Professional Documents
Culture Documents
I do not believe GM was irresponsible for only recently recalling vehicles. GMs duty is
to its shareholders. The GM case slightly echos the Ford Pinto case. The ignition switch failure is
the result of a 2nd or 3rd order problem. That is, the ignition switch did not fail unless other, user
generated conditions were present. Similar to the decision Ford made, the costs of updating the
design can be overwhelming and can be cost prohibitive. General Motors sells ~10 Million vehicles
each year. Repairing each component which could potentially fail due to over-use by a consumer is
cost prohibitive. Freeman argued that customers should be considered a stakeholder in companys
decision making process. However, the scope of the ignition switch failure seems limited compared
to the scope of implementing a solution. As an engineer with experience developing automotive
components, I understand first-hand the complexity of identifying and preventing 2 nd and 3rd order
failures. Even if GM has undertaken the expense to correct the ignition switch, there would be
another component poised for failure. The decision to implement, or not implement a solution to a
potential problem is challenging, especially when the potential results could be the death of your
customer.
How does one breach the Implied Warranty of Merchantability and the Implied Warranty of
Fitness for a Particular Purpose?
An implied Warranty of Merchantability is breached when a product fails to perform in
accordance with reasonable expectations of the buyer. For example, when a buyer purchases a
vehicle with airbags, it is reasonable to assume that the airbags will operate in the event of a crash.
An Implied Warranty of Fitness for a Particular Purpose is breached when the buyer reasonably
expects the seller to provide product in a specific condition, but the seller breaches this warranty by
not providing product which meets the buyers request.
the penalties are likely not enough to convince GM to change their strategy, just their Public
Relations.
Example of a Company who made good decisions
No entity makes good ethical or legal decisions all the time. However, when a company
decides their reputation as a company and stakeholder in the communities in which their employees
and customers live and work, the results can be good for all stakeholders. In May of 2005, GE
launched their Ecomagination campaign. The campaign marked a strategy change for the company
in which they would invest in R&D, Capital, and Marketing programs aimed at environmental
responsibility. While many critics dismissed the campaign as Public Relations stunt, there were a
few significant steps GE took in communities which GE had harmed. One of the most significant
actions taken by GE was the turn-around of policy of the Hudson River clean-up. GE had long
denied their responsibility in the pollution of the river for 30 years through the 70s. Despite court
orders to pay for the clean-up efforts, GE continued to litigate, delaying action and expense. In
conjunction with the Ecomagination program, GE dropped their opposition to the EPA oversight and
cleanup orders. GE began quietly settling many suits around the US and in the Hudson River district.
River drudging and clean-up efforts in the EPA directed Hudson River projects cost GE more than
$500 Million.1 However, as GE was embarking on re-inventing themselves as a world leader in
Green Technology, it was important for them to atone for their past miss-steps. GEs quest to cleanup their legacy of polluting the Hudson River was more about making investments in the future than
paying for past mistakes. But finding financial incentives to do the right thing has rewards for all
stakeholders, including investors.
1 http://www3.epa.gov/hudson/