Since 2014, General Motors (GM) has issued millions of recalls on the vehicles they have manufactured. A criminal investigation was opened in 2014 to identify why there was such a large amount of failing ignition switches and to determine if GM was ignoring the issue of all the faulty cars. This was on all news mediums and was a large crisis that GM had to manage. The way the company handled the crisis in terms of communications to the public and their crisis management process was not an efficient system even though they had the resources to make it this way.
Crisis management is a plan that a company has in place in case of crisis to minimize the effects and also rebuild after the crisis. Research has shown that crisis in the auto market can not only effect the one auto manufacturer but also the other companies in the auto industry which can be described as the halo effect (Ma, Zhang, Wang, & Li, 2014). Ma, Zhang, Wang, and Li found that if Toyota went through a crisis that companies also based out of the same countries such as Honda and Mazda were negatively impacted. This shows the importance in crisis management is not only vital to the functionality of the company itself but also the other companies in the same business. GM did not initiate a good crisis management plan in which we will analyze from several standpoints.
The recalls started in 2014 but the issue was started when GM changed the ignition switch in the Chevrolet Cobalt which in turn resulted in faulty air bags leading to 10 deaths in 2007 (Valdes-Dapena & Yellin, 2015). Since GM was more or less ignoring the issue at hand when it started in 2007, they waited for the issue to escalate into 2014 before taking any action. Statements made by CEO of GM, Mary Barra were more to handle the after effects rather than than prevent the crisis from growing into a larger issue. Barra has reiterated the steps that GM has taken including firing 15 of their employees, increasing the safety measures as well as hiring their attorney to compensate those affecting but has not explained why this happened. After over 2.6 million vehicles were recalled from GM consumers want more than an explanation of what they have done to bring themselves back from the crisis; Consumers want to know why it happened in the first place and what GM is going to do to change it. As cited by NBC news reporter Steve James, Barra stated “This isn’t just another business challenge. This is a tragic problem that never should have happened. And it must never happen again” at the trial in June of 2014 (2014). This statement made acknowledges the company was in the wrong but does not explain the why. In public relations, it is important to get the information to the consumer and recover from the crisis. If consumers want to know why it happened then there should be an explanation released. This statement should be straight forward and answer all the consumers questions in order to clear any confusion and also rebuild the loyalty and reputation that GM lost in this crisis. This statement must also hold up in court as GM is currently under investigation.
According to James (2014) there was a total of 13 deaths and over 20 million recalls issued by GM. The public relations releases should have been much more direct and should have answered more questions due to the duration and the escalation of the issue. This issue was first brought to the public early enough to put a prevention plan in place but instead they chose to wait it out. Because of their lack of clarity and the duration of the crisis, their reputation and consumer perceived value may suffer which may also affect the other American auto companies. In the future, GM must assure they prevent the crisis internally with new policies but must also have strategic crisis management policies in place. They must also understand that consumers do not forget instances like this one and they need to do everything they can to maintain their business and loyalty.
James, S., June 18, 2014. GM’s Mary Barra grilled in congress of car safety crisis. NBC News. Retrieved from http://www.nbcnews.com/storyline/gm-recall/gms-mary-barra-grilled-congress-over-car-safety-crisis-n134356
Ma, B., Zhang, L., Wang, G., Li, F., (2014). The impact of product-harm crisis on consumer perceived value. International Journal of Marketing Research, Vol. 56, Issue 3. DOI 10.2501/IJMR-2014-023
Valdes-Dapena, P., Yellin, T., (2015). GM: Steps to a recall nightmare. CNN Money. Retrieved from http://money.cnn.com/infographic/pf/autos/gm-recall-timeline/