General Motors Recall Crisis in 2014 - Case Study Example

Management Communication-GM 2014 Recall Crisis (Name) (University Affiliation) (Date) Introduction As many communication experts hold, the manner in which a firm manages a desperate crisis usually gives the patrons a far more genuine look at how they are run than any pedantically drafted press release could ever offer. Companies must continuously seek the best way of handling firm crises as situations often differ. A crisis often threatens the operations as well as the reputation of a company and as such, many businesses often try to avoid disclosing the aggregate information associated with the incidents whenever they are communicating to the public. They avoid giving the public the truths for the fear of negative publicity. What such companies often fail to understand is that withholding the facts is often more dangerous to the company that the incident itself. As such, any firm that has been hit by a crisis must strategize its public communication while handling the crisis. In effect, this paper seeks to analyze the 2014 General Motors ignition switch recall, which put the firm in a crisis communication mode. The recall, which happened immediately Marry Barra took over as General Motors’ chief executive officer, was due to a series of complaints and lawsuits that were burgeoning due to the company’s defective ignition switches that were causing accidents. This paper will, therefore, use various sources including company reports, investigation reports, news releases as well as news reports to analyze the communication response methodology that was used by General Motors with regards to handling the incidence. Based on various communication management theories and concepts, this paper will look at GM’s communication effectiveness as far as handling the crisis is concerned. A Short Overview of General Motors (GM) The General Motors Company has been in business since 1902 and is specifically engaged in the designing and manufacturing of trucks, automobile as well as spares across the world. The company, which is commonly known as GM, is largely known for manufacturing renowned brands such as Chevrolet, HSV, Cadillac, Baoun, Vauxhall, Opel, GMC as well as Jie Fang (GM. 2015). Founded by William Durant in the U.S.A, GM acquired Oldsmobile in 1908 and the subsequent year, the company again acquired Oakland, Cadillac as well as Elmore. By the year 1911, General Motors had already entered the international market thus exporting various types of automobiles and trucks out of the U.S as well as Canada. The company’s expansion process continued to increase and in 1930, it again acquired railcar builder firms, which included the Electro-Motive Corporation and Yellow Coach Company. Notably, General Motors has for a considerable part of its history been considered as the largest company in the United States as well as the largest single employer globally. However, in the early 2000s the company was hit by an economic slide, which took a toll on GM forcing the United States Government to intervene to prevent the company from crumbling down (Business Insider, 2015). Currently, General Motors manufactures as well as markets brand new automobiles and trucks and also offers international special features such as satellite radio, OnStar vehicle protection, accessories, special services maintenance as well as parts (GM. 2015). As of June 30th this year, General Motors had a market capitalization of $47.57B while the company collected revenue of $152.36 billion in 2015 (Marketwatch.com, 2016). Besides, General Motors which is headquartered in Detroit, employs more than 250,000 individuals across thirty-five countries (GM. 2015). An Overview of the Incident The GM 2014 recall incident, which officially took off in February was associated with thirteen deaths that were closely tied to the defective ignition switches in a considerable number of GM's newly manufactured vehicles. With $35 million fine at stake from lawsuits, the General Motors had no option but to recall a significant number of vehicles as the lawsuits and burgeoning complaints were tarring the firm’s reputation. According to Argenti (2015), poor communication management was the significant factor that led to the recall incident that cost the company's reputation. This is because studies indicate that the issue of defective ignition switches was known among the employees but due to the communication structure, which was bureaucratic and undermined the junior staff, the issue could not be disclosed. Evidently, recent studies also indicate that GM is not the only company facing management communication issues as well as a cultural crisis as companies such as Sony and Apple have often preferred to hide information from the public associated with the hacking of their data system (Alfonso & Suzanne, 2008). Whenever there is a crisis in an organization, no one often comes forward to speak up or rather take appropriate action that would help in curbing the issue hence preventing accidents as well as negative reputations. On February 13, 2014, General Motors pronounced its first recall of about 780, 000 vehicles, in North America because of the defective ignition switches issue. The faulty switches had potentially devastating effects on these cars because the engine could suddenly shut off suddenly when the bunch of keys attached to the car keys were relatively heavy. From the study conducted by the company engineers, it was found that the occupants of the vehicle, whose ignition switch was faulty, were often endangered. This is because once the engine shut off suddenly, airbags were often prevented from inflating in time (Smith, 2014). Since then, General Motors continued to recall vehicles and according to the company’s records, the company had recalled over 16.4 million cars that had ignition-related defects by August 2014 (Ivory, 2014). According to the announcement made by the United States Attorney, Kenneth Feinberg, 230 deaths as well as 1,991 injury claims associated with GM’s defective switch cars had been reported as of December 2014 (Ivory, 2014). Unfortunately, the ignition problem had long been known to the organization but due to poor communication management, the company never took appropriate action to avoid further crisis. Accordingly, the company was largely blamed by both the state and the public for not disclosing the facts related to the faulty ignition switches crises as well as delaying a product recall. Analysis The crisis associated with General Motor’s defective ignition switches could have been addressed in time by communicating to the public immediately after the company started receiving complaints regarding the problem. However, the company chose to hide the information for a relatively long period about a product defect that cost the lives of thirteen individuals and eventually forced the firm to recall millions of vehicles hence tarnishing its reputation. The company chose to hide the truth from the public until a new C.E.O Mary Barra was appointed. It took the intervention, excellent communication management skills as well as the effective leadership of the company’s new leader, Marry Barra to handle the situation. According to Austin and Pinkleton, (2015) a firm through its leadership should first realize that defining the problem is often the crucial thing to do whenever the company is hit by a crisis. This is a significant principle in communication management. In one of his famous speeches of 1959, John F Kennedy once stated that the word crisis in itself holds two concepts: danger and opportunity. Whereas a crisis comes with serious threats in itself, it also usually comes with an opportunity to prove to the public that an organization can overcome such a challenge. Equally, Ms. Barra also seems to share this conception this could be seen in her letter to GM’s staff, which was dated March 4, 2014. In her letter, she posited that the company’s reputation would not be determined by the recall itself, but how it was going to address the issue going forward (General Motors, 2014). As Austin and Pinkleton, (2015), posits, the first rule of crisis communication is to go in public and admit the mistakes committed by the company. Even though this concept may drive the company’s lawyers crazy, admitting mistakes publicly often build an incredible goodwill as far as the court of public opinion is concerned. Accordingly, before announcing for the recall, the first thing that Mary Barra did was to take responsibility for what had occurred and asserted that on behalf of the company she was sincerely sorry for what had happened and promised to handle the matter to the core. In her submission, the new C.E.O admitted that part of the problem was related to company’s priority to cost over quality. She went further to explicate that the company was involved in an intense cost-cutting, restructuring as well as shrinking for the firm's survival and as such, the previous company’s management had hesitated to pass along bad news. Consequently, the company knowingly condoned a cover-up in order to secure its reputation (Himsel, Par. 2014). Needless to say, the loss of lives, injuries as well as inconvenience caused by GM’s defective ignition switches hence leading to a recall, pushed a huge number of people to post negative messages on Facebook and other digital platforms. However, the company maintained a clear, direct line while at the same time maintaining some semblance of personality and humanity as indicated in the snapshot below. According to Coombs (2014), the concept of communication management is not only applied during a crisis, but rather even before the crisis is known to the public. Importantly, many crises often take time to rapture and more often than not, the management is usually privy to such incidents and has the full control of how to handle the crisis before it ruptures. Looking at General Motors’ defective ignition switches problem, the crisis was known all along internally and was bound to escalate at some point. Due to its corporate culture, the General Motors management was reluctant to pass along the bad news. It is evident that prior to Mary Barra’s appointment, the company had hesitated to disclose the bad news as it feared that a recall of its renowned and popular automobiles would have been an appalling setback to the company. In crisis communication management, it is often important for a firm’s leadership to communicate early and often before, during as well as after an incident to keep the public informed and to prevent any possible preemption. It is often imperative for the company to be the one telling about the incident first; the stakeholders, as well as the public, should not get the bad news from the media or other sources as this would further damage the company’s reputation (Coombs, 2014). According to the theory of Agenda-setting, the media is principally charged with shaping the public opinions through coming up with sensitive topics that the public often picks up to discuss. It is worth noting that the media usually leads the public to think what is significant at a point in time thus information institutions have the power of setting the agenda. Accordingly, during a crisis, firms should not withhold information as this may lead the media to lose trust in them. Consequently, the firm may end up receiving negative coverage from the press during a crisis which often acts as the conditional factor that often affects the agenda-building process. Tentatively, a firm that is facing a crisis should use the opportunity laid out by the agenda-setting theory to feed the media with information which can, in turn, be released to the public thus forming a positive image. Through the public relations or communication department, an organization facing a crisis should furnish various media houses as well as journalists with relevant information regarding the incident or crisis through conferences, press releases as well as issue advertisements. Even though Marry Barra was not in a position to technically stop the General Motor’s crisis, her excellent communication skills played a significant role to the handling of the whole situation; her communication skills were a great asset to the company. Her crisis communication skills can be judged by the transparency as well as skills with which she managed the recall incident on the internet. Evidently, General Motors’ C.E.O, Marry Barra deftly confronted the issue from the onset while at the same time downplaying the significance of her gender. Her communications strategy incorporated various digital media platforms such Facebook, the company’s official website as well as Twitter as the snapshots below indicate. Flashman (2016). Ddsss Flashman (2016). Conclusion From the GM’s 2014 recall incident, it is evident communication management is often a significant concept in the daily operations of any given firm. The concept of communication management often becomes more important during a crisis. When the company effectively utilizes its communication department, it is in a position to control a situation that could otherwise get out of hand if ignored hence degrading the reputation of the company. From GM’s scenario, the paper has found that the company had initially made mistakes in handling its communication with the public but was later rectified by the new C.E.O, Mary Barra. Mary Barra, managed to use various channels including the digital platforms to respond to the incident with a strong as well as genuine message. Besides, in addition to harnessing Twitter and Facebook to connect directly with the patrons, the able C.E.O also addressed the recalls in a series of videos in various medium such as the USA TODAY editorial and during her commencement speech at various Universities. References Marketwatch.com (2016). General Motors Co.. Marketwatch.com. Retrieved 18 July 2016, from http://www.marketwatch.com/investing/stock/gm/financials Smith, A. (2014, February 14). GM recalls 778,000 cars for faulty ignition. CNN Money. Retrieved from http://money.cnn.com/2014/02/13/autos/gm-recall/ Ivory, D. (2014, September 15). G.M.’s ignition problem: Who knew what when. The New York Times. Retrieved from: http://www.nytimes.com/interactive/2014/05/18/business/gms-ignition problem-who-knew-what-when.html Himsel, D. (2014, May 16). General Motors, Avon, and the Devastating Power of Entrenched Corporate Culture. Forbes. Retrieved from http://www.forbes.com/sites/forbesleadershipforum/2014/05/16/general-motors -avon -and the -devastating -power -of -entrenched -corporate-culture/ Coombs, W. T. (2014). Ongoing crisis communication: Planning, managing, and responding. Sage Publications. Flashman, G. (2016). General Motors Recall: Responding to an offline crisis using social media communications. Linkedin. Retrieved 19 July 2016, from https://www.linkedin.com/pulse/20140702213424-18107545-general-motors-recall responding-to-an-offline-crisis-using-social-media-communications Business Insider. (2015, January 1). GM Adds Another 92,000 Cars To Its Ignition Switc Recall. Retrieved from http://www.businessinsider.com/afp -gm-adds -another-92000 vehicles-to-ignition-switch -recall-2015-1 GM. 2015. About GM: Our Company. Retrieved July 19, 2016, from GM: http://www.gm.com/company/aboutGM/our_company.html Argenti, P. A. (2015). Corporate communication. McGraw-Hill Higher Education. Austin, E. W., & Pinkleton, B. E. (2015). Strategic Public Relations Management: Planning and Managing Effective Communication Campaigns (Vol. 10). Routledge. Alfonso, G. H., & Suzanne, S. (2008). Crisis Communications Management on the Web: How Internet‐Based Technologies are Changing the Way Public Relations Professionals Handle Business Crises. Journal of Contingencies and Crisis Management, 16(3), 143 153. General Motors. (2014, June 5). GM CEO Mary Barra's Remarks to Employees on Valukas Report Findings [Press release]. Retrieved from http://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2014/Ju /060514 -mary- remarks.htm Read More