General Motors announced last Monday the recall of some 8.5 million vehicles from model years 1997-2014.
Meanwhile, also last week, Kenneth Feinberg, a compensation expert retained by GM, announced that families of those killed in car crashes attributed to defective ignition switches will receive payments starting at $1 million.
The disquieting developments from GM headquarters in Detroit are just the latest drips in the drip, drip, drip of negative publicity that has fallen upon the nation’s largest automaker for much of this year.
Indeed, last week’s recall, which includes nine models, increases to 29 million the GM vehicles recalled this year in North America. That surpasses the number of vehicles GM sold in the U.S. from 2005-15.
GM’s compensation plan is a response to civil and criminal actions against the company in the wake of damning revelations that it knew about the defective ignition switches installed in the Chevrolet Cobalt and HRH, Pontiac G5 and Solstice, and Saturn Ion and Sky – but failed to disclose the defect for more than a decade.
All told, GM’s mass recalls, newly created victims fund and other related expenses could cost the automaker a staggering $7 billion, Morningstar Inc. analyst David Whiston told the Wall Street Journal.
But no less worrisome for the automaker – which very well would have gone out of business were it not for a massive bailout by the federal government – is that the negative publicity it has received – deservedly so – could undo the remarkable gains the company has made over the past couple years.
Yet, there is a ray of light amid the gloom that has beset GM since the start of the year: CEO Mary Barra, who took over the automaker’s top job a mere five and a half months ago, and who hardly could have imagined the crisis that awaited her, has taken important first steps to repair the damage to GM’s brand.
That begins with the mantra for which Ms. Barra became known as GM’s head of product development: “No more crappy cars.” The automaker’s mass recall is a multibillion dollar statement that it is putting its era of crappy cars behind it and that it is committed to quality craftsmanship going forward.
As to GM’s multibillion-dollar victims fund, it is a praiseworthy act of conscientious capitalism on CEO Barra’s part. Indeed, because the automaker filed bankruptcy in 2009, the reorganized company that emerged from Chapter 11 could have been shielded from legal liability for defective cars sold prebankruptcy.
That could have meant that the families of those killed in defective GM cars received no compensation for the automaker’s negligence, except for the offer of $500 coupon toward a new GM car.
In a letter to GM employees earlier this year, Ms. Barra vowed that the company would hold itself accountable for the deaths and injuries caused by its defective vehicles. And last week, she endorsed the plan by Mr. Feinberg to create a victims fund, saying it was her company’s “civic duty.”
It will take some time for GM to restore the good name and reputation it once had with the nation’s car buyers. But the automaker at least is moving in the right direction.
From the Orange County Register
