GM, Toyota, and Target: Easier to do “The Wrong Thing” on Safety and Security?

Mar 26, 2014

It never ceases to amaze me how much more effort companies seem to make in reacting to covering up, blameshifting, and recovering from errors of their own creation, and how much more willing they are to pay fines and settlements than to prevent, detect, and respond quickly to mistakes. In fact, covering up the error is often more egregious than the error itself because it reveals a corrosive corporate culture so clearly demonstrated with Watergate and the Nixon Administration in 1972-1974.

I wonder if companies have actually sat down and analyzed the cost of their backside-covering behavior with the cost of doing “the right thing” as outlined above.  Particularly when the impacts of doing “the wrong thing” like diminished customer loyalty, loss of sales, brand damage, resources thrown into urgent problem fixes, customer notifications, customer calls and contacts handling, lawsuits, investigations, and new laws and regulations are so large and extensive.

I doubt it though. Here are just three of many recent cases in point:

1.  The General Motors recalls over engine ignition switches in which 12 people died, and in addition to recalls related to airbags, brake assembly plugs, and instrument panels. What makes GM’s actions particularly troublesome are the company’s immense resources it could have used to prevent or early-detect and correct the issues. And that taxpayers’ money was used to bail out the automaker.

http://www.foxnews.com/leisure/2014/03/18/gm-recalls-118-million-suvs-over-airbag-issue

http://www.usatoday.com/story/money/cars/2014/03/18/gm-ceo-barra-president-reuss-recalls-safety/6557865/

2. Toyota’s defect cover-up. Kudos to U.S. Attorney General Eric Holder for not letting Toyota get off the hook by leaving open the right to prosecute the automaker for wire fraud if it doesn’t clean up its act as part of a $1.2 billion settlement related to vehicle safety issues like accelerator problems.

Like GM, Toyota has the resources to do the right thing. In fact, Toyota built its reputation with buyers on quality, and it became a dominant automaker for that reason and should return back to those roots.

http://www.washingtonpost.com/news/morning-mix/wp/2014/03/19/toyota-said-to-be-settling-with-government-for-1-billion-in-recall-probe/?tid=hp_mm

http://www.justice.gov/iso/opa/ag/speeches/2014/ag-speech-140319.html

3.  The Target security breach, in which the company now admits that it was alerted to the criminal acts, but failed to act.  There is no excuse for Target’s actions.  It learned of the crime and did nothing, and its customers paid the price.

 http://miami.cbslocal.com/2014/03/16/target-admits-it-ignored-early-signs-of-security-breach/

There is also no sensible reason why American retailers like Target, and Americans banks, have stuck so long with obsolete magstripe cards and not gone over to more secure chip cards like those in other countries, like neighboring Canada. Target, not surprisingly, has sped up its chip card roll out.  Strangely enough, Canadian banking giant Toronto-Dominion (TD), which owns TD Canada Trust and TD Bank in the U.S., has chip cards for TD Canada Trust customers but not for TD Bank customers.

Companies also commit the same destructive acts when it comes to workplace safety.  “Safety first” is a phrase too often forgotten in the rush to produce more in less time and with fewer resources. The history of construction, mining, and steelmaking are cases in point. 

At some point there will be a hue and cry for more regulations, which companies will once again hire lobbyists to squeeze Congress and the White House to resist, which sets up the same stupid, costly cycle of disastrous events in which consumers pay for, including with their lives. 

Companies seem to laugh off fines and other penalties, treating them as the cost of doing business. Hopefully the Toyota settlement will change things, but I’m not overly optimistic.

What will it take to force negligent companies to alter their patterns?

  • Criminalizing this behavior (I would love to see a YouTube video of an auto exec making license plates or fixing roads…)?  
  • Requiring miscreants to run apologies in each of their flashy ads to inform and remind would-be buyers of “buyer beware”?
  • A White House edict that taps the might of U.S. government spending by prohibiting the U.S. government from doing business with companies who prefer to catch flak than to catch errors?  (In Canada, an Order-in-Council to do likewise). Or if the companies are the most qualified vendors, make the initial payments conditional on correcting the errors, and suspending all future payments and contracts if the companies relapse into their past behavior? Or how about putting quotas on sales as a punishment?

That companies, and executives, are all too willing to put human lives at risk as “collateral damage” in the campaign to win more profits should not be tolerated.  But they have a point. Despite all of the bad publicity, people continue to buy GM and Toyota vehicles and shop at Target. Like the bug-plagued software from leading vendors.  Price, attractiveness, and convenience appears to trump all, even usage issues and, yes, safety. 


Brendan Read

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Brendan Read is Senior Industry Analyst with over 25 years’ experience covering business, communications, staffing, and technology. He has worked in, prepared reports, and blogged on a wide range of topics including customer contact, CX, CRM, IoT, social media, supply chain, and BC/DR. He also has backgrounds in construction, manufacturing, materials, resource extraction, site selection, and transportation. He examines the broad economic, environmental, innovation, political, and social mega trends, and their impacts on businesses, markets, and society.


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