Scandal

GM's recall scandal: A scorecard on CEO Mary Barra

March 21, 2014: 7:00 AM ET

So far so good. She's following many of the right principles of crisis management, and there's more work to be done.

By Fraser Seitel

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FORTUNE -- Mary Barra is the incoming CEO of General Motors, whose two-month-old "honeymoon" was stopped in its tracks by the most damaging safety/cover-up scandal in the company's 106-year-old history. Today, she finds herself squarely in the crisis management crucible, presiding over a tragedy, where 12 drivers died, reportedly due to faulty GM (GM) ignition switches; a problem the company had known about for 10 years but never corrected.

How well Ms. Barra manages "Switchgate" will largely define the remainder of her term in office and bear greatly on her reputation as a CEO.

Here's a scorecard on how she is handling the scandal thus far:

Fixing the problem

The most important part of crisis management is "fixing the problem."

Most people don't understand that effective "public relations" must start with performance, not cosmetics. It's axiomatic that "you can't pour perfume on a skunk." Positive public relations demands taking action first to fix the problem and then communicating.

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In Ms. Barra's case, she has moved decisively to recall the vehicles, reassure car owners, and remedy the ignition switch problem. GM has recalled and vowed to quickly fix 1.6 million affected vehicles -- all older models and two of which, Pontiac and Saturn, no longer exist. And the CEO named a 40-year GM veteran as the company's new vice president of global safety and appointed a high level internal task force to take control of the recall.

She apologized profusely to the victims of the defective switches, called the incident a "terrible, tragic problem" and told a room full of reporters, at this week's unprecedented -- especially for GM in the midst of a recall -- press conference, "Our goal is to make sure that something like this never happens again."

In other words, the CEO appears to be on top of the problem.

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Get the bad news out

A second principle of crisis management is to get out all of the bad news as quickly as possible in order to put it behind you and move on.

Accordingly, GM followed the Switchgate recall with another recall of 1.7 million newer vehicles, whose airbags were faulty. At the same time, the company announced that it would take a $300 million first-quarter charge for its recall repairs -- again, unprecedented for a company as tradition-bound as GM.

In lumping in all this bad news right at the front of the crisis, Ms. Barra properly sought to immediately absorb a big hit and then "set the agenda" for recovery; smart crisis strategy.

Find out why what happened, happened

CEOs are judged by how "seriously" they attack the issues that led to the problem. For instance, are they really interested in stopping bad behavior, or are they just giving lip service?

The fact is that GM executives knew for years that its ignition switches were potentially harmful; yet they refused to recall them. Why? And who at GM was responsible for the decision? Ms. Barra claims that as GM's global product development chief, she wasn't involved with the ignition switches. Fair enough. But who was?

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To her credit and to answer that question, Ms. Barra has launched an internal investigation to find out who knew what, when, and why no action was taken. That's good. Less good, however, is that she has placed at the helm of the investigation, a representative of King and Spaulding, GM's outside legal firm which presided over ignition switch settlement cases. That looks "fishy," Barra.

If Ms. Barra is interested in dispelling any hint of "conflict" in the internal investigation, she will replace the King and Spaulding participants with more "objective" analysts. Which leads to this …

Bridle the lawyers

In a major crisis like GM's, lawyers properly tell you what you "must" do to defend yourself in a court of law. Public relations advisers, by contrast, tell you what you "should" do to defend yourself in the court of public opinion.

There's a big difference.

In GM's case, all eyes will be on how equitably the company settles with the families of those killed or injured by the faulty ignition switches.

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And that's complicated. For one, the liability for the defects, technically, may belong to the predecessor company -- the pre-bankruptcy "Old GM" -- rather than the "New GM" that Ms. Barra now heads. So why should Ms. Barra's company pay out anything? For another, some victims have already settled with GM, unaware of the company's apparent cover-up over 10 years. So why should Ms. Barra's company agree to reopen these cases?

In such an unclear legal environment, it would be understandable if GM listened to hard-nosed lawyers and held the line on payouts. But if Ms. Barra and GM followed this advice, the verdict in the court of public opinion -- not to mention, the halls of Congress -- might be far different.

If she's smart, Ms. Barra won't automatically succumb to legal arguments to take the chintzy way out.

Be visible

Finally, when faced with such an epochal crisis, a good CEO must be visible.

That means talking to the staff, to the press, to the Congress and becoming the "face" of the company's response. GM rival Toyota (TM) learned -- to its billion-dollar detriment -- that trying to stay in the background off the radar screen when faced with such a public crisis is a sure-fire recipe for disaster.

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Admittedly, Ms. Barra isn't a politician but rather a lifetime auto executive, who is clearly uneasy in commanding the spotlight and untrained in being glib or charismatic. And it is also quite true that GM's tragedy wasn't her doing.

But ... she is now Numero Uno at GM and, indeed, the new "face" of the company. So like it or not, this is her responsibility. And if she is sincerely interested in getting to the bottom of this scandal and ensuring that it never happens again, then she should continue to follow her instincts and have faith that the public, in the final analysis, will appreciate her best efforts.

So far, she is off to a pretty good start in that direction.

Fraser P. Seitel has been a communications consultant, commentator, author, and teacher for 40 years. He teaches public relations at NYU and is the author of the Prentice-Hall textbook The Practice of Public Relations, now in its 12th edition, and co-author of Rethinking Reputation and IdeaWise. He can be reached at yusake@aol.com.

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