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Was GM irresponsible for only recently recalling vehicles is faulty ignition switches?

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.

Do you think General Motors breached either Implied Warranty?


Customers who bought a new car should have the expectation that the ignition and other
safety systems in the vehicle should operate in accordance with industry standards. The GM ignition
switch problem reminds me of another systematic failure in the automotive industry, the Ford x
Firestone recall. In both cases, the root cause of the problem was caused by mis(or over)-use of the
product. In the Firestone case, it was under-inflated tires and high speeds, both are factors which
were controlled by users. In the case of General Motors, the root cause of the failure was due to
excessive weight attached to key rings damaging the ignition switch. Did General Motors breach the
Implied Warranty? No, not as long as General Motors included a warning not to hang more than 8
ounces of keys from the ignition switch to prevent failure. Ignition failures of General Motor cars
measure in the hundreds, yet GM sales measure in the million. This implies that the ignition failures
were occurring in less than .01% of vehicles. Despite the emotional testimonial and massive class
action suits brought against GM, a failure rate of less than .01% does not bring me to the conclusion
that GM breached either Implied Warranty, particularly if GM had adequately warned consumers
that excessive weight attached to the ignition switch may lead to pre-mature failures. The parallels to
Fords Pinto and Firestone cases are evident. The Toyota accelerator pedal cases also bare some
resemblance. History will continue to repeat into the foreseeable future. Automobiles are complex
machines. The opportunity for failure exists within the hardware, software, but most often with the
operator. Those familiar with the complexity of automobiles are astounded by the number of cases of
deaths from hardware failures. But the astounding part is how rare these occurrences are, not how
prevalent they are. The massive penalties GM will pay to settle the cases still only amounts to $50
per vehicle sold in 2014. This, of course, is a large sum of money, but implementing the 100s of
other potentially faulty design updates would be far more expensive than $50 per vehicle. In the end,

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/