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GM Recalls and Culpability

Discussion in 'TSLA Investor Discussions' started by Auzie, Jun 7, 2014.

  1. Auzie

    Auzie Tree Hugger Member

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    #1 Auzie, Jun 7, 2014
    Last edited: Jun 7, 2014
    GM Internal Investigation Report, NYT Recommended read, at least Summary and Culture parts.

    In 2002, faulty ignition switch was installed in some GM cars. Switch failed to keep car powered on in circumstances that drivers could encounter. The failure of the switch would prevent the air bags from deploying.

    Problems with the switch were reported to GM, however GM engineers dealing with the switch problem did not connect the dots as they did not understand that the switch failure would cause air bags non deployment in a crash. Consequently switch problem was treated as a convenience problem and efforts to fix it were impacted with cost considerations, which would have been immaterial in case of safety issues.

    Few contributing factors to GM failing to address this issue in a timely manner:

    Resistance to raising issues

    GM culture (GM salute - avoiding responsibility, and GM nod - everyone nods in agreement to a proposed plan of action but then everyone leaves the room with no follow up) did not help to resolve the switch problem.

    Failure to share or gather knowledge / information silos

    GM lawyers hid fatal flow, from critics and one another


    GM was under great pressure to cut costs. That meant cutting heads and choosing the cheapest suppliers.

    And many others...

    Report concludes that there were multiple, interrelated factors that led to GM's decade long failure to recognize the safety defect in Cobalt and initiate a recall.

    What I found in the report is not much different to what I see every day at work. After experiencing the culture of several multinationals, I believe that what happened at GM is likely to be happening in other large organizations. The difference is in the product, not all product defects cause deaths as is the case with cars.

    The different tone can be set only at the top level and when that happens, the change flows down through the ranks.

    One NYT commenter echoes my thoughts, although I struggle with the jailing bit. There may be better ways to enforce accountability: "Corporations will continue to shrug until CEOs and high level execs are jailed. It's that simple.

    Until then, they will simply apply a cost-benefit analysis to any flaw, and ineluctably conclude that the cost of repair is greater than the benefit of profit.

    CEOs are promoted and hired for short-term profits, not long term vision; this is one of the fatal flaws of American capitalism as it stands now. Execs are very used to kicking the can down the road--they walk through the revolving glass doors so rapidly you can't see the doors spin, and are very rarely, if ever, penalized for poor job performance. At the very worst, they are let go with tens or hundreds of millions of dollars. So for them, the risk of fines & negative publicity down the road in a company they are likely not to even head, is not great enough to interfere with the get rich quick schemes of the present.

    Until we jail our CEOs for their crimes at the rate we jail regular folks for manslaughter or marijuana, we will continue to see these deaths."
     
  2. Krugerrand

    Krugerrand Active Member

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    That appears to put a lot (if not all) the blame on the CEO. The reality is that the CEO is just one person and it's next to impossible to know what everyone in your company is doing once the company passes a certain size. Elon combats this to some degree by putting his desk in the middle of the company floor, by being an obsessive perfectionist in all areas, by working inhuman hours, by fostering different corporate culture etc... But even he can't know everything that goes on in his company now that it's grown so much. He has to (as do all CEOs) rely on others. We know what happened when Elon relied on others in the earlier days of Tesla. He clearly learned from that experience, but it's still very difficult to protect against it, especially as a company grows and grows as fast as Tesla.

    There's plenty of blame to go around concerning the GM Cobalt story; more than the CEO was responsible.
     
  3. Familial Rhino

    Familial Rhino Endangerous Herbivore

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    The first rule of leadership: everything is your fault.

    The CEO is, above all, responsible for setting the tone for the whole company. The way a company's culture evolves over time is entirely driven by its leaders. Once you're at the top, the buck stops with you.

    I am in no way implying that the CEO should go to jail for setting the wrong culture, or allowing it to develop. However, a worthy leader should always insist to hear the bad news first. By this measure, GMs leadership hierarchy was not worthy.

    At the same time, I do think that any employees who actively suppressed evidence of potentially life-threatening defects should stand trial.
     
  4. Krugerrand

    Krugerrand Active Member

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    Yes, that's what we spout knowing full well that responsibility almost always lays at the feet of others as well. But we do like to have someone specific to be the scapegoat, don't we?

    Again that's what we continue to repeat over and over while knowing that reality is often very different. It takes more than one person to set or change the tone for a whole company as long as that company consists of more than one person. A CEO is an important part of the company, but they are far from the only part. Without the cooperation and help of those around the CEO, sabotage and even destruction of a company can happen regardless of what the CEO does. A company is a group effort and therefore responsibility for success or failure should fall to the group. As is evidenced in the current GM issue, it wasn't just one person. There was a group of people who were and are responsible for the current outcome.


    CEO's definitely carry a lot of responsibilities, but neither am I naïve enough to think they can know or control every individual and their actions in the company. Some people are really good at lying and it's not necessarily the CEO.
     
  5. Familial Rhino

    Familial Rhino Endangerous Herbivore

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    #5 Familial Rhino, Jun 7, 2014
    Last edited: Jun 7, 2014
    I don't know about "we". I know I don't want a scapegoat, which is why I came out against jailing the CEO to "set an example", as others suggested on other forums.

    It is plain to everybody that others were also at fault. Nobody believes the CEO discovered the defect and hid it. Why does that need restating?

    The fact remains that CEOs very rarely pay for their failed leadership, as evidenced by the financial crisis. Failed leadership is just that, regardless of the fact that others in the organization share the responsibility.

    I never stated the CEO can control everyone, nor that others haven't lied.

    I am saying that leaders who don't aggressively seek out the bad news first, and don't explicitly ask the same of those who they need to delegate their power to, are inviting failures like this. When the company in question sells products to which people entrust their lives, you bet I'm going to consider them more responsible than anyone else. They're more than happy to take most of the credit (as measured in dollars) when things are going well. They should be the first to accept responsibility when they fail, too.

    On edit: The reason I am coming down so strongly on this side of the line is that, so far, GM has managed to fire 15 employees, none of whom served in the highest echelons of the company. When this is the narrative that is being pushed, it is crucial to place the primary blame where it belongs: at the top.
     
  6. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

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    When you have many layers of management (like most big corporation), no one has to lie because the Chinese Whisper game syndrome is in effect.

    Because big U.S. companies are always looking for any excuse to move jobs to China, India, or have the jobs performed by some of the 2.5 million prisoners in the U.S., no one at the lower levels is going to speak up because it's likely to cost them their job.

    Certainly the leader sets the tone. I recall a few years back when JAL had a 747 accident the JAL President went to each family and personally apologized.
     
  7. Familial Rhino

    Familial Rhino Endangerous Herbivore

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    #7 Familial Rhino, Jun 7, 2014
    Last edited: Jun 7, 2014
    That's right, that was my point. They won't speak up out of their own initiative, unless (to repeat myself) those above them aggressively seek the bad news.

    Not to mention that the technical failure was on the engineering side. Some in that position will sweep things under the rug rather than accept their own responsibility. In any organization with more than a few dozen people, what people end up deciding in situations like this will be dictated by incentives and the predominant culture.

    This is an article in the Wall Street Journal making this very point, expressed by Corporate Governance professionals (the link goes to the Google Search for the benefit of non-subscribers; it should be the first link):

    Experts Say Fixing GM's Flawed Culture Is Barra's Main Task.

    Money quote:
     
  8. jerry33

    jerry33 S85 - VIN:P05130 - 3/2/13

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    Agreed, but my understanding is that Ms. Barra has been at GM a long time so she's part of the culture she has to fix. That's going to be hard because she's going to have to change herself first.
     
  9. Familial Rhino

    Familial Rhino Endangerous Herbivore

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    FWIW, I am certainly giving her the benefit of the doubt. I am sure she fully intends to fix it, to prevent a similar situation from recurring on her watch. I wish her the best, as she has a devilishly hard task ahead of her.

    (Apologies if I derailed the thread; moderators, please move my posts if they don't belong here.)
     
  10. Krugerrand

    Krugerrand Active Member

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    We don't actually disagree, simply talking past each other.
     
  11. Familial Rhino

    Familial Rhino Endangerous Herbivore

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    Yeah, I think you were trying to provide balance for one extreme, and I for the other. We cool.
     
  12. Chickenlittle

    Chickenlittle Active Member

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    Before CEO position she was the person head of safety reported to. I believe there should be criminal charges filed with such gross neglect. Look at korean example of ferry capsizing. Pm of country resigns, coast guard to be redone with their response to situation, crew and owners with criminal charges. Would be good example. Corporation structure provides for financial protection of individuals but not criminal negligence
     
  13. Auzie

    Auzie Tree Hugger Member

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    #13 Auzie, Jun 7, 2014
    Last edited: Jun 7, 2014
    This could be a separate thread, discussion on GM, and I considered that option before posting in this thread. Had I started a new thread, it is likely that moderators would have moved it out of Investors section elsewhere.

    Moderators, it would be nice if you let us investors have discussions on various topics, in Investors section. Investors have more stake in the game and that is likely to affect their reasoning. This discussion is relevant to Tesla investors, as Tesla is growing into huge organization and may encounter similar problems as GM.

    I would appreciate if that is possible, to stay in Investors section. If not, that's ok as well.:smile:
     
  14. Auzie

    Auzie Tree Hugger Member

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    #14 Auzie, Jun 7, 2014
    Last edited: Jun 7, 2014
    I agree that size has a lot to do with so many problems. Organization's (large) size creates inefficiencies, internal conflict of interest, competing agendas. Size breeds bureaucracy and layers of management which rarely adds value but hampers the processes. It greatly dilutes accountability.

    I would not apportion blame to anyone, blame game is not helpful and implies deliberate misconduct. To me it seems that people get caught in a set up that throws competing demands on them and they must make choices with various, often equally bad, consequences.

    I have experienced GM internal dynamics more than once with various employers, and I am lost for answers. Only once I experienced an employer that seemed to overcame these issues to somewhat greater extent than usual.

    This balancing the economies of scale with inefficiencies of size is extremely difficult to get right. A job cut out for the CEO.

    I disagree that CEO can be absolved of responsibility due to ignorance. It is CEO's job to structure the organization in the way that promotes efficiency, transparency and accountability.

    I watch Tesla growth with great concern.
     
  15. Krugerrand

    Krugerrand Active Member

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    Well, I'd disagree with that as well.

    Yep, sure. At some point the CEO can no longer personally see to every detail. It's just too grand a job for one person. He can hire a great support staff to carry forth his ideals, who in turn hire other great staff, and so on down the line, but by then it's somewhat out of the CEO's hands.

    That's a valid concern. The bigger they get, the easier it becomes for less desirables to slip through.
     
  16. Auzie

    Auzie Tree Hugger Member

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    #16 Auzie, Jun 7, 2014
    Last edited: Jun 7, 2014
    This echos my thoughts as well.

    I find jailing people barbaric and often counter effective. As a society we may need to contain some people some of the times, for protection. CEOs are not violent and have valuable skills that are wasted in jail. It might be more effective to get CEOs that cause serious damage to do some community service, there is insatiable demand for these services and such service might give CEO's some education that they need. Also hit them with fines. That is my futuristic vision of dealing with leadership failure.:wink:

    Life is not fair, people with power get away with serious mistakes, and lower GM ranks copped it. That is how it is. Transparency and information flow is equalizing the power field a bit, future will be better than today.
     
  17. Chickenlittle

    Chickenlittle Active Member

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    Look at two situations that make it clear that there is inconsistency in our system.

    1. A walmart driver on the road for 24 hrs rear ends Tracy Morgan limo killing another passenger arrested now.

    2. Gm ignition switch. Multiple people, error in judgement or conspiracy 13 to 74 people dead.

    neither 1 or 2 planned to kill people. 1 a lapse in judgement 2 over 10 years of bad decisions
     
  18. Auzie

    Auzie Tree Hugger Member

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    I am not familiar with the details of the road accident that you mention, however what stands out to me as a main difference of the two cases that you listed is the ease of responsibility attribution.

    In the case of walmart driver accident, the responsibility for actions that resulted in harm can easily be attributed to a single person.

    In case of GM switch, many people took part in decision making or failed to make a decision when one was called for. It is far more difficult to pin the responsibility for past actions that caused harm to responsible individuals.

    I wish I was wrong, but imo GM culture problem is unlikely to be fixed by an insider. Good luck to them.
     
  19. Robert.Boston

    Robert.Boston Model S VIN P01536

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    But under the Citizens United precedent, shouldn't we view GM as a "person" and be able to find it culpable of these crimes? The question is, to my thinking, what is the equivalent to jail time for a corporation?
     
  20. sbronle1

    sbronle1 Member

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    In reality great leaders surround them selves with great people. As a company grows the premier leader can in no way oversee every operation. If they try that it is called micro-management and that too leads to failure. For Tesla, I would suspect that Elon Musk has surrounded himself with brilliant people that he trusts. Aside from monitoring issues he must give guidance with mission goals and the such. I am so proud to be a Tesla owner. I am proud of the company and it's mission. This is not a "car," it is a vessel of the future that is sure to stay and stimulate our lazy American ass auto makers to kick it up a notch. Well done Tesla!
     

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