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Lessons for CEOs on Barra’s Response to GM’s Crisis

Is it possible for a CEO to bear the brunt of responsibility with a crisis that festered before she was in charge? Can a company with a poor track record in corporate integrity ever do enough with new transparency measures to acquire a good reputation?

CEOs, academics and business historians are paying close attention right now to this issue and will be picking over how it all works out for years, maybe decades, to come. So far, Barra is earning pretty good reviews from peers and management experts as she continues to step up the degree of GM’s mea culpa, cooperates with regulatory authorities, institutes new internal safeguards and attempts to manage reactions by employees, customers and shareholders. Barra pledged to fix faulty ignition switches linked to 12 deaths and also to explain why the automaker failed for 10 years to correct a problem it knew existed. Barra held a public press conference and apologized for the safety defects and said something went horribly wrong. This was unlike other times when an automaker has faced a recall and possible litigation. This came as there is an internal investigation at GM about what went wrong. Usually attorneys don’t want a company to admit anything wrong. Was this a smart PR move? Will it help GM? Why did Barra do it?

David E. Johnson, CEO of Strategic Vision, LLC, a public relations and branding agency specializing in crisis communications, says, “Barra’s move was brilliant. The public often complains about companies not taking responsibility and being open which is one of the root causes for distrust with corporate America. By being proactive and open, Barra generates good will for GM and is also setting part of the narrative of the story.” He says what Barra is doing is what other CEOs should do during a crisis.

But “remember, while this was [pre-Barra] GM, the consumer won’t differentiate,” Joe Spak, RBC Capital Markets analyst, told the Detroit News.

“The world is watching to see if GM’s culture has really changed from the old days,” Jim Olson, former head of U.S. PR for Toyota and now a professor at Winthrop University. “I teach my students that you have to embrace problems to learn from them – not try to bury them. The old GM would have tried to distance itself from this crisis.”

Gene Grabowski, a veteran communications hand who came to the Levick crisis-PR firm in Washington, D.C., from the always-embattled Grocery Manufacturers Association, told Advertising Age, “the problem is those decisions made a long time ago are now reaping consequences at a time when the public is more concerned about the responsibility of manufacturers, more in-tune with recalls and how they should be done, and more sensitive to the dangers to families and individuals because of the failure to call a recall.”

In the end what matters is “how you make good,” argued Eric Dezenhall, head of a crisis-PR firm in Washington, D.C., to AdAge. “Or how you take tangible actions to make the problem less bad.”

In any event, influential industry-media figure Keith Crain, publisher of Automotive News, suggested that Barra recuse herself from participating in the investigation because she was working for GM in key positions during the period in question, even though she said she had no knowledge of this festering problem.

Rather than recuse herself, however, she has agreed testify before Congress – even though she didn’t even know about this ten-year-old problem until a few weeks ago.

Even The New York Times gave her credit for being transparent and forthright pointing to her comments to employees — including a letter on March 4 — “representing the latest effort by the company to limit the damage that the recalls have inflicted on its reputation and consumer confidence.”

“Mary Barra understands the value of taking full responsibility for G.M.’s latest, high-profile challenges, especially if she wants to send the message that this is a new G.M.,” said Karl Brauer, an analyst with the auto-research firm Kelley Blue Book, told the Times. Investors showed scant reaction to the news. Shares of G.M. closed at $34.63, up more than 1 percent on a strong day for the market.

Early on, Barra is determinedly providing a clear contrast to how rival Toyota handled its own safety-recall crisis that began four years ago. Though the company didn’t cause the amount of damage first believed, its chiefs handled the reputation crisis badly. They acted pugnaciously every step of the way, hurting sales of Toyota products in the crucial U.S. market to an extent that may never be quantified.

And yet, Toyota seems finally to have recovered nicely not only from its recall mistakes but also from the earthquake and tsunami off of Japan three years ago that devastated its manufacturing supply lines. The company plans to earn a record $17 billion for the fiscal year ending March 31, and its U.S. market position largely has been restored.

But much as Toyota’s moves may already have been instructive to Barra in managing GM’s own crisis, CEOs and business experts will study her responses closely — and their results.


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