as well as Opel Zafira in Europe. The company also develops vehicles that use liquefied petroleum gas (LPG) in selected markets internationally depending on regulatory and infrastructure aspects as well as the availability of natural resources in such markets. With regards to electric vehicles, General Motors produces seven different models linked with some form of electrification in America. The firm also has plans to develop plug-in hybrid electric vehicle technology as well as extended series of electric vehicles such as Cadillac ELR, Chevrolet Volt, and Opel Ampera. An overview of the Ignition Recall Even though the major crisis befell the company in 2014, the issue had been noted some years back but was never revealed to the public. More often than not, warnings associated with defective devices in automotive industry, which always result in recalls have been appearing in the news but companies are yet to learn how to handle such incidents. Studies indicate that many of these recalls often stem from development, technical as well as production issues. As Valukas (2014) posits, in case a firm learns that one or more of the products are defective and could harm the customers, the significant step that the firm is supposed to take is to report immediately the issue to the National Highway Traffic Safety Administration (NHTSA). Importantly also, the automotive company is required to take prompt measures to remedy the issue. In General Motors' case, issues linked with defective ignition devices was realized in advance, but due to the long-running internal problem in the firm, the employees kept quiet with the problem. Apparently, the organizational culture at GM did not encourage the employee to speak up but focus on the bottom line. On 13th February 2014, General Motors announced the recall of approximately 810,000 GM motor vehicles due the nature of their defective ignition switches. For the first time, the company admitted that the switch was defective. When the key chains of the driver hung too heavy or when bumped, it could easily cause the vehicle’s engine to stall as well as make the car’s airbags to malfunction. Interestingly, the recalls did not stop as another set of recalls was announced immediately after February resulting in a total of 2.7 million vehicles with ignition switch defects to be recalled (Bennett, & Spector, 2015). By the end of 2015, General Motors had verified nearly two thousand compensation claims associated with the victims who experienced accidents due to the faulty switch. In effect, a hundred compensation claims were deemed eligible for compensation, as the defects were directly associated with the forty deaths, which had been reported (Muller, 2014). May Barry, the firm’s first female Chief Executive Officer committed herself to try opening up the traditionally top-down line of communication between the workers and the management during her first ten months of tenure. This was to comply with all the investigations associated with the ignition switch issue. Accordingly, Barra ordered an internal investigation to take place in General Motors to get the course of the problem. Later, Barra appeared before Congress four times regarding the incident admitted on record that the old GM management had indeed done a serious blunder as they knew about the issue but decided to conceal every detail. Moreover, Barra fired fifteen employees from GM, who had the knowledge about the issue but did not alert the top management. Besides, she also started implementing new corporate culture incentives (Wayland, 2014). Analysis As indicated earlier, General Motors is not the only company that was trapped in the repercussions associated with the cultural crisis. With today’s business world, which is ever-changing, multinationals are still wedged in the old mindset of concealing crises, which eventually raptures thus impacting their reputation and performance as well (Hallahan, 2006). Equally, some of the employees in the General Motors were aware of the ignition switch issue for more than eight years but could not utter a word. They could not take the necessary step to remedy the crisis until many people lost their lives in road accidents while others were injured (Business Insider, 2015). According to Business Insider (2015), corporations should realize that it is important for employees to be trained to become accustomed to cultural change since the current business world is competitive. On the same note, Himsel (2014) posits that human beings are by nature programmed not to change. Hence, they hung to what has worked before as they fear what change beholds. Accordingly, GM’s employees were comfortable with keeping quiet about the faulty ignition switches issue as they were cultured not to question the management or leak any information to the outside world regarding the firm’s daily operations. Like in a majority of organizations, employees at GM were resistant to change. Equally, Himsel (2014) argues that employees often feel comfortable in their routines, set mindsets and a culture that often works for them. Consequently, whenever, the workers experience something unfamiliar or face a threat, their brains automatically change into a defense mode. Accordingly, this is in line with the incident that happened at General Motors, whereby the workers were not ready to admit their mistakes. These employees preferred keeping quiet leading to the escalation of ignition switch crisis, rather than owning up their mistake and finding a remedy to the problem. It is worth noting that it is often dangerous for an organization to conceal a crisis that is building up as once it leaks to the media (Gower, 2006). This is because the repercussions would be worse than if the organization had chosen to go public on the issue before it escalated. In reference to the theory of agenda-setting, the media is often considered as a powerful tool of building perception as they set the agenda for the day (McCombs, and Ghanem, 2001). In effect, General Motors suffered bad publicity for delaying the ignition call as the media reported that the issue was well known internally, but no immediate action was taken. According to McCombs and Ghanem (2001), the agenda setting concept can sometimes be exploited by the corporations, whereby firms seek to get their information about success or a crisis published thus influencing the public before the media exposes them negatively. In reference to General Motors’ case, the Public Relation Officer could have advised the company to provide the media with information regarding the ignition switch issue immediately the problem had been detected. This would prevent accidents and depict a sense of goodwill to its clients as well as the public. As Himsel (2014) explains, General Motors was recovering from the 2000 recession and as such cost-cutting initiatives eventually became the company’s culture: cost culture. The company was cutting, restructuring as well as well as shrinking costs as a survival tactic. Accordingly, years of organizational culture, which prized cost over quality followed. Similarly, this culture also brought about the hesitance to pass along negative news hence condoning a cover-up. Fletcher and Mufson (2014), strongly buttress the above observation by asserting that the ignition switch problem is directly linked to the organizational culture of reluctance to pass along news that is deemed negative as it could tarnish the corporation’s reputation. In essence, GM was struggling with the issue of shrinking costs as well as buffing its image, therefore, a recall for its popular small vehicles would have meant a terrible setback, a situation the firm would not want to experience. From the above analysis, it is evident that GM significantly failed with regards to handling the situation in time. They failed to recall the affected vehicles in time thus causing major havoc to its customers, which in turn gave the company a bad publicity. However, despite the bad reputation that had been caused by the faulty ignition switch incident, the New C.EO, Marry Barry managed to handle the crisis quite well. The C.E.O depicted pragmatism as she dismissed all the employees that were related to the ignition switch scandal and appointed a new Vice President that would be in charge of the Global Vehicle Safety. Besides, Barry also hired external investigators to dig into the matter. To reclaim the stakeholder’s confidence, the C.E.O fully cooperated with the government investigations as well as launched new communication initiatives that would help in the promotion of a new corporate culture. The concept of crisis communication requires an organization’s top management to show and assure commitment with regards to handling a crisis (Argenti, 2014). Accordingly, Barry assured the public to change the culture of keeping quiet with an issue and committed herself to shifting the company from focusing on costs to customer safety. Conclusion In summation, the paper has managed to highlight GM’s switch ignition recall incident hence explicating the reason behind the recalls. From the analysis, it is evident that General Motors was responsible for the major accidents that were related to the faulty ignition switches and had prior knowledge regarding the crisis. The paper has also gathered that the company was suffering from a cultural crisis, whereby the employees feared to speak up during a crisis for the fear of interfering with the company’s daily operation flow. Ultimately, it has been noted that the company did not handle the crisis in time even though its new C.E.O managed to calm the situation. References Argenti, P. L. 2014, March 11. The Crisis Communications Playbook: What GM’s Mary Barra (and Every Leader) Needs to Know. Retrieved January 31, 2016, from Havard Business Review: https://hbr.org/2014/03/the-crisis-communications-playbook-what-gms-mary-barra-and-every-leader-needs-to-know/ Bennett, J. 2014. GM’s Ammann Drives for Change. [online] WSJ. Available at: http://www.wsj.com/articles/gms-ammann-pushes-for-change-1415751611 [Accessed 31 Jan.2016]. Bennett, J., & Spector, M. 2015, March 13. General Motors Settles Case That Triggered Ignition-Switch Recall. Retrieved January 31, 2016, from The Wall Street Journal: http://www.wsj.com/articles/wrongful-death-case-that-triggered-gm-recall-settled-1426262260 Business Insider, 2015. GM Adds Another 92,000 Cars To Its Ignition Switch Recall. [online] Available at: http://www.businessinsider.com/afp-gm-adds-another-92000-vehicles-to ignition-switch-recall 2015-1 [Accessed 31 Jan. 2016]. Fletcher, M. 2014a, June 5. GM CEO: 15 fired over ignition switch recalls; probe shows pattern of failures, no cover-up. Retrieved from: http://www.washingtonpost.com/business/economy/gm-ceo-15-fired-over ignition-switch-recalls-probe-shows-pattern-of-failures-no coverup/2014/06/05/2dc575bc-ecb8- GM. 2015. About GM: Our Company. Retrieved January 31, 2016, from GM: http://www.gm.com/company/aboutGM/our_company.html Gower, K. K. 2006. Truth and Transparency. In K. Fitzpatrick, & C. Bronstein, Ethical in Public Relations, Responsible Advocacy. Thousand Oaks: Sage Publications, Inc. Hallahan, K. 2006. Responsible Online Communication. In K. Fitzpatrick, & C. Bronstein, Ethics in Public Relations, Responsible Advocacy (pp. 107-130). Thousand Oaks: Sage Publications, Inc. Himsel, D. 2014. General Motors, Avon, and the devastating Power of Entrenched Corporate Culture . McCombs, M. and Ghanem, S.I., 2001. The convergence of agenda setting and framing. Framing public life: Perspectives on media and our understanding of the social world, pp.67-81. Valukas, A.R., 2014. Report to Board of Directors of General Motors Company Regarding Ignition Switch Recalls. General Motors internal investigative report. Chicago: Jenner&Block. Available online at http://s3. documentcloud. org/documents/1183508/gm-internal-investigation-report. pdf. Wayland, M. 2014. Fortune: GM’s Barra Crisis Manager of the Year. [online] Detroit News. Available at: http://www.detroitnews.com/story/business/autos/general motors/2014/12/29/barra-named-crisis-manager-year/21015167/ [Accessed 31 Jan. 2016]. Read More