On Monday, General Motors General Motors announced that it would take a $300 million charge during the first quarter to reflect the cost of recalls for deadly ignition defects on the Chevrolet Cobalt and other problems. GM also announced three new recalls for another 1.5 million more vehicles, including sport utility vehicles, and Cadillac sedans, for a variety of potential defects.
The latest moves come after some difficult weeks for the largest U.S. carmaker, which is under scrutiny from Congress, the National Highway Traffic Safety Administration, safety advocates and numerous lawyers for recalls involving 1.6 million vehicles worldwide, including the small Cobalt, that date back a decade or more. The situation has raised questions why GM's new chief executive, Mary Barra, and other senior management did not know about or address the defects sooner. Twelve people died in accidents involving the faulty ignition switches, although GM says no injuries have been reported in the latest set of recalls.
In a statement, Barra said she had asked her executives to give added attention to their pending reviews of GM products, "bring them forward and resolve them quickly," reflecting the automaker's eagerness to get past the furor. GM also released a video of Barra speaking directly to employees.
GM's predicament is the same kind of uproar that surround Toyota five years ago. In 2009 and 2010, the Japanese' carmaker's sterling reputation was battered by millions of recalls involving sudden acceleration in a variety of its vehicles. Like GM, Toyota was in the spotlight for months, as investigators and trial lawyers delved into its production methods and corporate culture. While the crisis ended after about half a year, Toyota is still mopping up the damage.
The 2009-10 experience was a historic turning point for Toyota, coming not long after it passed GM to become the world's biggest carmaker. Used to maneuvering with an aura of opaqueness, Toyota had little preparation for the kind of scrutiny that came its way.
It was especially trying for Toyoda's new chief executive, Akio Toyoda, the grandson of the carmaker's founder. Toyota initially resisted efforts to have Toyoda testify before Congress, saying that the matter could be handled by its North American operations. But as it emerged that the decision making process for handling the recalls rested in Japan, Toyoda flew to Washington in February 2010 to appear before the House Committee On Oversight and Government Reform, one of three panels that opened investigations in the Toyota recalls.
Akio Toyoda, President of Toyota Motor Corporation, at the annual results conference in Tokyo, May 17, 2011, a year after he testified before Congress. Picture by Bertel Schmitt (Photo credit: Wikipedia)
Flanked by a translator and a senior North American executive, Yoshi Inaba, Toyoda repeatedly apologized for the situation. "I extend my condolences from the deepest part of my heart," Toyoda said. He showed even more remorse later at an event with Toyota employees and dealers, when he choked up with emotion in thanking them for their support and again expressed his apologies. Asked what he would tell President Obama, Toyoda said, "Toyota cars are safe."
At the time, some members of Congress questioned whether Toyota was getting extra scrutiny in the wake of the federal GM bailout. Federal officials disagreed, noting that there had been recalls of more than 23 million automobiles from many different car companies.
As GM's time in the spotlight continues, it's likely that Barra, too, will have to testify before Congress. Most likely, she can hope for the settled waters that soon surrounded Toyota. After a series of Congressional hearings in winter 2010, public interest in the Toyota recall situation began to wane.
By the New York International Auto Show in late March 2010, there was little mention of the recalls, which at the time totaled 6 million, and company executives were tentatively expressing optimism that the company could soon return to normal.
But as with the aging Cobalts, Toyota's quality issues still haunt it. Last fall, Consumer Reports removed the Toyota Camry from its recommended list, along with the the RAV-4, the industry's original crossover vehicle, and the Prius-V. The step took place because Camry and the other vehicles failed a new test from the Insurance Institute For Highway Safety.
And last month, neither a Toyota nor a GM vehicle won the top spot from the magazine in its annual car ratings. That went to the Tesla Model S, which is built in a factory in Fremont, California, that was once home to a joint venture between Toyota and GM.
Akio Toyoda
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