How GM Can Steer Through Crisis of Ignition-Switch Recall
In a letter to employees, General Motors CEO Mary Barra wrote the company's "reputation" won't be determined by the ongoing recall of 1.6 million vehicles with potentially fatal ignition switch problems -- but how it addresses the "problem going forward."
If that's Ms. Barra's litmus test, then GM's efforts at reputation management are still idling in neutral, warn some Crisis PR experts.
One of the first rules of reputation management is to be proactive, not reactive. Reputation experts say GM's response seems to have been a day late and a dollar short since the first field reports started trickling in about the faulty ignition switches that have been linked to at least 12 deaths.
Now Congress, the U.S. Department of Justice and Manhattan U.S. Attorney are investigating how and why GM was slow to issue a recall on vehicles containing potentially fatal faults. (For the nuts and bolts details of the recall and various investigations, read full coverage from our sibling publication Automotive News). And the country's largest auto-maker could end up paying the price, warns crisis expert Gene Grabowski of Levick.
"GM is learning what other companies have learned over the past several years: delays in a recall can cause more damage than any recall itself because of the damage to the brand." Still, the potential millions of dollars lost to government fines and lawsuits from victims' families will "pale in comparison to damage of the brand here," he said.
"Now we'll have possible criminal liability tacked onto it. As the story unfolds, it's looking more and more like the committee in GM thought it would be too risky to do such a recall and thought a minor part could be blown out of proportion. The problem is those decisions made a long time ago are now reaping consequences at a time when the public is more concerned about the responsibility of manufacturers, more in-tune with recalls and how they should be done, and more sensitive to the dangers to families and individuals because of the failure to call a recall."
Barra leading the charge
Above all, the company needs to apologize, tell the unvarnished truth and get the problem solved as quickly as possible. That's just what GM seems to be doing, say other experts.
Promoted to CEO only two weeks before the recall, Ms. Barra is personally directing GM's response and pledging full transparency and cooperation with investigators. Those are all the things you want from a new leader, said consultant David Kiley.
"Mary Barra inherited this situation -- but she's taking charge of it personally. She's not delegating," he said.
Meanwhile, GM is offering a $500 cash allowance to owners of recalled vehicles and asking dealers to offer loaner cars while their vehicle's in the shop for repairs. That's a smart, concrete gesture, according to Eric Dezenhall, author of "Damage Control," who's tired of reading how "sorry" companies are when they get in trouble.
"A lot of companies make the mistake of placing corporate rhetoric over tangible action. I think the public's had enough of corporate courtesies about how 'deeply' the company cares," said the CEO-founder of Dezenhall Resources in Washington, D.C. "What goes much further is how you make good. Or how you take tangible actions to make the problem less bad. Whether its rebates or loaner cars, these are all steps in the right direction."
Stakes are high
The stakes are high for both GM and Ms. Barra.
Besides the real human tragedy of a dozen deaths that could possibly have been avoided, the growing criticism of GM's slow response threatens to overshadow the company's real advances in quality and performance. (Chevrolet's Corvette and Silverado swept Car and Truck of the Year honors at the 2014 North American International Auto Show, for example).
Whether real or imagined, the perception among some consumers is GM "put a price on people's lives" by not recalling faulty vehicles much earlier, warns Mike Paul, founder of The Reputation Doctor.
"That's a bad thing to have out there in people's minds," he said. "That may not be true. But that's the perception. And that perception is what's eating them up right now. GM was on its way back: that's the message we heard repeatedly. And now this happens."
Meanwhile, this is the first test for Ms. Barra, who broke through the steel ceiling to become GM's first female CEO Jan. 15. If the federal government feels misled by a company bailed out by American taxpayers, then GM's leaders will have their hands full jumping through hoops, said Mr. Kiley.
"GM will have to go the extra mile on everything they do -- because of all the eyeballs that are on the process now," he said.
GM's response so far has revolved mainly around social media and official responses to investigators and regulators. But there's some other, more expensive, moves GM can make as it struggles with the biggest potential feeding frenzy since Ford/Firestone in 2000:
Run ads: Many companies typically take out full-page ads to apologize to their customers and detail how they'll correct the problem. But GM has not run any ads around the recall. "We have not addressed this in our advertising," said Greg Martin, a spokesman for GM's in Washington D.C., via email.
Whether it's a TV spot on CBS's 60 Minutes, a YouTube video or a full-page ad in the Wall Street Journal or New York Times, GM needs to start communicating, says Mr. Paul. Without that, the story will shift to a "GM is back in trouble" meme.
"They have competitors who will use this against them in private conversations and in their positioning."
Mr. Kiley expects GM to run a full-page print ad in the next week or so. But he doesn't blame GM for keeping its powder dry. What good is "advertising into the wind" when the story's changing every day, he asks.
"You don't want to go out and advertise with one message today -- then something happens on the regulatory side that makes you want to rewrite it. In the early going, you really handle these things with public relations. And maybe emails to customers and posts on social media."
Put Mary Barra on TV: GM's response should come from the top, said Mr. Paul. From what's he's seen so far, Ms. Barra is an excellent communicator who could bring a woman's perspective to the situation.
In her letter. Ms. Barra apologized to customers and passionately defended GM's response, saying the company "acted without hesitation."
"This is an opportunity for her to use that skill. And also to use, in my opinion, her female strength," Mr. Paul said.
Many male CEOs and CMOs struggle when communicating emotion, said Mr. Paul. In the case of a recall involving a dozen deaths, consumers are looking for an emotional, not a by-the-numbers response, from GM.
"She wants people to be thinking that GM cares not just about adults, or individual drivers, but about families. If she does that well, it's a home run. But she has to take the risk to get the reward."
There's precedent for the approach in Detroit. During the Ford/Firestone tire recall-crisis of 2000, ex-Ford CEO Jacques Nasser appeared on national TV commercials to profess the auto-maker's commitment to safety. During the 1980s, Lee Iacocca appeared in popular TV spots touting the turnaround of Chrysler.
But times change. Now that the dark arts of spin control have entered pop culture, most consumers fancy themselves crisis-PR experts, said Mr. Dezenhall. So good luck to any CEO seen as trying to "spin" away bad news in TV spots.
"That whole trope of the CEO making an impassioned plea doesn't work as well in this era as it did in the past. In fact, it often costs them their job. We have a joke in our office: whoever goes on TV gets fired."
Hire outside an crisis-PR shop: That's another typical response by companies in trouble. They hire big outside agencies such as Levick, or experts such as Mr. Dezenhall and Mr. Paul, to give them a different perspective from that of the usual lawyers and bean-counters. GM has already hired two outside law firms to help with its internal probe, according to CNBC.
But when it comes to crisis marketing, GM is "relying on our existing firms for support as needed," said Mr. Martin.
IPG's Weber Shandwick works with GM. The global PR firm has a special unit devoted to crisis management which GM might be tapping into already. Other shops include Interpublic Group's Commonwealth for advertising; Aegis' Carat for media buying; Publicis' Leo Burnett for Silverado creative; and Rogue for Cadillac.
In the end, Mr. Kiley said he'd be "shocked" if federal or Congressional investigators discover a conspiracy at the top of GM to try to sweep the ignition switch scandal under the rug. But he believes GM will still end up paying fines, and suffering other damage, before this is all over.
"What's way more likely is they'll find a couple of individuals in the middle ranks of GM who expressed idiotic judgment in dealing with this," said Mr. Kiley.
--Alexandra Bruell contributed to this story.