By Kendra Marr
Washington Post Staff Writer
Tuesday, December 9, 2008
Step one on the road to recovery: Admit you have a problem.
General Motors, the world's largest automaker, yesterday candidly confessed to the blunders that has led it to near-collapse in a full-page advertisement in Automotive News.
"While we're still the U.S. sales leader, we acknowledge we have disappointed you," the company said in the magazine ad. "At times we violated your trust by letting our quality fall below industry standards and our designs become lackluster. We have proliferated our brands and dealer network to the point where we lost adequate focus on our core U.S. market. We also biased our product mix toward pick-up trucks and SUVs. And, we made commitments to compensation plans that have proven to be unsustainable in today's globally competitive industry."
The letter, titled "GM's Commitment to the American People," appeared just as the House finished drafting a bill for federal aid yesterday. The company laid out the reasons why it needs an $18 billion government bailout and vowed to turn around its business.
"It's addressing what Congress wants to hear, but they do realize they've made mistakes," said industry consultant Laurie Harbour-Felax.
Maryann Keller, a longtime industry analyst who has written two books on GM, found it strange that the automotive giant would offer its appeal in a niche industry trade publication.
"I find it bizarre," she said. "Why are you spending money on this? What a pointless exercise."
Still, the confession marks a turning point for GM. Just a few weeks ago the chief executives of the Detroit automakers were caught off guard by the tough questions they received from Washington lawmakers. They offered vague responses when asked whether they would take pay cuts and seemed sheepish about why they had traveled to the hearings by corporate jet. They appeared to blame their firms' problems solely on the current economic decline.
"What exposes us to failure now is not our product lineup, or our business plan or our long-term strategy," GM's chairman and chief executive G. Richard Wagoner Jr. said in his initial testimony to Congress. "What exposes us to failure now is the global financial crisis which has severely restricted credit availability and reduced industry sales to the lowest per capita level since World War II."
Apologizing isn't an easy feat for corporate America, said Gene Grabowski, chair of the crisis and litigation practice at Levick Strategic Communications.
"When you're a publicly held corporation, every utterance you make is scrutinized by Wall Street and has consequences in the marketplace," he said. "It's no wonder they're careful, especially with something so important as an apology. But they're also human beings. Sometimes it's human nature to resist giving an apology. A certain amount of pride has to be swallowed."
Former Chrysler chief executive Lee Iacocca played it right when he humbly asked Congress to bail out Chrysler in 1979, management analysts said.
"He was appropriately respectful of Congress and the process," Grabowski said. "He didn't come on his knees, but he did come with a plan and with a guarantee to turn Chrysler around."
Mattel chief executive Robert A. Eckert won praise for apologizing before Congress for the lead paint found in millions of the company's toys last year. But hearing Eckert say sorry too often took away his earnestness.
"It got to be too much," Grabowski said. "It was over the top."
Then, there's the complete lack of an apology. None of the financial institutions that recently received a government bailout, from AIG to Citigroup, have formally expressed regret as GM has.
"That has totally alienated people," marketing guru Jack Trout said. "People are mad as hell at the financial crowd."
Sen. Charles E. Grassley (R-Iowa) went as far as saying he wants Wall Street executives to deliver Japanese-style apologies to the American people.
"I am talking about scenes I've seen on television where in belly-up corporations the CEOs go before the board of directors, before the public, before the stockholders and bow deeply and apologize for their mismanagement," he said in a statement in October. "Something like that happening among Wall Street executives would go a long way toward satisfying my constituents and many Americans that help might be needed and would more gracefully be given by the taxpayers of this county."
But that's a cultural difference, said Lamar Reinsch, a professor at Georgetown University's McDonough School of Business. If this auto crisis were unfolding in Japan, the Japanese chief executives would be resigning immediately. The American have not been as ready to admit wrong. Ford and Chrysler's executives have not been on the job long. Wagoner has been credited with negotiating important concessions from the United Auto Workers.
"All three of the Big Three would be better off if they had shown more humility earlier," Reinsch said.
But from a marketing perspective, GM's frank request for forgiveness and promise to improve nailed what Trout calls the "Law of Candor."
"You admit a negative as a way of setting up a positive," Trout said. "It's not enough to say 'I screwed up.' You want to say 'I screwed up but here's the good that's going to come out of it.' "
Which brings the company to step two: Solve it.
"Talk is pretty cheap," said Jonathan R. Cohen, a University of Florida law professor who has studied corporate apology-making. "Action is often more telling."