While the series of recalls affecting nearly 27 million General Motors vehicles at a cost of $4 billion so far, GM is not the only car company to issue recalls in 2014-2015. Toyota, Ford, Honda, Acura, BMW, Mazda, Nissan, and Subaru all were affected due to the recall of Takata airbags due to the risk of violent deployment.
Just last month Ford recalled 2011-2013 Explorer SUVs and Police Interceptor vehicles because a side door handle spring could come loose and unlatch during a side-impact collision. 2012-2015 Lincolns were recalled because a vacuum pump relay could ignite a fire under the hood. Finally, F-Series Super Duty ambulances were recalled because an exhaust temperature sensor could fail to detect high temperatures in the vehicle.
According to GM analysts, the impact of recalls depends on the leadership. In an internal report, they compared their post-recall performance with Toyota’s. GM experienced a small decrease, but Toyota saw a 4 point impact. GM attributes the relatively small impact to strong leadership actions such as an internal investigation, a compensation fund, and disciplinary actions within the company.
I once read an article that I can’t locate right now but which indicated that the higher a company’s reputation was, the greater price they paid in a scandal. In other words, company A is seen as social responsible and transparent whereas company B is viewed as cost-cutting and indifferent to social responsibility. If the same crisis affected each – such as a major recall – company A would be perceived worse than company B after the scandal even though the crisis was identical. Company A loses a premium because external stakeholders have higher expectations. I wonder if that might also explain why Toyota paid a higher price for its recall than GM.