More than a decade ago, General Motors discovered that its ignition systems were prone to sudden failure. The failure would cause engines to shut down, even when cars were hurtling down roads at high speed. GM has acknowledged reports of 12 deaths linked to the defect.
You would think that leaders of GM would have rushed to warn the public, would have rushed to install a fix for such a dangerous problem, as soon as it was evident. You would think leaders of GM would have rushed to do this out of concern for public safety. Or a concern for its own reputation.
GM leaders had to see the consequences for Toyota Motor Corp. when that company's leadership dissembled and delayed as they learned of reports that some of their cars were prone to sudden acceleration. Toyota paid record fines to government regulators and shelled out a fortune in litigation expenses. Weakened by recalls, a devastating earthquake in Japan and loss of consumer trust, Toyota briefly lost its title as world's best-selling automaker to GM in 2011.
On Feb. 7, GM told federal regulators it would recall some of the vehicles with ignition problems. On Feb. 25, the company expanded the recall to 1.6 million cars that it built from 2003 to 2007. Dealers are being told to replace the ignition switch – a part said to cost no more than five bucks.
Now GM faces hearings in the U.S. House and Senate, an investigation by the National Highway Traffic Safety Administration and the reported scrutiny of federal prosecutors in New York. The company has hired former U.S. Attorney Anton Valukas to conduct an internal investigation.
How did GM's leaders go for years without acknowledging problems with the company's ignition systems and rushing to fix them?
Maybe Ross Perot, once a GM board member, had it right when he said in Fortune Magazine in 1988: “At GM, if you see a snake, the first thing you do is go hire a consultant on snakes. Then you get a committee on snakes, and then you discuss it for a couple of years. The most likely course of action is ... nothing.”
GM had time and reason to act. Its engineers first identified the ignition problem in 2001. Another internal report two years later documented how a service technician observed a stall while driving, and fixed the problem by replacing the ignition switch – but only in that car. In 2005, GM warned its dealers about “inadvertent turning of key cylinders” in some models now under recall. The company devised a fix but later canceled it. The media flagged the problem too: Among other news accounts, a reporter at the New York Times wrote that his wife had to coast to a stop by the side of a freeway after her knee knocked against the steering column in her Chevy Cobalt.
General Motors has been making cars in America for more than a century. Over the decades it has survived a great deal – the rise and fall (and occasional crash) of the American economy, the advance of international competition, a bankruptcy and federal government bailout.
It will survive this. Toyota came back and regained its world sales title in 2012. We anticipate that how GM survives this blow to its reputation will depend not on its top management – its credibility has taken a terrible hit. Survival will depend on the efforts of GM's local dealers around the country. They're the people who work directly with customers, the people who build loyalty, trust and confidence. Those dealers didn't create this problem; they stand to be victims, too, if GM sales take a hit. They will be key to saving the company.
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