General Motors Recall Incidence Which Occurred in 2014 - Case Study Example

Name: Class: Unit: Introduction Crisis communication is very critical in ensuring the success of an organization. This is due to fact that poor communication during crisis can lead to, reputation crisis harm for stakeholders and loss of revenue (Courtland, 2003). This has made public relations practitioners an integral part of crisis management in an organization. According to Sriramesh and Vercic (2003), an effective crisis management requires ability to handle the threats in a sequential manner. The General Motors (GM) recall crisis which happened in 2014 is one of the largest scandals in the motor vehicle industry. The company made the headlines when they had to recall 2.6 million cars due to faulty ignition switch which led to deaths. The matter was made worse by evidence which showed that they knew about the fault for years but failed to act on it (Bennett & Lublin, 2014). The communication response determined the aftermath of the crisis. This essay analyses GM recall incidence which occurred in 2014. It starts with a brief description of the incidence. This is followed by analysis on how GM responded to the crisis drawing on various theories. Brief description of GM recall crisis In February 2014, GM motors issued recalls for several models of cars suspected to have a faulty ignition switch. The faulty switch was turning the engine on automatically and preventing the airbags from deploying while the car was in motion. According to Bennett and Lublin, (2014), investigations found that the issue was detected by the company back in 2001 but nothing was done. By the end of 2013, GM asserted that a faulty ignition switch was to be blamed for 31 crashes and 13 deaths. Mary Bara became the new CEO in January 2014 and had to face the questions on how the firm handled the ignition switch problem. In February 2014, GM notified NHTSA that it had determined a defect in 619,122 cars in the US market. The company made the first official recall in February 2014 where Chevrolet Cobalt and Pontiac G5s were recalled. The first formal apology was made in March 17, 2014 where the new CEO made a video apology (Geier, 2014). The apology involved acknowledging wrong doing in crisis handling and a commitment to repair 3 million vehicles. A new safety officer was then appointed. The house energy and commerce committee started hearings on the GM ignition switch recall and why it took so long. In April 2014, NHTSA and GM CEO testified at the house and senate hearings on how the recall was handled. GM CEO, Barra made an apology to the families who had lost loved ones due to the defect (Bennett & Lublin, 2014). In may16 2014, GM was fined a record $35 million civil penalty after NHTSA found them at fault. NHTSA claimed that GM had failed to act fast in reporting the delayed switch defect. An internal inquiry which was carried out by Anton Valukas found out that the ignition problem had existed for 11 years. Geier (2014) assert that this was seen by many as a pattern of incompetence and neglect. The information about the faulty cars did not reach GM management until 2014 when the issue became public. The faulty ignition was associated with 87 deaths and a recall of 27 million cars (Bennett & Lublin, 2014). How GM responded to the crisis GM communication and responses during the pre-crisis was criticized as limited and aloof. According to Bennett and Lublin (2014), there was poor internal communication which was associated with lack of two way communication and incompetence. This is especially due to fact that GM knew about the ignition switches crisis back in 2000s and did nothing to address the issue. During the 2014 recall, it was identified that the issue has been communicated between the employees and suppliers in various occasions during the year. In fact, it was identified that GM engineers, auto-writers and some newspapers were talking about the ignition switch defect long before the recall crisis of 2014. The GM spokesman statement during this period was partial and inconsistent (Geier, 2014). Thus, the type of information communicated pre-crisis showed that there were internal communication problems. According to Coombs and Holladay (2011), organization communication culture can impact it negatively during crisis. The internal communication culture at GM has developed into placing blame on others. This may have led to the crisis since no one wanted to take the blame. The GM earlier management never came to a solution due to their weak internal communication (Geier, 2014). The managers from different departments failed to communicate early with each other and address the issues. According to Geier (2014), GM Initially responded to crisis using the denial strategy. This is through neglecting all signs that the ignition switch fault problem was growing into a major disaster. Initially, there was no strong crisis response despite initial deaths being associated with the firm. In fact, it is expected that a scandal should be given priority with a full apology, corrective actions, accommodation and responsibility (James, 2012). It was not until the new CEO took full responsibility that the response was swift. The new GM CEO led the crisis management efforts in a proactive manner. Based on Sriramesh and Vercic (2003), this helped a lot in gaining a positive and balanced media story than having a reactive approach. She was able to use openness, honesty and collaborative approach with the media and other stakeholders. Media were invited for corporate meetings and addressed directly. She was able to change the initial culture and take the responsibility directly. Coombs and Holladay (2011) assert that apology should be delivered with compassion and the victims reached to. The firm started using news releases, videos, letters to customers and social media to reach out to all stakeholders and those affected (Goel, 2014). Customers were warned on the potential risks and given advice to avoid being victims. The franchised dealers were empowered to help in recalls and ensure customers were satisfied. The CEO also met the victims personally and issued another statement of apology (Geier, 2014). Her initiated investigations led to further recalls which helped a lot in addressing the crisis. For GM, once the scandal came to light, the firm showed a sense of urgency and regret. This was associated with having a new CEO who was well versed with crisis communication. The new CEO, Mary Barra had two main messages regarding the scandal. First, message showed a sense of urgency in addressing the scandal. She expressed that GM was to tackle the scandal both internally and externally (Goel, 2014). In fact, it was explained that GM had ordered an independent investigation which was to be made public. GM collaborated with NHTSA and the congress in coming up with a report on the company practices which was to be made available to the public. Through internal investigations, the CEO promised that GM was to make changes to company structure and bureaucracy (Geier, 2014). The company took the responsibility and committed itself to making the things right. Crisis response helps a lot in determining the aftermath of a disaster. Also, public relations play a major role in creating a response and addressing the public concerns (Coombs & Holladay, 2011). According to Courtland (2003) recommended crisis communication guidelines, the response to crisis is expected to be quick and clear. This is where an organization tells its side of the story. An apology should be clear and concise. The first rule of crisis communication is admitting the mistake in a public manner. Making an admission public in a quick manner helps a lot in building the public goodwill (Coombs & Holladay, 2011). In the face of the scandal, GM started using social media to manage customers and repair its reputation (Geier, 2014). The company Facebook page addressed the customers complaints while at the same time trying to promote their business. According to Huang (2006), crisis websites acts as a best practice during scandals. The internet is a very effective ways in addressing crisis due to the ability to reach a wide audience and its interactivity nature (Coombs & Holladay, 2011). The dual approach in the social media helped in promoting businesses while addressing the customers’ complaints (Goel, 2014). This may have helped a lot in shaping the brand perceptions. Initially, it is important to note that GM was silent and did not give any interviews prior to the expose in 2014. GM response was not communicated early and often. Coombs (2014) asserts that the leaders’ voice is most critical during crisis management. Due to failure to communicate early enough, newspapers were able to use inside sources and write on the scandal. Thus, the company was not able to tell its side of story before it broke out to the public (Goel, 2014). The firm failed to use the chance to tell its side of the story in an efficient and eloquent manner before the media took it. Despite the slow initial response, Barra was able to act and communicate during the crisis. In fact, she was able to emerge with her reputation almost intact despite being a CEO of the firm accused of negligence. She communicated that she wanted the scandal to remain as a reminder on why people should do the right thing and the need to avoid negligence. She committed herself to use the incidence to change the organization culture. The reaction from the CEO proved that GM genuinely cared and was ready to care for those hurt (Geier, 2014). After the crisis, there is need to regain public confidence. This requires coming up with decisions which can restore public confidence. According to Benoit (1997), it involves restoring the public confidence through communication. To regain public confidence, the firm was honest and sincere as evidenced by the CEO. GM employed Kenneth Feinberg to act as the consultant and decide on how to pay the families affected by the recall. By 2015, the firm had already kept aside $550 million for compensation. The review done by the firm associated 97 deaths to the company ignition switch fault. The CEO assured the public that they have changed their culture and focused on ensuring safety and quality (Geier, 2014). Thus, the firm was able to avoid a defensive strategy which would have made the matter worse. Looking at the GM response, it is clear that communicating early is easier said than done. This is due to fact that the firm is expected to communicate even before they have all facts on the scandal they are in. According to James (2012), the first communication is mostly based on communication of values and concerns regarding the scandal. This is through showing that the firm is concerned with the customers affected by the crisis. As the scandal came to a close, the CEO was praised for the manner in which she handled the scandal. The CEO was able to focus completely on managing the crisis and run the business (Geier, 2014). As evidence, the handling of GM crisis by their new CEO shows how to effectively respond to crisis. She behaved in the expected manner both verbally and nonverbally. This was a great way to communicate negative news. According to Adubato (2008), lack of communication breeds rumors and can damage the situation. The designated spokesperson should be able to deliver the message in the right manner through a well drafted media plan. This was all evidenced as the GM CEO communicated on the scandal. This is due to fact that official responses helps a lot in clarifying the issue to the public and eliminate unwanted attention (Coombs, 2014). Conclusion Crisis communication helped GM to overcome the recall crisis. GM faced a major recall crisis in 2014 which was associated with neglect and poor communication within the management. The faulty switch problem was known from 2000s but nothing was done and the management was not well informed. As the issue came into light in 2014, there were several deaths linked to the ignition problem. The new CEO was praised for the way in which she handled the crisis. The CEO public relations with the stakeholders helped a lot. She acted fast and her efforts helped to repair the image and also come up with strategies to address the issue through recalls and compensation. Having a CEO who was well versed with crisis communication helped GM to overcome the business crisis and emerge as a winner. References Adubato, S., (2008), What were they thinking?: Crisis communication: the good, the bad, and the totally clueless, New Brunswick, N.J: Rutgers University Press. Bennett, J., & Lublin, J. S. (2014, June 4), GM Recall Probe to Blame Cultural Failings Auto Maker's, Investigation to Highlight Poor Communications, but Clear Top Bosses. Retrieved June 12, 2017, from The Wall Street Journal: http://www.wsj.com/articles/gm-ceo-to-discuss-ignition-switch-probe-findings- thursday-1401897900 Benoit, W.L., (1997), Image repair discourse and crisis communication, Public relations review, 23(2), pp.177-186. 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