IMPLICATIONS OF GM FAULTY IGNITION SWITCHES 6
Implicationsof GM Faulty Ignition Switches
Implicationsof GM Faulty Ignition Switches
Inrecent months, General Motors (GM) has been faced with controversieson faulty ignition switches, which can shut off the car’s engine.This has forced it to recall millions of cars back to the factory. Animportant revelation is that these faulty ignition switches, whichhave been associated with several deaths in a vast majority ofregions of the world, especially in the U.S.A., had been noticed bythe company a decade ago, before declaring the recall (Pelfrey,2014).
GeneralMotors is facing several legal battles, especially because it did nottake action early enough to resolve the problem. The reasons cited bythe company are that the stakeholders felt that the process couldtake too long, and it was expensive. This has, however, been opposedby critics from different quarters (Pelfrey,2014).The critical issues of concern were that the company failed todisclose the ignition issue to the public. As a consequence, theproblem came to the limelight after a case was filed by Lance Cooper,an attorney based in Marietta, Georgia, concerning a woman’s deathin a car crash.
ReputationManagement Implications from the GM Ignition Switch Developments
Therehave been massive implications on the General Motors reputation dueto the ignition problem. The negative publicity about the company wasfurther worsened recently due to some developments, including thecontinued recalls which have been done almost on a weekly basis. Thetotal recalls have now reached almost seven million vehicles. Thishas massively affected the company’s sales, as well as income. Thereputation and financial fallout of the company can be seen from the$ 1.3 billion that the automaker posted as a charge against the firstquarter earnings (Pelfrey,2014).It has also been criticized widely for withholding crucialinformation from the public in regard to their safety. In itsdefense, the company has cited the 2009 bankruptcytoprotect itself from the continued legal claims.
Inaddition, the profits made by the company in the first quarter fellby 86%, which accounts for about 125 million. At the same time, GMmade only 6% share, compared to the last year’s share of 58%.According to a CBS report, the recall charge reduced the company’searnings by 48%inthe first quarter of the year (Pelfrey,2014).
Theother headache to GMisthe reputational damage. This might be challenging to assess, but itsimplications can be felt from the above issues. This could, however,havebeenhandled in a better way ten years ago. As opposed to the assertionsmade by the company, the cost of repairing the defective parts isonly 57 cents (Pelfrey,2014).It had been portrayed to be costly by the stakeholders in thecompany, which has further tarnished the company’s image to thepublic.
Relevanceof Other CSR Concepts
Oneconcept of corporate social responsibility (CSR) that the company hastried to apply is through incorporating its CSR in its businessstrategy. This has been done by the $1.3 billion that it has chargedagainst the first quarter earnings. It has gone ahead to involve itsbusiness stakeholders, something that has seen the company remainrelatively strong, despite the negative publicity. The company hasbeen trying to use the concept of ‘Creating Shared Value’, butthe current avenues are not allowing this to happen (Pelfrey,2014).The only obvious option left for the company is to argue its case inthe court of law. Experts have argued that this could see GM reduceits losses. One of the policies that the company is putting in placeis to make sure that its personnel are entirely responsible for theiractions. This is indicated by the management’s decision to acceptand take responsibility of the faulty issue.
Itis evident that the company needs to review a ‘benchmarkingconcept’ in its reputation management. This is where the companyanalyzes the strategies used by its competitor in the same industry.It could work out to know how to deal with its customers,implementation of its CSR policy and efficiency. However, this can beviewed as a late response to the current problem, but it is crucialfor the company’s future. However the most important thing for GMCompany is to make sure that its products are safe. This willeventually, automatically improve its reputation of the manufacturer.
GM’sStrategic Management of Stakeholder Relationships
GMhas been known as one of the companies with the best strategies ofmanagingstakeholder relationships (Pelfrey, 2014). The company has a powerfulstrategy which focuses on its global vision. This has been enforcedthrough designing one of the best brands in the world. It hasinvested in doing research and using new technologies in the market,which has come as a result, of re-investing its profits in itsbusiness cycle. The brand that the company has introduced into themarket, designing, innovation and research, make it one of the bestin the industry.
Despitethe latest developments, the company has been known to build thebest-in-segment vehicles, which have earned it a positive reputation.The company boasts of operating efficiently, as well as in a sociallyresponsible manner. However, this is now debatable due to the currentunfolding events. Another strategy to improve revenueisselling. The company has employed the best staff members in theindustry to catapult its profits over the years. This has seen thecompany maximizing its earnings in previous occasions. Customers haveconsequently benefited by having higher residual value from theirvehicles (Pelfrey, 2014).
Impactsof Legal, Regulatory and Political Issues on GM
Therehave been legal implications from this problem, where the companyestimates to be having 79 lawsuits filed by its customers due tolosses of lives and damaged vehicles, which accounts for about $ 10billion. There are also twenty class action lawsuits, which the GMlegal team must deal with. On the political arena, the company hasbeen questioned on the manner in which it has handled the wholeissue, especially through giving conflicting information. This couldbe observed from the GM CEO’s contention before the Congress
Aspectsof corporate governance and ethical considerations
Thecompany is viewed to have failed in the implementation of basicaspects of corporate governance such as carrying out proper SWOTanalysis, the five Porter’s Forces and competitive advantage. GMalso failed in analyzing its risk management process. The company hasbeen accused of concealing crucial information, therefore, breachingthe code of conduct. This has cost GM a fine of $28,000 by theNational Highway Traffic Safety Administration, which has furthertainted its public relations.
Overthe years, GM Company has built its brand and had worn the publictrust. It had therefore improved its reputation tremendously.However, a recent unfolding has tainted its public image. How thecompany continues to deal with the situation is what matters. It mustbe appreciated that the leadership has accepted the mistake and takenaction by laying off some of its top personnel. This is a positivegesture towards rebuilding its reputation to the public. Corporatecompanies should invest in ensuring that they are sociallyresponsible in all their business activities. This will minimize suchmistakes in future.
Pelfrey,W. (2014). Billy, Alfred, and General Motors: The story of twounique men, a legendary company, and a remarkable time in Americanhistory. New York, N.Y: Amacom