By on July 2, 2014


Megan McArdle, over at Bloomberg View, wonders out loud if the flood of recalls issued by General Motors, covering every car they’ve sold for the past three years and a wide swatch of the vehicles the company has made and sold over the past decade and a half is a deliberate strategy on the part of the company to protect its  image with consumers from further harm. The strategy may be working. The sales reports for June show that the current sales of new GM vehicles seems to be unaffected by all of the publicity and controversy surrounding defective ignition switches that can shut off the car, rendering the airbag systems inoperable in case of a subsequent collision.

Some may see, in the recalls, just more of the same poor quality that many consumers associate, correctly or otherwise, with the domestic automakers, particularly GM. McArdle is not so sure that is how the massive recalls will ultimately play with the broad market:

I wonder if something else isn’t going on, something smarter. I wonder if GM hasn’t decided to go hog wild on the recalls because at this point they have nothing to lose.

There’s a point in a bad scandal where things have gotten about as bad as they could possibly get. New revelations don’t make things worse, because they hardly could be any worse. Instead, they get lost in the deafening noise of prior bad news.

At that point, it’s a good idea to announce anything that you’ve been worrying about might one day come out. People won’t really notice now, and by the time they’ve recovered sufficiently to take an interest, your worrisome story is old news.

What sayest the Best & Brightest on the matter? Blunder or brilliant?

Ronnie Schreiber edits Cars In Depth, a realistic perspective on cars & car culture and the original 3D car site. If you found this post worthwhile, you can get a parallax view at Cars In Depth. If the 3D thing freaks you out, don’t worry, all the photo and video players in use at the site have mono options. Thanks for reading – RJS

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34 Comments on “Is GM’s Recall Mania More Corporate Blundering or a Strategic Move?...”

  • avatar

    Brilliant. It’s not as if their rep could fall any lower.

  • avatar

    Don’t forget, they now have a female CEO who is new on the job. The massive recalls could very well be an effort to make it look like she’s cleaning house, to coin a sexist term. Like what’s-her-name in Gone With The Wind, think of Mary Barra saying, “As God is my witness, I’ll never have to announce recalls again!” The effort may well end up burnishing her credentials as well as the reputation of the company.

  • avatar

    Of course that’s what it is! It’s standard operating procedure used by every public company that’s ever missed a quarter or delivered any bad news: You’re going to get clobbered anyways so take every write down and deliver every nugget of bad news at once… Get it out of the way and reduce the likelihood you’ll need to do it again mid-recovery.

    • 0 avatar

      As I’ve said before, if it’s clear you’re going to miss your bonus targets, you want to get everything out this year, to improve your shot at making bonus next year.

      Also, Ms. Barra is new in the job, so she has every incentive to get all the bad news out while she can still blame it on her predecessors, without having any of it stick to her.

      Never underestimate the impact of greed and self-interest in C-suite decision-making.

      • 0 avatar

        I agree. And it hasn’t hurt sales of GM products. There will always be GM fans who will opt for GM products, no matter what.

        So, all in all, I see this as a smart strategic move on Ms Barra’s part.

        In fact, I am more impressed with Ms Barra as GM’s CEO than with any of her predecessors and their C-suite policies.

  • avatar

    This makes me think of Rocky III, where our hero deliberately gets pounded down by Mr. T and waits till he tires. The previously-dubious boxing analyst yells: “I’m beginning to see that Balboa’s strategy is working.”

    Of course Balboa ended up with brain damage. That’s why I personally think McArdle may be giving those GM stumble bums too much credit.

    What’s happening is probably much simpler and happening at the dealer level. Buickman said it was an opportunity, and he’s right. Push that clunker in for a recall fix, and drive out with a new car. Really, how many people who are already Cobalt/Ion/G5/HHR customers hate GM? Once they’re in the door, it has to be tempting to get a good trade-in price on that 8-year-old jalopy with the automotive version of the Clap. Throw in cheap financing and cash on the hood, and they’re putty in a dealer’s hands.

    Upside? The new product is better in relative terms. Baruth’s recent 55,000-mile Cruze rental suggests the newer GM stuff may serve them just fine. But I’m an optimist and hope springs eternal.

  • avatar

    Anyone thought that maybe the writer over at Bloomberg was paid by GM to say this?

    • 0 avatar

      Possibly. I felt that way about some of Forbes’ Joanne Muller’s fawning articles about this, particularly the ones that went easy on Akerson.

    • 0 avatar

      You must not be familiar with Megan McArdle, a glibertarian who often writes about things that she doesn’t understand.

      It’s her job to have opinions. Her opinions aren’t necessarily based upon facts and other such trivialities.

      • 0 avatar

        Are you trying to say she’s best qualified to be a TTAC commentator? Sorry, that one was just too easy.

      • 0 avatar

        I appreciate that you are aware of this; libertarians want as little to do with Ms. McArdle as champions of small-government non-interventionism wanted to do with Mr. Bush. She’s just another neocon without depth who affects a position.

        • 0 avatar
          George B

          Megan McArdle writes about economic issues so I don’t see how the label “neocon” applies. Not sure what label I’d use. Maybe libertarian-leaning moderate from the city. She definitely didn’t grow up in a rural world of volunteer fire departments and having to burn or haul your own trash, so she doesn’t imagine just how much government one can live without.

  • avatar

    The press doesn’t get the story.

    The Obama administration has dramatically ramped up its use of fines and bad PR in an effort to get automakers to police themselves. The policy now is that an automaker who needs to be instructed by NHTSA to initiate a recall for stuff that can kill people is going to be hit with an eight-figure fine for each instance. This level of punishment is unprecedented.

    The feds are now looking very closely at GM, thanks to the Cobalt problem. GM is trying to avoid what could potentially turn into hundreds of millions of dollars in fines, combined with terrible press, all for stuff that it would have needed to recall, anyway.

    Given the alternative, it’s better to take the bullet now than to get hit by an entire magazine of federally-sponsored bullets later. Getting caught is inevitable, so they may as well get it over with at a lower price.

    • 0 avatar

      If what you say is true (and I don’t have any reason to doubt it), it shows that somehow the new GM is getting it and moving on and ahead, adjusting to reality and not trying to fight it. Smart move.

      • 0 avatar

        The fines are a matter of public record. Just a single $3 million fine against BMW exceeded the total fines collected during eight years of the Bush administration.

        The change has been dramatic; it’s surprising that the automotive press hasn’t noticed the difference, since it is documented and easy information to get.

        Auto safety has been an administration priority. But with limited staffing, the fines are being used to motivate the automakers to police themselves.

    • 0 avatar

      Thanks, Pch101. Of course the press not getting the story is an old story in and of itself.

  • avatar

    I think this is good on GM’s part. Get the mistakes out all at once lessens the impact. If an amputation is necessary, best it be quick then the a constant sawing that only leads to rot and eventual loss of limb anyway. I think there’s a large contingent of consumers out there that trust more makers that recall than makers that don’t or resist. It’s not like any maker out there puts out flawless product.

  • avatar

    They are going through the list and doing all the recalls they probably should have done earlier. Getting it all out in one hit is probably the right PR strategy as the collective memory is notoriously short.

    Other automakers are also taking advantage and are pursuing the “farting in a pig pen” strategy of doing some large scale recalls under the cover of the GM story.

  • avatar

    Why not? They’re recalling cars that have been out of production for a decade. How many Intrigues and Aleros are still on the road? It must make the Pontiac/Saturn/Hummer owners feel good that GM will have their back in perpetuity.

  • avatar

    Time will tell. This is a classic case of the pendulum swinging from one extreme to the other. I used to work in the GM recall investigation group (PI) and have personally conducted internal investigations that resulted in recalls. The historical practice when I was in the group was all cars affected by a potential issue were innocent until proven guilty. Although that sounds OK, the catch was how hard investigators dug or how well they were supported / encouraged in their investigations. I personally knew an investigator who had a quite successful career (grade level / promotions) because he was good at minimizing vehicles involved in recall investigations. Upper management liked him a lot. Today, it appears GM is looking at potential recalls and deciding that all vehicles are guilty without working too hard to prove otherwise. How else do you explain completing so many investigations in such a short time period. The number of recalls this year is unprecedented. They don’t have much choice from a PR standpoint, and for now, this is the better course for them. However, given the business implications of the recall costs, I expect that pendulum to slowly swing back somewhere in the middle going forward.

  • avatar

    Much as I hate to agree with McArdle, I think it’s a good move by GM. Get all the pain over with at once, and after the first couple recalls it’s not news anymore, so no more bad headlines. And it makes it look like they’e serious about fixing problems, instead of sweeping them under the rug. New GM indeed.

  • avatar

    Considering that business press will print anything if the money is right, I find that highly unlikely that GM did not paid for this. It is precisely cut out for the amusement and/or satisfaction of the shareholder.

    This is something old GM would have done. Honestly the only difference I see between the old GM and the new one is current existance.

  • avatar

    I think this is exactly what they are doing. I’m guessing the conversation went something like this.

    The C-Suite wants a list of ANYTHING we are remotely thinking of recalling and all statistic on anything we built in the last 15 years NOW.

    The bar of “abundant caution” was set lower. They’re right – the averaged slob gets bored – fast.

    Ukraine what?

    Who is ISIS?

    Didn’t GM do a recall last month?

    Oh look Miley Cyrus almost naked!

  • avatar

    This is exactly what Toyota did after the UA scandal of a few years ago. They recalled everything that might be an issue all at once. Some of the time the customer would go in for the pedal recall and have another recall knocked out at the same time. They at that point might not even realize that there was ever anything else wrong with the car because they were focused on the pedal issue.

    I see this a lot at the Mercedes dealer where I work. They bring their car in for normal service and we take care of a recall while it’s there and then we mention that we took care of it for them. We look like the good guys for having the customer’s back on a recall that they forgot or didn’t know about.

  • avatar

    They’re only going to take one hit (albeit a big one) to the stock this way. Write off all the bills and ill will at one time so only one year’s financials are affected and the shares can start slowly climbing back up after the dust clears. Textbook damage control – Ms. Barra gets to blame the previous administration and say ‘we’re a different company now’.

  • avatar

    The trouble is, that when an administration can and does play these games, no one is safe, Ford could be next, or Subaru, I think that most of this is politically motivated, I don’t know the motives, for the most part, I think this is a witch hunt.

  • avatar
    George B

    I question if it is even possible for GM to try to get all the bad news and recalls out of the way quickly. The engineering work to test proposed solutions to avoid creating new problems is really hard to speed up. The logistics of getting new parts manufactured for the recall is it’s own nightmare. Then GM has to get service bulletins and new parts out to the dealers. If GM speeds up announcements of recalls to get all the bad news out of the way, they run the risk of frustrated customers who can’t get recall work done because dealers don’t have the parts.

  • avatar

    Ya know, all this GM talk, but I would be willing to bet that Honda has recalled as much of a percentage of their fleet over the last 10 years as GM. For our 2003 CR-V, it had I think it was four recalls and two extensions of warranty, not to mention numerous service bulletins specifically related to cheap parts. Wobbly seat anyone?

    To this day the lapse in parts quality by Honda and never seems to get mentioned, but I saw it and drove it from new in 2003. It’s one of the reasons that we own Mazda now. GM is, as it was years ago, an easy target, but they are not alone in the cheapening up of parts and such, and the failures that go along with it.

  • avatar

    I’m glad to see _someone_ learned from Nixon and Watergate…

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