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OM in the News: Now Comes the Hard Part for General Motors

March 11, 2014

gm recall“Less than a month after General Motors announced it would recall 1.6 million cars because of a defective ignition switch,” writes The New York Times (March 10, 2014), “the automaker now faces an arduous task: fixing the cars.” The process, particularly for older vehicles like the ones G.M. is recalling, is time-consuming and requires many steps, from designing the new parts, testing them to make sure they solve the problem, finding and informing owners, and actually completing the repairs.

The company has just started to send out the recall letters with a stern, if unusual, warning: “Remove all items from your key ring, leaving only the vehicle key.” That is because if the defective ignition switch is jostled, or even if the key chain is too heavy, it can turn off the engine and the car’s electrical system, disabling the air bags. G.M. said it had linked the defect to 31 crashes and 13 deaths since it was first alerted to the problem in 2004. The letter also tells owners that the replacement parts “are not currently available.”  G.M. said the supplier, Delphi, needed to prepare the machines that would make the part before mass production could begin. In some recalls, parts suppliers have already sold off those machines, making it even more time-consuming.

The G.M. recall is large, but it is one more than 900 recalls in the past 7 years, covering 50 million vehicles. While recalls are not unusual, the number of fatalities involved and the way G.M. handled this one stretching over the past decade has the potential to cost the company hundreds of millions of dollars in fines and possible legal damages, in addition to tarnishing its reputation. This is a great story to bring to your class both in the context of Chapter 17 (Maintenance and Reliability) and as an Ethical Dilemma in Chapter 5 (Design of Goods and Services.)

Classroom discussion questions:

1. Why did G.M. wait so long to recall a defect it knew existed for a decade?

2. Why is this recall going to be difficult?

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