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 Analysts and academics warn that a misstep by GM could leave it with
a lingering headache, something Toyota Motor Corp <7203.T>
experienced from 2009 to 2011 with recalls linked to sudden
acceleration. The Japanese automaker was criticized for being slow
to react to complaints and initially blaming the drivers.
GM is currently interviewing employees dating back to the discovery
in 2004 of the problem with the ignition switch, which has since
been linked to 13 deaths, sources previously said. Meanwhile, U.S.
safety regulators have opened an investigation into whether the No.
1 U.S. automaker reacted swiftly enough in its recall last month of
more than 1.6 million vehicles.
GM Chief Executive Mary Barra on Tuesday in a letter to GM employees
said she deeply regretted the circumstances but was pleased with the
company's response and the focus will be on customer safety and
satisfaction.
Moving past the recall and related fallout will be critical to
ensure the Detroit company continues the rebound since its 2009
bankruptcy reorganization, analysts said.
"They need to get past this as quickly as possible," said George
Cook, a marketing professor at the Simon Business School at the
University of Rochester.
"You cannot be reactive in dealing with the American car-buying
public," added Cook, formerly an executive at Ford Motor Co <F.N>
for 10 years. "You have to be proactive and I think they'll be
forgiving if it's not really, really serious. People have short
memories about that stuff."
GM's recall was to correct a condition that may allow the engine and
other components, including front airbags, to be unintentionally
turned off.
GM has said the weight on the key ring, road conditions or some
other jarring event may cause the ignition switch to move out of the
"run" position, turning off the engine and most of the car's
electrical components. GM has recommended that owners use only the
ignition key with nothing else on the key ring.
The company said last week that the initial replacement parts will
be available in early April.
Trent Ross, senior vice president of reputation and risk management
at Ipsos Public Affairs, said GM needs to take ownership of the
issue right away. Several analysts lauded Barra for her letter.
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"GM needs to show it's doing the right thing," he said. "And Mary
Barra has to demonstrate that the buck stops with the CEO."
In her letter to employees, Barra emphasized that whether the
company's reputation and sales suffer is not the issue.
"Our company's reputation won't be determined by the recall itself,
but by how we address the problem going forward," she said.
GM faces a fine of up to $35 million from U.S. National Highway
Traffic Safety Administration in addition to recall costs it has not
outlined. Analysts agreed the big costs could come from lawsuits
likely to result from the recall and probe.
Toyota, for instance, settled economic-loss claims in its case for
more than $1 billion and is negotiating settlement of hundreds of
personal-injury lawsuits. It also is in talks to settle a criminal
probe by the U.S. Justice Department for a reported $1 billion.
However, that has not hurt sales or stopped Toyota from ranking
highly in consumer quality rankings conducted by J.D. Power and
Associates, suggesting that any damage to GM could be fleeting,
analysts said.
GM's case could take time, however, given the Detroit company's
internal probe and the investigation opened by the NHTSA, which Cook
said could last at least six months.
Allan Kam, a former enforcement attorney with NHTSA, said the
agency's 107-question "special order" was unusual. "I've never seen
one quite as detailed as this one," he said.
Kam speculated GM would prefer to settle the NHTSA probe in a way
that would allow its answers not to be published widely. However,
the mounting pressure on NHTSA, with members of Congress sending
letters of inquiry, may make that outcome unlikely.
(Additional reporting by Paul Lienert in
Detroit, and Emily Flitter in New York; editing by Steve Orlofsky)
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