Chevrolet Volt crisis gives General Motors’ recovery plan a nasty electric shock

November 29, 2011

Effervescent General Motors marketing supremo Joel Ewanick now has a lot more on his bulging agenda than reviewing global ad agencies. GM is facing a full-blown image crisis, thanks to its flagship vehicle – the hybrid Chevrolet Volt – having an unfortunate tendency to burst into flames.

I should say it’s not the car itself which is a fault, but the lithium-ion batteries critical to powering it. And “smouldering” rather than “spontaneous combustion” is nearer the mark. Plus, there aren’t, as yet, many recorded cases. Never mind, all the ingredients are there for an outbreak of public hysteria, ventilated by the media.

As with most of these PR crises, the actual threat to human welfare is difficult to assess. Much more certain is the disproportionate negative impact on the manufacturing company’s reputation once the matter has entered the public domain. Especially if the beleaguered company fails the test of  immediate and effective remedial action. A few years ago the self-same problem of lithium-ion batteries catching fire (in this case in laptop computers) caused Dell to instigate the biggest computer product recall in history.

For GM, the Volt crisis could not be more serious. Last Friday, the federal authorities, in the guise of the National Highway Traffic Safety Administration (NHTSA), decided to launch an official investigation. A successful Volt – which is the halo product of GM’s biggest car marque, Chevrolet – is integral to GM’s hopes of recovery, not in numbers sold (heaven forbid, about 6,000 so far!), but in terms of perception as a leading-edge automobile maker.

You may smile at that, but GM’s senior management is deadly serious. Not long ago, Ewanick suggested that Apple, rather than other car-makers, was the benchmark by which his company’s future performance should be judged. The hybrid range has been used to curry public favour and convince the world that GM no longer equals “gas-guzzler.”

And it gets worse. President Obama has made it clear that the e-car is critical to lessening America’s dependency on oil. He wants one million electric vehicles on the road by 2015. What’s good for America is clearly good for GM. But not if the public is put off hybrid technology (of which it is, in any case, sceptical) by the suspicion that batteries may catch fire.

Predictably for a company under siege, GM’s immediate response to  the federal safety investigation was to issue a bland statement stressing the car’s safety – classic procrastination. Its crisis management team has now moved up a gear with the announcement yesterday that GM will provide free loan cars for any owner inconvenienced by a Volt “incident”. I wonder what other measures are on the way.

In the meantime, GM’s flagship remains firmly anchored in port. The Volt global export-drive has been beached.

Volkswagen – which has hugely benefited from its rival Toyota’s set of reputational issues – will be watching GM’s discomfort with interest. Toyota and GM are its principal competition. VW has come from behind and is now comfortably cruising towards being the world’s largest car-maker.

Toyota’s ad campaign is a hostage to fortune

September 7, 2010

Someone high up at Toyota seems to have taken a leaf out of World War 1 generalissimo Ferdinand Foch’s strategic manual: “My centre is giving way, my right is in retreat; situation excellent. I shall attack.”

That is the only plausible explanation for the beleaguered car-maker’s eccentric decision to launch an advertising blitz countering – wait for it – the perception that Toyotas are in any way unreliable or unsafe.

Apparently, it’s the brainchild of Toyota’s US general manager Bob Carter and newly appointed group vice-president marketing Bill Fay. “What were’re dealing with here,” says Bob, by way of explanation in Ad Age, “Is a perception issue, and brand perceptions are not brand realities.”

The reality, Bob, is that Toyota has just had to recall another 1 million vehicles with suspected, er, reliability and safety issues. That brings to 12 million the total number of recalls since November last year – 10 million in the USA – on account of sticking throttles, dodgy mats, brakes that don’t seem to work properly and cruise management systems with a habit of stalling at high speed. OK, not too many proven deaths have resulted (so far). But then, how many do you need for “perception” to become the “reality”?

I can see where the contrarian thinking may have come from. Considering the number of recalls, Toyota market share had held up remarkably well. It’s still the top-selling car marque in the USA and lost “only” 1% share in the year. Until August that is, and the latest recall. Stripping out the exaggerated comparative caused by the “Cash for Clunkers” trade-in incentive last year, sales have still plummeted a disastrous 14%, as potential buyers begin dropping Toyota from their consideration list and looking more closely at Hyundai and Ford instead.

But plugging the perception gap with some advertising is just wishful thinking, I’m afraid. First get those safety and realiability issues sorted out, then run the reassurance campaign and it might have more credibility. Don’t just take that from me, by the way. Look no further than the publicly expressed opinion of Bob Seelert, chairman of Saatchi & Saatchi Worldwide – the very agency that is hatching the campaign. Earlier this year Seelert controversially chose to contradict his client in public about the wisdom of continuing advertising support while the faults remained unfixed. With hindsight, the advice seems wiser by the day.

I don’t dispute the need to reassure Toyota’s baby-boomer customer base. But PR is the way to do it; not an advertising campaign – using the assertive rhetoric of product benefits – that will become hostage to the next vehicle recall. Which, on the statistical evidence so far, can’t be very far away.

Too much marketing at the expense of quality control?

August 10, 2010

As the old adage has it, you can have Speed, Quality and Price, but only two of them at any one time. Some leading brand-owners seem to have forgotten that eternal verity and attempted to have the best of all worlds at once – with disastrous results, according to a thought-provoking article by Jack Neff that appeared in Advertising Age this week.

The gist of Neff’s thesis is that a number high-profile brand catastrophes over the past year – such as those afflicting BP, Toyota and Johnson & Johnson – are essentially attributable to management’s decision to spend too much on marketing and too little on quality control. He contends that the savings on so-called “operational efficiencies” and slashed R&D budgets are ultimately suicidal, because disasters of the above magnitude can undo – overnight – years of patient brand-building, perhaps irrevocably.

Not everyone (by any means) agrees that the fundamental cause of these disasters was the diversion of necessary funds from product enhancement to the marketing budget. For example, J&J’s baffling series of product recalls, and the corporation’s manifest incompetence in righting them swiftly, arguably has more to do with the acquisition of pharma giant Pfizer in 2006 and the botched restructuring that followed than the rechannelling of excessive funds into marketing.

Nevertheless, the article poignantly highlights the limits of marketing when unaccompanied by due managerial diligence.

BP spent five years, and colossal sums of money, building itself into “Beyond Petroleum” – the greener alternative among oil companies – only to cause one of the world’s worst man-made disasters. How much managerial incompetence was at the root of the disaster remains to be assessed, but the suspicion is plenty.

Toyota, which built its brand reputation upon reliability and quality, has now had to recall over 9 million vehicles. It has lost ground, perhaps permanently, in consumer brand quality rankings and done great damage to its corporate integrity by engaging in a series of unappetising cover-ups designed to hoodwink its customers out of legitimate redress.

J&J was once a byword in textbook crisis management, after it brilliant handling of the 1982 Tylenol cyanide scare. Today, it faces federal hearings over its mismanagement of much lesser recalls. Its shiftiness in addressing an avalanche of quality problems has been a gift to the own-label OTC drugs, personal and household sectors.

These are merely some of the most prominent examples. Procter & Gamble itself has been experiencing a significantly heightened number of product recalls (albeit not of the same order) at a time when its main response to intensified competition has been to increase the global marketing budget by a massive $1bn to $8.6bn. Wall Street was not amused by the announcement.

BP brand plunges from Deepwater to Ground Zero

May 11, 2010

I’m beginning to feel sorry for Andrew Gowers. Having had an exemplary career at the Financial Times, he had the misfortune to become its editor. In the wake of a complex and expensive libel case, he was ‘let go’  by senior management in 2005. With contacts like his, why worry though? A glittering future in PR beckoned.

And so it proved when he became head of communications at blue-chip investment bank Lehman Brothers London. How was he to know that, in two  short years, he would be at the epicentre of the global financial meltdown? Never mind, pick yourself up, dust yourself down and move on to…BP. Weeks later, the Gulf of Mexico explodes into uncontrollable life.

Avoiding reference to Jonah, I’ll confine myself to the observation that, for a man with Gowers’ peerless experience of crisis management, he seems to have been pretty slow on the uptake. Yes, he’s been indefatigable on the airwaves, mainly pointing out that it’s not all BP’s fault. Which it isn’t: try the Swiss-based company which leased the rig to BP, and the US maintenance outfit which passed the defective shut-down valve as fit for purpose. Also, BP is only a two-third investor in the oil well. But no one wants to hear about that; certainly not President Barack Obama and the American people.

What Gowers, and his colleagues, conspicuously failed to do was mobilise their chief executive fast enough. The oil rig explosion took place on April 20. BP may not have known the leak’s rate of flow, but it certainly knew this was a very serious industrial accident indeed. Yet it was not until three days later that the company released its first statement from group ceo Tony Hayward and, as far as I can make out, not until May 3 that Hayward himself made a broadcast public statement.

Did it really take that long to determine this oil spill is quite possibly the worst man-made ecological disaster to date? Not in the minds of journalists who – like nature – abhor a vacuum, and fill it with speculation. And not – crucially for any crisis management specialists these days – in the social media space, where any half-way decent speculative theory gets magnified a gigafold. Does Gowers or BP viscerally understand this? I suspect not. Until very recently, if you had looked up “BP Oil” on Google you would have found hundreds of references to the incident – on blogs, Twitter, YouTube and the rest, but almost none seeded by BP itself. Does BP imagine its investors take no notice of all this? £19bn knocked off the share price suggests otherwise: they will get their information wherever they can.

Credit where credit is due, Hayward is now cleverly framing the disaster as a common threat, with BP in the front line of resistance. His language has an appealing Churchillian ring to it. But the initiative may already be lost.

Of course, from a corporate standpoint, BP’s caution is entirely understandable. Make light of the disaster while it is still unfolding and it projects an uncaring image which will do endless damage to the brand later. Rash admissions, on the other hand, will expose it to years of litigation, with its toll on management focus and corporate profits. No one knows this better than Hayward, who has spent three years cleaning up the company’s reputation and settling claims after the March 2005 explosion at  BP’s Texas City refinery, which killed 15 workers and injured about 170. Corporate negligence ill fits the image of a company that has struggled hard to position itself as environmentally friendly with a cuddly logo and a $4bn alternative “Beyond Petroleum” energy initiative.

And yet all that misses the point. The speed of mass communications these days no longer permits – if ever it did –boardrooms to dictate the pace of events. Another fine example of crisis mismanagement, admittedly on an infinitesimally smaller scale, reinforces the point. Johnson & Johnson is rightly considered a model in consumer marketing circles for the way it dealt with the 1982 Tylenol scare, in which seven people died after some pain-killer capsules were laced with cyanide. But now it has come a cropper, after the US Food and Drug Administration warned that some of its proprietary over-the-counter medicines for children (including Tylenol) had too much active ingredient in them, and thus failed to reach the acceptable public safety benchmark.

Although there is no evidence of anyone being harmed, and J&J acted promptly and efficiently in organising a voluntary recall, it failed to explain itself to anxious parents, who have become increasingly restive. They quickly availed themselves of Twitter, Facebook and various parenting blogs to express their frustration at not being able to get a straight answer out of the company about what was going on. This is only the latest of a number of poorly explained recalls, which could have catastrophic knock-on effects for the company’s reputation. As one parent, quoted in the New York Times, put it: “Another recall for baby Tylenol. Well no more baby Tylenol, back to generic brand.”

Although J&J can scarcely blame the forces of nature for its self-inflicted disaster there are, nevertheless, parallels with the BP situation. In both cases, the companies seem obsessed with procedures and asserting internal control, which conveys the unfortunate impression that cover-up rather than communication is the ultimate agenda.

As I commented in my blog post on the Maclaren baby pushchair crisis last autumn, a bunker mentality is the default company reaction in these situations, and it’s actually disastrous. True, some crises are worse than they seem; acting upon them could aggravate their severity, whereas left alone they may quietly subside. But can you really afford to take that risk? Suppose this is the big one, the corporate reputation-wrecker?

Whatever you do, don’t hide behind PR flunkies and hope it will go away. Get the chief executive out there early, personally engaging with the media. Maclaren didn’t do that, with disastrous results for sales in its main market, the USA. BP and Toyota eventually did, but I bet they wish they had wheeled them out earlier.

Start with the question: Why is Seelert criticising Toyota in public?

March 1, 2010

Sack him, or back him? That’s the dilemma facing Toyota chief Akio Toyoda as he mulls the controversial advice given him by his agency chief, Bob Seelert – chairman of Saatchi & Saatchi Worldwide.

Seelert has taken the highly eccentric course of contradicting in public his client’s decision to continue advertising, amid a hail of criticism accompanying the recall of about 8 million vehicles globally because of accelerator and brake problems.

Due credit to Seelert for making a point about his client’s best interests at the expense of the agency he heads, but why is he doing it in public?

It’s tempting to conclude that Seelert, a former client himself (mostly at General Foods), cannot resist the temptation to play the management guru. About a year ago, he brought out a book entitled Start With The Answer: And Other Wisdom for Aspiring Leaders. It’s full of pithy insights into how to run a business, distilled by a man with a lifetime of experience (although, not in running his own).

What Toyoda thinks of this, we can only conjecture. He’s a bookish, thoughtful fellow known to have been deeply influenced by Jim Collins’ latest management blockbuster, How The Mighty Fall. Indeed, he has gone so far as to judiciously apply Collins’ analysis to the plight of his own company.

Somehow, I suspect he will be less sympathetic towards Seelert’s two ha’pence. For a start, Seelert’s views on Toyota advertising are far from gaining universal approval among crisis management experts. Many might accept that actively selling Toyota vehicles at this stage is unwise. A corporate campaign aimed at reassuring customers around the world is a very different matter.

Then, too, there is the not insignificant matter of causing the chief executive of a Japanese corporation (however modest, personally) to lose face in public through openly questioning his judgement. I’m sure that Seelert’s senior colleagues at Saatchi have been vociferously reminding him that Toyota has a choice.

That choice is called Omnicom, which has lost almost all of its General Motors business in the last year. It could of course go for more of the bits of business that remain, such as Chevrolet. All the same, I’m sure the significance of this spat has not been lost on Omnicom chief executive John Wren.

What made Max Mosley step down?

June 25, 2009

Max MosleySo farewell, Max Mosley – linchpin of Formula One – and one part of an inseparable double act that has gone down in history. While Bernie salted the money away with ever more ingenious financial engineering, Max made sure that no one else got their hands on the rule book and spoilt their game. Together, they were the enforcers, exercising an arbitrary control over the sort of  fiefdom last seen in these realms about the year 1485.

Why exactly did Max quit so suddenly? Like everything else to do with the chicanery of Formula One, we can only see through a glass darkly. Was it a case of Max, the consummate  poker player, finally overplaying his hand? Or, more improbably at first sight, Max the sacrificial lamb laying down his career for the sport he loves?

Incredibly, you can make a case for both positions without fear of contradiction. After besting his opponents during an in flagellante delicto scandal that would have brought a lesser man down, Mosley must have dispelled any surviving doubts that he walked on water. He claimed he would resign this autumn as president of the Federation Internationale de l’Automobile (FIA), his power base these past 16 years. But those familiar with the situation reckon he had no such intention and, come the time, he would have put himself forward for another 4-year term, there being no obvious alternative. Under pressure, he indicated as much himself during the heated controversy of the past few weeks. Sponsors, shareholders in F1, the constructors, the teams, Ecclestone even, may have thought he had damaged the reputation of F1, but they couldn’t see an alternative either. So they shut up.

In these circumstances, Mosley may have wrongly concluded that he had the power to drive through the structural reforms F1 so badly needs if it is to remain an appealing spectator sport. Chief among these was the need to radically reduce the budgets deployed by the F1 teams from about £200m per annum to nearer £40m. The point of this was to make the sport more affordable to new would-be teams. Honda has recently pulled out and it has not proved that easy to fill the grid, especially in the current straitened economic circumstances. A brilliant idea, passed through the committees nem con? Not exactly. Eight F1 teams (there are only 12 altogether, and two of those remaining are not established) threatened to secede and form an alternative championship. Funnily enough, these eight teams all have powerful constructors – like Mercedes, BMW, Renault, Toyota – behind them and they took a dim view of having their technical advantage in the field handicapped by an ‘arbitrary’ budget ceiling which might help less well-endowed newcomers.

Fota, as the alternative organisation was dubbed, would have split the sport, reduced spectators, damaged TV rights and had the sponsors tearing their hair out. But Mosley was convinced that when push came to shove, the constructors would back down. After all, he and Ecclestone had been here before, and seen them off. They may have the money, but they don’t have the organising skills.

So, why after showing supreme brinksmanship did Mosley still lose? The first point (one he would make himself, no doubt) is that he did not. Well, not exactly. The sport remains united, under the control of Ecclestone and the FIA and – so Mosley claims – the dissident teams have agreed to a glider-path of diminishing budgets over several years. So a triumph of sorts, even if he won’t be around to relish it. But the big mystery, according to a source familiar with the situation, is why his negotiating position collapsed so dramatically and he agreed to go more or less immediately. As they point out, he could have called Fota’s bluff and maybe got away with it. Not only had he thrown writs in their path, which would have to be answered in court, there were circuit owners to be brought around and TV rights to be negotiated. No small hurdles to overcome.

Now that he is going, the immediate reaction in F1 circles (not excluding Ecclestone) is a sense of relief. For all Mosley’s accomplishments over the years, the whiff of scandal has left a nasty smell about the place. Relief, too, at the FIA, now that no one has to pass his colossal personal expenses.

Looking further afield, there may be cause for regret. Whatever his flaws, Mosley knew both what he wanted for the sport and how to get it. It is for any successor to prove that he has both the leadership and sufficient detachment from the many powerful stakeholders in F1 to make a success of running the FIA.

%d bloggers like this: