Honeymoon May Be Over for GM CEO Barra

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Problems with a faulty ignition switch now linked to the deaths of 13 people have short-circuited the honeymoon for General Motors’ new CEO Mary Barra, who, after barely two months at the helm, must help GM navigate the biggest challenge to its reputation since it emerged from bankruptcy five years ago.

The crisis echoes the safety flap that rocked rival Toyota Motor Co. in 2009 and 2010 when it was forced to recall more than 10 million vehicles due to problems with so-called sudden acceleration. As with Toyota, it now appears GM knew for a long time it had problems with switches that could unexpectedly turn the vehicle off, causing crashes in which airbags would not inflate.

GM initially recalled 800,000 vehicles Feb. 13, acknowledging six deaths were linked to the problem. It nearly doubled the number of vehicles recalled barely two weeks later – to 1.6 million worldwide – at the same time revealing the death toll had also risen to 13. The head of GM’s North American operations also issued several apologies for a process that “was not as robust as it should have been,” before Barra said she would personally take over management of the problem.

What has come to be dubbed “Switchgate” is raising some familiar questions, such as who knew what, and when – especially with GM acknowledging that the first signs of a problem date back to 2004. The following year, it now appears, GM engineers considered changing to an alternative switch but then scuttled the idea.

Barra could face a particularly tough challenge since she served as GM’s global product development chief for several years before being promoted to CEO.

For the moment, at least, Barra appears to be taking the correct initial steps, said Tom Kowaleski, a former head of General Motors communications and now an independent communications consultant. “She defined the issue for … the company and how they handle it will be the key, not just the fact that it happened,” he suggested.

Crisis management specialists noted that recalls have become increasingly common in the auto industry. There have been significantly more since the Toyota unintended acceleration crisis began in late 2009, and they appear to be the result of both automakers and the National Highway Traffic Safety Administration wanting to look proactive on safety.

But while most recalls don’t make the headlines — or, at worst, quickly vanish from public attention — “Switchgate” could drag on for some time, cautioned Anthony Johndrow, a managing partner with New York’s Reputation Institute. And how much it will impact GM — or Barra — may depend on exactly what caused the long delay in responding to the ignition switch problem, he said.

“What gets consumers to react most are issues related to the company’s core value proposition and its ethical decision making,” said Johndrow. It would be particularly problematic if it turned out GM willingly ignored the problem, he and others warned, to save money.

The problem comes at a particularly bad point for GM, which has only begun to improve its image after the damage of a government-funded rescue from bankruptcy, as well as years of lagging in the cellar when it came to quality and reliability. Ironically, most recent studies, such as the closely followed J.D. Power Initial Quality Survey, have found the maker’s products rapidly gaining ground on traditional leaders like Toyota.

GM will almost certainly pay in court to the families of those injured or killed due to the switch problem, and may wind up paying millions in federal fines for its delayed recalls.

The Japanese maker has largely recovered from its own safety crisis, but, Johndrow warned, GM “doesn’t have as much of a runway” to turn its image around, so if it doesn’t handle things well quickly, “it’s going to go south.”

“It’s always vital that the person at the top take ownership of the problem, as Mary Barra has done,” said Don Tanner, a partner in the surburban Detroit crisis communications firm Tanner Friedman. But, “it really comes down to accountability,” he added, noting the public’s distaste with the idea that no one in the financial community has been held accountable for the banking and mortgage scandals that nearly destroyed the U.S. economy.

GM will almost certainly pay in court to the families of those injured or killed due to the switch problem, and may wind up paying millions in federal fines for its delayed recalls. But Barra also may need to shake up the GM system, suggested Tanner, and hold some people responsible.

“To show she is not just talking the talk may mean more than just opening their (corporate) pocketbook,” he said. If she handles it right, stressed Tanner, Barra “could come out as a hero by demonstrating good decision making.”

For his part, former GM PR chief Kowaleski said it’s unlikely Switchgate will make or break Barra, cautioning, “There will be a lot of other issues and this could be just a little blip in her tenure.”

But how the current crisis is handled, other experts added, will certainly indicate whether Barra is up for the job, and provide at least some indication of how she’s likely to deal with those other issues in the years ahead.

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