Crisis Management Case Study GM

Crisis Management Case Study
GM RECALL 2014
Sean Young | Corporate Communication | 04.08.2018

Crisis Definition
On February 6, 2014, General Motors(GM) recalled about 800,000 of its small cars due to
faulty ignition switches, which could shut off the engine during driving and thereby prevent
the airbags from inflating. The company continued to recall more of its cars over the next
several months, resulting in nearly 30 million cars worldwide recalled.
The fault had been known to GM for at least a decade prior to the recall being declared. As
part of a Deferred Prosecution Agreement, GM agreed to forfeit $900 million to the United
States.
 Cause of ignition failure
Unintended ignition switch shut-off happened because the "switch detent plunger",
designed to provide enough mechanical resistance to prevent accidental rotation, was
insufficient. General Motors was aware of this potential problem, and held meetings about
it, as early as 2005.
 Reaction to the recall
The families of the 13 people who died in car crashes involving the recalled vehicles gathered
outside the US Capitol prior to Mary Barra's testimony on April 1. They were joined by four
Democratic politicians in support of tougher rules regarding the disclosure of automobile
defects
At the Capitol, they also said that their relatives had died "because they were a cost of doing
business GM style."
The recall cost GM more than $3 billion in shareholders' value over four weeks. One mother,
Laura Christian, created a Facebook page to bring together the family, friends and those
who support them.
PAGE 1
Feb. 25, 2014 - GM more than
Jan 15 2014 Feb. 13, 2014 - GM says it is doubles its ignition-switch
recalling 776,562 older- recall, mostly in North
Barra becomes CEO models America, to 1,620,665
vehicles.
April 1, 2014 - Barra tells a April 2, 2014 - Barra comes

March 18, 2014 - GM names
U.S. House panel she is under withering attack at a
Jeff Boyer vehicle safety chief,
“deeply sorry” for the U.S. Senate wiyh accusations
responsible for product safety
company’s failure to respond of “criminal” behavior and “a
issues, including recalls
quickly. culture of cover-up.”
April 11, 2014 - Documents May 16, 2014 - GM is slapped

released by a U.S. House April 24, 2014 - GM says it is with a $35 million fine by the
committee show that GM the subject of five different U.S. Department of
engineers were aware of government probes related to Transportation for its
serious but rejected several its massive recalls. delayed response to the
opportunities ignition-switch defect.
May 21, 2014 - GM says it is June 5, 2014 - GM says it fired

recalling more than 284,000 15 people for misconduct and
lated charge for the second older Chevrolet small cars in failure to act on the recall of
quarter to $700 million from the United States and other the defective ignition
$400 million. markets, bringing recalls at switches for years after first
this year to 29 and almost gaining knowledge of the
13.8 million vehicles. problem.
June 16, 2014 - GM recalls 3

million more cars for
June 6, 2014 - GM announces June 13, 2014 - GM recalls
ignition-switch issues,
four more recalls, unrelated 511,528 Chevrolet Cobalts and
roughly doubling the number
to ignition issues. other models.
of GM vehicles with known
switch problems.
June 18, 2014 - U.S.

lawmakers accuse GM of a
“disturbing pattern” of
neglecting safety and reveal June 30, 2014 - GM recalls The latest recalls swell the
emails from 2005 in which a 8.23 million mostly older cars total number of vehicles
GM employee warned a “big linked by the automaker to recalled by GM this year to
recall” may be necessary over three deaths. 29 million.
an ignition-switch problem
that was only addressed this
week.
PAGE 2
The root Cause: The Crisis from within
When the recall of GM vehicles for faulty ignition switches came to light in February
2014, there were already more than 10 years of silence surrounding it. While
speculation grew that executives had tried to cover up the ignition switch issue, some
believed the problem went unanswered largely because no one truly understood the
issue, a reflection of a much larger underlying problem found within the company’s
very core: its culture.
Resulting from the economic recession of 2000 and intense cost-cutting measures,
GM became a practitioner of cost culture. GM was restructuring, shrinking and cutting
costs out for the survival of the company. It was then followed by years of an
“organizational culture that prized cost over quality, hesitating to pass along bad
news and possibly condoned a cover-up,
Fletcher and Mufson point out that “the problem [was] a corporate culture reluctant
to pass along bad news. When GM was struggling to cut costs and buff its image, a
recall of its popular small cars would have been a terrible setback.”
Barra said “the faulty parts and fatal accidents that went on for almost a decade were
born of bureaucratic bumbling and ‘individuals seemingly looking for reasons not to act,’
rather than any sort of executive cover-up or risky attempt to avoid extra expenses.”
Shepardson and Burden outline that “GM has been criticized for decades as insular, slow
to take responsibility for problems, hesitant to deliver bad news to superiors and
reluctant to fire poorly performing executives.”
The Valukas report, an in-depth report that summarized the investigation of former
United States attorney Anton Valukas into the company’s handling of the ignition
switch recall, introduces the concept of a GM “nod culture.” Executives and managers
in charge would all nod to changes in meetings, but never actually take the action to
PAGE 3
do it, based on “managers being afraid or unwilling to report problems to other
departments or senior executives”
Crisis Communication
Pre-Crisis
It has been noted that, in 2005 there were complaints launched regarding the same
that is the issue of the ignition switch but however many employees had either
denied it or had not responded to it.
It was only in 2014 that Barra decided that there was a need for GM to Adopt a
cultural shift approach from cost-cutting to customer oriented.
POST CRISIS
The main goal of the post crisis period was to regain the public trust by encouraging
is 16+-year-old students to purchase a GM car
PAGE 4
TACTIC 1
VIDEO RELEASE
In this video, the GM CEO Was addressing the employees and the public accepting
that the organisation had made mistakes in the past and that the organisation needs
to change its ideology to be into being a customer oriented organisation.
Tactic 2
Social Media Response
In an aim to regain customer Faith GM had decided that it would use its Facebook
and Twitter pages not only connect with public as a way to resolve any
inconvenience which is caused by them in these past few years.
PAGE 5
TATIC 3
Revamp in internal Structure
 Sacking of employees involved with the scandal

 Proper internal investigation team to conduct internal audit
 Improving Communication lines vertically and horizontally
 Advertising of Safety Centric Customers first ideology
 New set of values launched
PAGE 6
Stakeholders
− Employees
− Customers
− Investors
− Government
PAGE 7
Action Plan
 Owner to take full ownership of the crisis
 Revamp internal and external structure
 Run ads: Manyx 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.
PAGE 8
Media Mapping
After Barra testified before the House Energy and Commerce Subcommittee
in April 2014, she became the subject in the opening skit on NBC’s “Saturday Night
Live.” The short sketch poked fun on Barra answering questions from Congress and
not having any real answers for them. Her responses repeatedly stated, “we’re
looking into it” and “that is part of the investigation.”
After much speculation that Mary Barra was appointed as CEO for the
automaker because of her gender, NBC’s Matt Lauer asked Barra on the “Today”
show in June 2014 whether she thought she got the job because she is a woman and
a mother . Barra is the first female CEO of GM and a mother of two who has been
with the carmaker since 1980. She dismissed the speculation, saying that she believes
she was selected as the new CEO based on her qualifications
PAGE 9
PAGE 10
Most reports on this crisis have been comparatively less negative but the media was
full of praise for GM CEO, Barra.
PAGE 11
Solutions implemented
 Recalls conducted
 Issue rectification strategy implementation
 Stakeholders connection
PAGE 12

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Crisis Management Case Study

Sean Young | Corporate Communication | 04.08.2018

 Cause of ignition failure

 Reaction to the recall

April 1, 2014 - Barra tells a April 2, 2014 - Barra comes

April 11, 2014 - Documents May 16, 2014 - GM is slapped

May 21, 2014 - GM says it is June 5, 2014 - GM says it fired

June 16, 2014 - GM recalls 3

June 18, 2014 - U.S.

Social Media Response

Revamp in internal Structure

 Sacking of employees involved with the scandal

 Revamp internal and external structure

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