GM Has The Benefit Of Doubt For Now

If no news is good news, the news around the ignition-switch disaster isn't good for GM. The headlines keep coming. New CEO Mary Barra faced a House subcommittee grilling her on how it happened and why it took so long to figure out. Her message: GM is a new company, a different company -- one where such a thing will never happen again.

The company has, indeed, been aggressive in fixing how it deals with product problems. It has expanded the recall beyond the margins of the vehicles directly affected, including hiring Jeff Boyer as a safety czar last week, putting a stop-sale order on its turbo Cruze compact car for an axle issue this week, and bringing in big-gun attorney Kenneth Feinberg, who handled 9/11 payouts and the BP gulf spill victims fund to deal with victim compensation. 

But in addition to the huge financial cost GM is incurring, at what point do the costs include eroding consumer perception? 

"At this point, it seems consumers don't care too much," says Jesse Toprak, chief analyst at research and shopping site Cars.com. "We looked at [GM vehicle] resale value changes for the very vehicles impacted by recalls, and the values actually went up overall. And really there hasn't been much of a change in consideration for those researching."

He points out to Marketing Daily that the recalls have been ecumenical lately, although there are obviously huge substantive and moral differences at play with GM’s ignition-switch fiasco. Toyota, in the news recently for its $1.2 billion settlement, had a recall of 1.9 million Priuses early this year; Nissan recently announced recalls of over a million vehicles over airbag issues; Chrysler just announced a recall of 900,000 SUVs; and Ford has had its issues around the Escape. "If this were domestic-specific or GM-specific, it would make a much bigger difference to consumers," says Toprak. "But everyone deals with it, so there are levels of understanding now that it can happen to everyone." 

AutoTrader.com actually did a quick single-question survey on its site from between March 21 and March 27 to see if the recalls were causing shoppers to lose confidence in the automotive industry’s ability to ensure safe vehicles. Fifty-three percent said that they are less confident in the ability of the automotive industry to ensure safe vehicles. Thirty-nine percent of AutoTrader.com visitors polled said that the recalls have had no effect on their confidence in the automotive industry to ensure safe vehicles. 

Said Mark Strand, market intelligence manager at AutoTrader.com in a release: "History suggests that consumers have a short memory when it comes to recalls and do not seem to hold onto negative perceptions that would influence future purchases of a particular brand.”

In AutoTrader’s study last spring polling 664 consumers, 34% of respondents said recalls would make them think less favorably of a brand. But 54% of respondents said they would think more favorably of a brand that voluntarily recalls a vehicle. 

Karl Brauer, senior director of insights at Kelley Blue Book, would likely agree with that -- saying of the Cruze turbo stop order: "Rather than waiting for a full understanding and planned fix for the Cruze, GM is apparently stopping sales at the first sign of a problem to remove the potential of endangering customers.” 

Robert Passikoff, president of marketing firm Brand Keys, tells Marketing Daily that GM’s baseline message must provide closure and contrition. "The problem is the implications of product problems from the brand perspective. You are into a whole aspect of what the brand stands for and what it means for me. What you are left with, in terms of looking at the path-to-purchase engagement drivers, is that there isn't a single one of those drivers that isn't being negatively affected by this crisis. Not a single engagement driver. "

In this year's Brand Keys Customer Loyalty Engagement Index, GM had climbed to the middle of the list and Passikoff says the recalls won't suddenly punt them off the list into a free-fall situation. "A recall is not a good thing for any brand, but things happen. Whether they drop to the bottom all depends on the problem and how it's handled. That's the issue. Yes, Mary Barra got up and admitted it; good for her, but bad for the brand. You can admire her for doing the right thing, but she's not the brand of car you buy."

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1 comment about "GM Has The Benefit Of Doubt For Now".
  1. Barbara Armour from EarthLink, Inc , April 3, 2014 at 5:27 p.m.
    I agree with Mark Strand. IF GM can be transparent now and deal with the issue while implementing verifiable, sustainable quality assurance efforts as an opportunity to improve- the GM brands will not be permanently impacted.