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General Motors Quick Guide to Crisis Management

Nearly fifty years ago, shortly after Ralph Nader’s 1965 book Unsafe at Any Speed charged that General Motors knowingly distributed Chevrolet Corvairs despite design defects, GM  CEO James Roche  hired former FBI agent  Vincent Gillen to investigate Nader  to, in Gillen’s words “ determine what makes him tick,” examining  “his real interest in safety, his supporters if any, his politics, his marital status, his friends, his women, boys, etc., drinking, dope, jobs, in fact all facets of his life.”

 

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The recent media and Congressional investigations of General Motors decision not to replace a defective ignition switch on Chevrolet Cobalts –a part that cost less than one dollar—despite evidence that the defect had contributed to more than a dozen deaths again put the spotlight on GM.  And once again, GM senior management seemed to be consulting the same playbook that Roche had apparently followed in responding to Nader’s charges.  According to the New York Times, although the company learned in 2009 that a potentially fatal defect existed in hundreds of thousands of cars, for the next five years, “GM told the families of accident victims and other customers that it did not have enough evidence of any defect in their cars… In one case, GM threatened to come after the family of an accident victim for reimbursement of legal fees if the family did not withdraw its lawsuit. In another instance, it dismissed a family with a terse, formulaic letter, saying there was no basis for claims.”

 

From a review of this record of five decades, we’re pleased to offer General Motors Quick Guide to Crisis Management.  We hope this will help GM managers and other corporate leaders to respond rapidly when the next round of design defects is revealed. 

 

1.  Ignore the problem in the hope it will go away.

The first step in corporate crisis management is to hope for the best.  Creating a communications system that keeps engineering, safety, legal and public relations departments units separate also helps.  After all, you can’t be liable for what you don’t know, can you?

 

2.  Withhold relevant information from regulators.

Regulators can’t take action in problems they don’t know about.  GM failed to report the defect to the National Highway Transportation and Safety Administration (NHSTA) for years. Last week NHTSA Administrator David Friedman testified before Congress that his agency would have acted differently had GM not withheld information.   

 

3.  Attack and threaten your critics.

In the unlikely event that a problem does come to light, warn your critics that further action could result in lawsuits, staggering legal fees and smear campaigns.  GM emphasized that several of those killed in the Cobalt crashes had been drinking prior to the event.   It also threatened families contemplating lawsuits that GM would aggressively seek to require these families to pay the company’s legal fees. 

 

4.  Apologize, apologize and apologize.

In the unlikely event the company is caught misrepresenting the record of what it knew when, company executives are urged to apologize profusely and repeatedly.

 

At the 1966 Senate hearing to examine GM safety record and its investigation of Ralph Nader, CEO Roche explained to the committee that GM had begun its investigation of Nader to determine if Nader was involved in the Corvair damage claims. He testified, “I am not here to excuse, condone or justify in any way our investigation” of Nader.  He deplored “the kind of harassment to which Mr. Nader has apparently been subjected” and was   “just as shocked and outraged” as the senators were.

 

And last month, Mary Barra, the current CEO of GM said, “Something went very wrong in our processes in this instance, and terrible things happened.” At subsequent Congressional hearings, media interviews and meetings with families of Cobalt victims, she has apologized more than a dozen times.

 

5. Hire experts to give some time and deflect legal or regulatory action.

GM has hired a raft of experts to conduct internal investigations of the Cobalt affair. It has also hired Ken Feinberg, the master craftsman of plans to manage corporate risk after disasters to come up with a possible compensation plan for victims and their families. 

 

6.  Lobby aggressively to protect industry against undue regulatory influence.

Media attention on auto defects waxes and wanes but it is Congress who writes the laws that regulate the auto industry.  To ensure a welcome reception on Capitol Hill, GM lobbies aggressively in good times and bad.  In 2013, GM reported spending $8.8 million on lobbying.  According to Open Secrets, between 2002 (when the parts maker Delphi first told GM there was a problem in the ignition switch that was later installed in Cobalts) through 20013, GM spent more than $114 million on federal lobbying. 

 

7. Support auto friendly politicians.

Since 1989, according to the Sunlight Foundation, GM has contributed more than $12.3 million dollars to candidates in federal campaigns.  Its top 10 recipients include 5 Democrats and 5 Republicans, showing the company’s commitment to bipartisan appeals to currying favor. 

 

Unfortunately, even these steps can’t guarantee that all problems will go away.  But in the long run, they help GM to keep its focus on profitability and to manage the inevitable distractions from that goal.