Nectar’s Computer-generated Paracrisis Response: Is it better than no Response?

Nectar is a loyalty reward program in the UK.  People earn points by shopping at various locations such as grocery and department stores.  There is nothing inherently controversial in loyalty programs, most people belong to several.  Nectar hit a paracrisis (I think the term social media crisis is rather useless because its conceptualization is so poor) when it announced it had added The Daily Mail to the program.  The Daily Mail has a questionable reputation as a newspaper most recently running what many believe were questionable anti-refugee material.  The point is that a controversial company was added to the Nectar program and many customers and other stakeholders were upset.  Because Nectar made the announcement of the addition on Facebook, the crisis did transpire most in social media. There were already over 5,000 comments as of August 17th.

 

The concern here is not with the The Daily Mail but with how Nectar handled the crisis.  As you can see in the visual above, Nectar chose to repeat the same statement anytime there was a concern expressed about The Daily Mail.

 

“The primary factor in our decision making for any new partnership is our current customer base. From our data and research, we know that there is a large crossover between our customers and Mail readers. We appreciate your feedback.”

 

Critics of the response, including media training company mediafirst, argued that people want a human voice not a computer-generated response.  Moreover, the response did NOT provide a link for more information on the company’s web site.  Such links are helpful in supplying additional information to interested and active stakeholders.

 

Firms that seek to engage stakeholders through social media create certain expectations including responding when there are concerns.  The computer-generated response might be done due to limited staff and resources but can make the situation worse.  As mediafirst noted, Nectar could have at least created different versions of their set response.  Social media can create additional crisis risks, especially if the social media messages are deemed in appropriate or ineffective.

 

Questions to Consider

 

  1. Why would this qualify as a paracrisis?

 

  1. What factors could push this to becoming an actual reputational crisis? What factors could prevent the escalation of the paracrisis?

 

  1. How can a firm balance the demands of responsiveness with the limited resources that might be assigned to social media? Is no response better than a computer-generated response? Why or why not?

Our Product is Where? Tiki Torch’s Unhappy Publicity

Ideally, company’s want celebrities to use their products so that when the media snap pictures, the product gets publicity.  But sometimes people use your product and you wish they would not.  Such was the case for Tiki Brand Products.  During the pro-white rally in Charlottesville, VA, the company’s Tiki torches featured prominently in stories about the white supremacists carrying the Tiki torches.  Search for a story about evening march and you will see images of the Tiki torches.  No one suggests Tiki Brands Products were sponsoring such an event but the product was linked to the protests that turned violent and deadly.  Tiki Brand Products responded with the following comment on its Facebook page:

 

TIKI Brand is not associated in any way with the events that took place in Charlottesville and are deeply saddened and disappointed. We do not support their message or the use of our products in this way. Our products are designed to enhance backyard gatherings and to help family and friends connect with each other at home in their yard.”

Luckily people agreed with the company and the responses were largely supportive such as this one:

“Thanks for making a statement. It’s too bad that the oh-so-charming crowd of half-wit incompetent torch-bearers decided to use your products, but it’s not like we can blame you. Certainly, you didn’t say, ‘Oh hey, let us sell you a truckload or torches at a deep discount for your hate rally.’

Take heart. Your apology is spreading across Facebook. Your products are made for friends and families to gather in love. We all know this. Their misappropriation of your products is not a reflection on you, but a reminder of how much of a perversion they make of the symbols of life in our country.

Questions to Consider

1.  What are the pros and cons of Tiki Brand Products making a public statement?

2.  Why do you think the company used its Facebook page and not its web site for the statement?

3.  What are some the advantages Tiki Brand Products has when dealing with the situation?

4.  What other actions and/or communication would you take and why?

Note to Wells Fargo: Repetition is not Good for Crises

The data from research studies clearly indicate a history of crises is problematic for an organization.  Multiple crises increase attributions for crisis responsibility (and attendant damage to the organization) because it indicates stability for crisis inducing behavior.  This is part of what has been called the Velcro effect because past crises attract negative views just as Velcro attracts fuzz.

 

Wells Fargo cannot seem to avoid taking actions they know can hurt their customers.  I must disclose Wells Fargo owns our home mortgage but it was sold to them and we had no choice in the matter.  Last year it was found Wells Fargo employees created extra accounts for over 2 million customers without their knowledge.  Over 5,000 employees were fired after that crisis/scandal.  This July Wells Fargo admitted it had charged people with automobile loans for insurance they did not need.  The improper insurance was charged to around 800,000 people.  About 274,000 of those customers were forced into delinquency with 20,000 to 25,000 having vehicles repossessed.  In addition to the financial damage, Wells Fargo has hurt their customers in many other ways including their credit scores and access to vehicles.

 

To make matters worse, Wells Fargo was aware of the problem since July of 2016.  The company had the consulting firm of Oliver Wyman investigate the situation.  The New York Times made the story public when if published a story based upon the internal report.  Wells Fargo clearly missed the chance to use stealing thunder on this crisis by not disclosing what it knew when it knew it.

 

Once the crisis/scandal was public, Wells Fargo began posting messages online including its webs site and on Twitter.  Here is the text from the response:

 

Wells Fargo CEO Tim Sloan shared his thoughts with team members about making things right for auto insurance customers.

July 28, 2017

Editor’s note: On July 27, CEO Tim Sloan sent the following companywide message.

On July 27 Wells Fargo made an important public announcement about the steps we are making to build a better auto lending business and to address efforts we are taking to make things right for some customers in regard to our vehicle Collateral Protection Insurance (CPI) Program.

In addition, The New York Times has published an article based on a preliminary report that we commissioned several months ago to help us ensure that we make impacted customers whole.

Customers’ auto loan contracts require them to maintain comprehensive and collision physical damage insurance on behalf of the lender throughout the term of the loan. As permitted under those contracts, Wells Fargo would purchase CPI from a vendor on the customer’s behalf if there was no evidence — either from the customer or the insurance company — that the customer already had the required insurance.

However, in July 2016 we initiated a review of the CPI program in response to customer concerns and determined that certain external vendor processes and internal controls were inadequate. More important, we discovered that those deficiencies inadvertently harmed some of our customers. We discontinued the program in September 2016 and immediately started work, with the help of independent consultants, to ensure that our remediation plan addresses customer situations in a thoughtful way.

Wells Fargo reviewed policies placed between 2012 and 2017 and identified approximately 570,000 customers who may have been impacted and will receive refunds and other payments as compensation. In total, approximately $64 million in cash remediation will be sent to customers in the coming months, along with $16 million in account adjustments, for a total of approximately $80 million in remediation. In some cases we already have refunded customers, and the remainder of the remediation program — which begins in August and concludes by the end of this year — is still being finalized.

Beyond this remediation, we’ve taken multiple steps to strengthen the Dealer Services business. Just this week, Dealer Services announced a new structure and other recent changes include centralizing collections, tightening our credit standards, increasing oversight of third-party vendors, enhancing our risk management practices, and hiring new leaders and team members.

Auto lending is an important business to Wells Fargo because it’s vital for our customers to have access to affordable vehicle financing that enables their everyday lives. Today’s announcement underscores our long-term commitment to the business and to conducting it in the right way.

We are deeply sorry for any harm we caused our customers, who expect and deserve better from us. Situations like this one reinforce the importance of continuing to examine every aspect of our business. We will acknowledge mistakes and take responsibility for our actions. On those days, I appreciate that it sometimes can be challenging to keep up the tremendous effort you make each day for our customers and for our company. I believe in the work you are doing. I believe it’s making a significant difference and that a brighter future lies ahead for all of us as we build a better, stronger Wells Fargo.

Thank you.

Questions to Consider

 

  1. How effective do you feel the Wells Fargo response will be for current customers? For potential customers?

 

  1. How important is compensation for this crisis? Why?

 

  1. How important is an apology in this crisis? Why?

 

  1. How badly will knowing Wells Fargo withheld information hurt efforts to repair the damage from the crisis?

 

  1. What role does the past crisis/scandal play in shaping this crisis/scandal?

 

Bush Brothers Show the Way to Handle a Product Harm Recall

Product harm crises common but serious issues for organizations.  Product harm crises can place customers in danger.  Hurting consumers is a serious risk for any organization.  In the food industry, product harm crises are often called food safety crises.  People are most concerned about products they consume or place on their skin making food safety crises potentially a massive problem.  Again, food safety crises are common with hundreds per year in the U.S. alone.  Any firm involved in the food industry should be prepared for a food safety crisis.

 

The number one priority during a food safety crisis needs to be the consumers.  Harming consumers is a horrible form of negative publicity for a firm.  The crisis communication must feature instructing information—telling consumers how to protect themselves from the danger.  A food safety crisis is one of those crises where people really want or need the crisis messages because they could be at risk of harm.  Not all crises, especially reputational crises, create such stakeholder demands/needs for information.

 

Oddly, the data finds that food companies are hesitant to use their won social media channels for communicating recalls to consumers.  Around 10% for food companies will place recall information on their Twitter feeds or Facebook pages.  This reality runs counter to industry and governmental recommendations to food companies to use their digital channels during a recall (food safety crises demand a recall).

 

Recently, Bush Brothers & Company had to recall certain types of their baked beans.  Can seems in certain batches could be defective so the recall was initiated to protect consumers from the potential danger.  The risk was discovered internally and there were no known illnesses at the time of the recall.  Below is the text of the full message.  The Bush Twitter feed and Facebook page announced the recall and provided a link the message below.  People are told the exact product with the problem and to throw the product out (instructing information).  Bush Brothers added an apology for the inconvenience caused by the situation.  Their words match their actions—the firm is showing concern for consumers.

 

Text of the Recall Message:

 

A Message For Our Customers July 22, 2017

 

For more than 100 years, Bush Brothers & Company has been dedicated to producing the highest quality products for our valued consumers, customers and their families.

 

On July 22, 2017, we announced a voluntary recall of certain 28 ounce cans of BUSH’S® Brown Sugar Hickory Baked Beans, Country Style Baked Beans and Original Baked Beans due to potentially defective side seams on the cans. This recall was initiated after our internal quality assurance checks identified the issue. Subsequent investigations indicated a temporary quality issue from one of our can suppliers. The problem was corrected and no other product is affected.

 

As a fourth generation family owned business, we are guided by our values of integrity, caring, responsibility, and trust and we apologize for any inconvenience or concern this situation may cause. It’s important to note that, to date, no illnesses or other adverse consequences have been reported in connection with this voluntary recall; however, we urge you to dispose of these affected products immediately even if the beans do not look or smell spoiled. We are working with our retailers to ensure timely removal of affected product from their warehouses and shelves.

 

To view the affected Lot Numbers and Best By dates, please see below. BUSH’S® Consumer Relations is available to answer any questions you may have by calling 1-800-590-3797 Monday-Friday between the hours of 8:00 am and 5:00 PM Eastern Standard Time. Information may also be found on our website at http://www.bushbeans.com.

 

Thank you for your patience and understanding as we work through this issue. We appreciate your continued loyalty.

 

Questions to Consider

 

  1. Why would food companies choose not to use their social media channels to communicate information about a product recall?

 

  1. What is the danger of not using social media channels during a food safety recall?

 

  1. How did the message from Bush Brothers go beyond just instructing information and how might that further help the company during this crisis?

Qatar Fifa 2022:  New Twist to False Information

 

Organizations have always had to be concerned about false information circulating about them that could damage reputations.   P&G, for instance has battled false claims its founder sold his sole to the devil for decades.  Starbucks and McDonald’s have also had to fight damaging, false information. We might call these situations rumors or even fake news.  The key defining characteristics is the information is false and threats to damage an organization’s reputation.  Fake news is an ambiguous term but I am using it here to denote false information presented to appear as real news. 

 

Qatar has many problems with the current sanctions by neighboring countries.  There has been a number of controversies surrounding their hosting of Fifa’s 2022 World Cup.  A few days ago a story appeared on the web site of what seemed to be the Swiss news publication The Local.  The story claimed six Arab nations would boycott the 2022 World Cup.  There was even a quotation from Fifa president Gianni Infantino.  The web site was a copycat of The Local.  Management of The Local claimed the news publication never ran such a story and Infantino denied the words were his.  However, several major news outlets carried the story thereby giving credibility to the false information.

 

Organizations must now monitor their environments for false information being disseminated as news (fake news).  We can add one more liability created by the Internet and one more appropriate application of denial during a paracrisis or actual reputational crisis.

 

Questions to Consider

 

1.  What are some of the problems when trying to use the term fake news?

 

2.  How does this case illustrate the potential damage fake news can inflict on an organization?

 

3.  Even with denial, does fake news create a lingering effect for organizations?  Why or why not.

Sharing Economy also a Risk Economy: Airbnb and Racism

We now see a variety of companies the reflect the sharing economy (aka collaborative economy).  The basic premise is that people own less and share more.  You use Uber instead of owning a car (or owning less car) and use Airbnb rather than having a vacation place.  The companies I just mentioned are making it work but also reveal how the sharing economy creates great risk.  (See other posts about Uber).  Airbnb is great example of increasing risk through a sharing economy.  Airbnb relies upon individuals to offer and to rent places through their system.  And this involves a lot of people.  As the company’s slogan says:  “Book unique homes and experience a city like a local.” 

 

We can debate if legally or technically the people renting the places (hosts) are employees of Airbnb, that is not the point.  The point is the actions of the hosts reflects upon the organization—for those renting a place that person is Airbnb.  So, when the hosts treat the clients badly, it reflects negatively on Airbnb.  The company has had problems with people who rent their properties (hosts) discriminating against those seeking to rent places.  There is data from multiple sources that indicate the system has problems with racial discrimination and renting.  Racial discrimination is a powerful social issue that can taint a company’s reputation and may be either a paracrisis or a reputational crisis.  A recent case brought the discrimination risk to light in the media once again.  Here are the basics of the case:

 

“An AirBnB host who made a racist comment to an Asian guest has been fined $5,000 – and told she must attend a course on Asian-American studies.

Tami Barker cancelled Dyne Suh’s booking, telling her in a message: ‘One word says it all. Asian.’

The fine was imposed due to a new agreement between AirBnB and California’s Department of Fair Employment and Housing (DFEH).

It lets the DFEH examine hosts that have had discrimination complaints.”

We see a governmental agency getting involved in the case rising the media attention to the incident.  The DFEH levied a fine and is requiring other remedial action from the host.  The host expressed regret for her actions and hoped there would be a positive resolution to the situation. 

Airbnb co-founder Brian Chesky seemed to anticipate the risk issue when he gave the following comment in a BBC interview in 2016:  “We started this company with the belief people are fundamentally good. Mostly everyone is really good, but when you have 100 million people, there are some who don’t believe in what you believe in.”

There is little reason to believe the racism issue is now settled for Airbnb.

 

Questions to Consider

1.  Would you consider this a paracrisis or a crisis?  Explain your decision.

2.  What seems to be effective and ineffective about the response to this paracrisis/crisis? 

3.  What actions might Aribnb take to reduce the racism problem in the future?

4.  What are the advantages and disadvantages or Airbnb seeming to place the blame on its host when such incident arise?  Is it a sustainable strategy as incidents continue to occur?  Why or why not?

 

The Renault Spy Scandal: When a Speedy, Decisive Action Hurts

Speed is a double-edged sword in crisis communication.  Organizations are told to respond fast.  The sooner the better it would seem.  But speed can produce errors and be based on incomplete and misleading information.  A quick reaction that is decisive projects the image of managers that are control of the bad situation.  If we go back to the 2011 Renault Spy Scandal we find a case were quick a decisive action hurt the company.

 

Dominique Gevrey, a security chief at Renault and former intelligence officer, brought forward evidence that three executives had sold secrets about Renault’s electric car strategy to unknow foreign agents.  In a quick and decisive move, Renault fired the three executives immediately though each proclaimed their innocence.  Of course many guilt claim tom be innocent but that was not the case here.  Two months later, Dominique Gevrey was arrested as he tried to board a plane leaving the country for Guinea in west Africa.  Other investigations found there were no secrets sold.  The story was a fabrication.  Gevrey was accused of fraud and was believed to have keep the over $200,000 given to a secret source who provided the information.  Renault apologized to fired employees and offered them their jobs back. Of course the apology was not embraced as the executives were suing over wrongful dismissal.

 

The scandal had gone from a little bad to very bad with Renault being called paranoid and dysfunctional in the media and calls going out to fire its current leadership that allowed such a situation to unfold. 

 

Questions to Consider

 

1.  How can managers balance the need for speed and action against correct decisions when allegations of wrongdoing are launched against other managers?

 

2.  Why would Renault act so quickly and not just wait for an investigation?  What are the pressures to act?

 

3.  What unique features of this case limit the conclusions we can draw from it?

Crisis Communication is Rocket Science: A Time Dilation View of Crisis and Reputation

In physics, there is a concept known as time dilation.  It is often used in the plots of science fiction stories but is a real concept derived from the work of Albert Einstein.  The basic principle is that time slows with speed.  The common example is to consider two identical clocks ticking.  One is on a speeding jet for two hours and the other is stationary on the ground.  When the clock in the jet lands, it will have ticked slightly less time.  The speed of the jet causes the one clock to experience a different rate of time flow than the stationary clock.  The example highlights how time is relative because it depends upon a point of reference.  Essentially, as an object moves faster, it experiences a slower time flow.  On a space craft, time flow can be slower near a gravitational mass because the gravitation field will cause the rocket to accelerate.  Science fiction stories like to note how time slows near black holes (a gravitational mass), for instance. 

 

What we commonly call rocket science is really the application of physics and engineering principles in space.  Physics informs us that a planet’s gravitational mass can be used to either slowdown or to accelerate an object moving through space.  This process is known as a gravitational assist maneuver or a gravitational slingshot.  The principles are used regularly for satellites (space crafts) sent to probe our solar system.  If an object approaches the planet and flies with the movement of planet, it can increase speed (slow the time flow).  If an object flies against the movement of the planet, its speed can decrease (quicken the time flow). 

 

But you are managing a crisis not writing a science fiction story or deploying a space craft so why talk of time dilation and gravitational slingshots?  I believe we can use the principles of time dilation and gravity assist maneuvers to understand how theory can inform the ways crisis communication affects the time variable in a crisis, what I will call the crisis clock.

 

Time is an underused variable in crisis communication.  Yes, there has always been the advice to respond fast to a crisis.  And stealing thunder informs us that if the organization is the first to release information about a crisis, the crisis inflicts less damage on an organization.  But these two applications are really timing (controlling when something is done) and so much about time itself.  When a crisis begins so too does a crisis clock.  The crisis clock runs during the lifespan of the crisis and denotes the time in which the crisis affects the organization and its stakeholders, typically in a negative fashion.  The effects of a crisis can linger well past when operations have returned to normal meaning the crisis time can still be running or can end before the return to normal operations.  The crisis clock stops when most stakeholders have forgotten about the crisis and return to normal interactions with the organizations.  Consider how automobile customers eventually forgot/no longer actively thought about the brake crisis allowing Toyota to return to its market position about a year after the crisis began.  As with issues, a crisis has an attention cycle that will run its course.  Solid organizations will survive the crisis and benefit from the passing of time and the end of the crisis attention cycle.  Essentially the crisis clock counts the time it takes for a crisis to move through the crisis attention cycle. 

 

Imagine an organization is a spacecraft moving through space.  A crisis is a mass in space that emits a gravitational field and radiation that can damage the space craft.  The crisis can vary in mass meaning some crisis exert little force and damage on an organization while others can exert a great deal.   The crisis attention cycle represents the time during which the organization experiences negative effects from the crisis mass—when the crisis clock runs. Ideally, the organization wants to pass through the crisis attention cycle as quickly as possible—time should move as fast as possible.  However, time dilation causes time to slow down when our organization is under the gravitational pull of the crisis mass.  Time passes more slowly as the organization speed up during the encounter with the crisis mass because actions are now time sensitive.

 

Crisis communication can be used to adjust the trajectory of the organization thereby influencing time dilation for the crisis clock—how long the organization experiences the crisis attention cycle.  We can draw a distinction between aggressive and passive crisis responses.  Aggressive crisis responses tend to be accommodative and quickly seek to address the concerns of the victims.  Passive crisis responses are less accommodative and seek to take as little action as possible.  Apologies and compensation are aggressive while denial, scapegoating, and excuses are passive.

 

An aggressive crisis response initially moves the organization closer to the crisis because managers are acknowledging the crisis.  Hence, the initial crisis communication can speed up the organization and slow the movement of crisis time while enhancing the negative effects of the crisis on the organization.  This may seem bad but is part of a larger process designed to change the crisis clock in a positive manager for those experiencing the crisis. The initial crisis response begins a gravity assist maneuver.  The question is what differentiates between a gravity assist maneuver that increases or decreases the organization’s speed.  Ineffective crisis communication will increase the speed of the organization from this encounter while effective crisis communication will decrease the speed of the organization.  The goal is to decrease speed because a decrease in speed permits the crisis clock to move faster. 

 

The critical question is how do we know what is effective and ineffective crisis communication?  Space craft rely on theories of physics to determine increases and decreased in speed from a gravity assist maneuver.  Managers can rely upon crisis communication theory to determine the outcomes from their gravity assist maneuvers.  In physics, speed is reduced by moving against the movement of the gravitational mass.  This is accomplished by moving in front of the gravitational mass.  Passing behind the gravitational mass will, on the other hand, increase speed.  To fly against the crisis mass, an organization must address stakeholder concerns and engage in other positive actions.  The crisis mass is negative, hence the need for positive actions.  Ineffective crisis responses contribute to the negative force (unfavorable reactions by stakeholders) and move with crisis mass.  For instance, denying a crisis when the organization has some responsibility, blaming others to avoid responsibility, or criticizing those trying to help with the crisis are all negative responses that will increase the speed of the organization thereby slowing the crisis clock and the crisis attention cycle thereby increasing the damage a crisis will inflict on an organization. 

Crisis Scanning for Food-borne Illnesses

The best way to manage a crisis is to prevent one from occurs.  Prevention means the crisis inflicts no harm on your stakeholders or your organization.  The Consortium for Sequencing the Food Supply Chain (lead by IBM Research and Mars) is trying to find ways to anticipate the threat of food-borne illnesses.  In the crisis world, food-borne illnesses are a type of product harm crisis and are sometimes called food safety crises.  Those in food safety talk about food-borne disease (FBD), a global public health problem impacting millions of people each year.

 

The Consortium describes its work this way:

 

In a novel large-scale experiment between IBM and Mars, Inc., researchers are harvesting and sequencing the DNA and RNA of simple food samples to determine where anomaly and selection occur when paired with common organisms or genes, toxins, and heavy metals. The index produced from this study will result in a “microbial baseline,” or a benchmark representing normal microbe communities, which food and health officials can use to understand what triggers contamination and the spread of disease.

 

By combining the database transportation, weather, and other contextual data, people will be able to predict when certain trigger events will create a food safety crisis/FBD.  Food producers will know when an outbreak is about to occur.  The given the amount of data used in the process, this can be called a big data solution for crisis scanning.

 

Anticipation of food safety crisis/FBD can save lives and prevent serious injuries.  Food-borne illness outbreak occurs when medical personnel confirm two or more people are linked to the same pathogen.  A systematic effort is them made to locate the source of the outbreak.  The effort includes questionnaires about food consumption to those who are ill and those who are not ill in an effort to locate the source.  About 60% of food-borne illness outbreaks are from food consumed at restaurants and other institutions (e.g., schools, prisons, nursing homes, etc). This can be a slow process.  Food sales data has been shown to provide a faster solution to locating the problem.  Still, the ability to prevent a food-borne illness or to identify it at its very inception will be a great benefit to public safety. 

 

Questions to Consider

 

1.  Why will crisis prevention never be 100%?

 

2.  How might those involved in the food industry integrate the work of the Consortium into their crisis planning efforts?

 

3.  What makes a food safety crisis unique from other product harm crises?

 

Takata: Supply Chain Complicates Crisis Risk and Communication

Supply chains are a fact of life for firms.  International firms tend to have long supply chains that reach to many locations around the planet.  Managers have always known the risks of supply chains with a focus on disruption to the supply chain as a key risk.  Losing access to a key resource or component can be disastrous.  Consider the story of Nokia, the Finnish telecommunications company.  A lighting strike in 2000 in New Mexico sparked a fire that seriously damaged the manufacturing facility of the supplier of the chip (Philips) used in Nokia and Ericsson phones. Nokia acted quickly to bridge the gap in chips.  Its rival Ericsson waited to take action.  The initial indication was this would be a minor disruption but two weeks later it was clear the disruption was major.  By the end, Philips took nine months to restore production.  By then, Nokia had captured the alternatives for get the chips leaving Ericsson with a chip shortage and an inability to manufacture its phones.  Dr. John Tantillo reported the decision cost Ericsson $400 million in annual earnings and a loss in market share while Nokia profits rose 42% that year and they increased market share.  In the end, Noki1 increased market share from 27 to 30% while Ericsson dropped from 12 to 9%.

 

Takata made and hope to continue making airbags.  Major automobile manufacturers have been using them as a supplier for years.  The problem is that for years, Takata airbags could be dangerous.  Some airbags are too explosive and create metal shrapnel.  People have been injured and killed by these airbags.  This week Takata filed for bankruptcy protect in the U.S. (where the defective airbags were manufactured) and Japan.  Takata has already agreed to pay $1 billion in penalties for its role in concealing the problem.  Once again, we have evidence of the damages created when a firm conceals a crisis rather than engaging in stealing thunder.  Takata has paid another billion dollars to people injured and the automobile manufacturers.  But there are further legal liabilities of around $9 billion. 

 

Honda, Nissan, and Toyota have all been paying the recall costs.  None of the firms believe they will recover the money for these recalls.  I own a Honda that was part of the recall.  Over a period of two years airbags on the driver and the passenger side were replaced with no cost to me.  Firms have recall insurance but that does not cover all the costs of a recall.  Honda, Nissan, and Toyota are all feeling the effects of crisis by a supplier in the supply chain.  Each has suffered some reputational damage as well from the crisis.  That is due in part to the manufacturers not helping to reveal the problem and concerns buyers have about faulty airbags.  Takata issued an apology and admitted employees knew of the defect since the early 2000s.  the initial apology is below.  But the automobile manufacturers must consider how they will respond to this crisis.  Supply chains can create various risks for crisis managers.

 

“I would like to sincerely apologize on behalf of Takata. The actions of certain Takata employees to undermine the integrity of the company’s testing data and reporting to customers were deeply inappropriate.”

 

Questions to Consider

 

1.  How viable is a scapegoat response for the automobile manufacturers in this case?  Why might it help or hurt?

2.  Why does the late apology and admission of guilt by Takata considered too little too late?

 

3.  What does the chip fire case reveal about the importance of crisis scanning and early action?