How the Bad Old Days May Bring Crises to New Companies

Posted on April 4, 2014


It’s been a bad couple of months for the transportation industry. The mysterious story of a vanished airliner that rivaled “Lost” for audience size and discussion, a derailed train that climbed an escalator at O’Hare in the middle of the night, and 1.6 million GM cars recalled for a faulty ignition switch. While the first two stories may earn dubious honors for their weirdness, the GM story is a tale that businesses all across America may be writing, though unwittingly, in their own distinctive script.

As reported by CNN, “General Motors…has been getting a lot of attention and criticism for its recall of 1.6 million vehicles worldwide to deal with an ignition switch problem. GM engineers knew at least as early as 2004 of the problem, but the company did not recall the vehicles until February of this year. At least 12 deaths have been linked to the problem with the ignition switch. And the number of vehicles covered by the recall has doubled since it was originally announced.”

Notably the vehicles recalled were the Chevrolet Cobalt and HHR, Pontiac G5 and Solstice and the Saturn Ion and Sky.

Exacerbating the potential for a crisis of confidence in GM was the subsequent recall of another 1.5 million vehicles, including 1.2 million for side-airbag wiring issues impacting the 2008-13 Buick Enclave and the GMC Acadia, as well as the 2009-13 Chevrolet Traverse and the 2008-2010 Saturn Outlook.

My first thought in viewing these reports was, when was the last time I saw an HHR or a G5 or any Saturn vehicle on the road? These cars were developed many, many years ago but just now are being recalled for problems as basic as the ignition switch and electrical wiring, neither issue seemingly related to the aging of the vehicles, but rather to their fundamental design.

What has happened here is that vehicles engineered by the old General Motors have sparked problems for the new GM. After the Great Recession, we were given to understand that GM and many of the other major automakers had totally reorganized themselves, with new consumer-centric attitudes that have subsequently won over buyers in very encouraging numbers. But GM, like many other businesses, may be confronting a “crisis of legacy”—one attributable to a company under its prior form and leadership or attributable to a business that has been acquired and subsequently is shown to have produced defective products.

In reinventing a company for the Digital Age, the Millennial Era, the 21st century or however management cares to phrase it, too often the products of the predecessor organization still on the market are ignored. Faulty designs and other dangerous issues created by “the old company” can haunt the reinvigorated Newco and severely damage its reputation, because consumers don’t—and shouldn’t be required to—make the distinction between the former Acme Anvils management team and the new, more wily one.

When a company attempts to write a new scenario for redefining its brand—through reorganization, acquisition, advanced products or other methods—it needs to ensure it has cleaned up Act One. That means that due process may need to be broadened beyond conventional boundaries during acquisition negotiations. Products on the shelves and in the showrooms must be examined to anticipate and proactively resolve potential defects. Public relations must be structured so that it looks not only forward, toward the “new” company, but also back to the offerings of the old one to explain to consumers any flaws the organization may have found and what it is doing to correct them before they impact consumers.

“Recall” should mean more than corralling defective vehicles; it should be a reminder for management teams to remember what their company has placed in consumer hands and its responsibility to ensure those products’ safety.”