12/22/2020 Gulf Regional

Legal Environment
of Business
GHL4010

Mahnoor Rehman
[COMPANY NAME]
Table of Contents
Task 1. Introduction....................................................................................................................................2
Key Problems and Issues of the situation given.......................................................................................2
Objectives of the Report..........................................................................................................................3
Outcomes of the situation presented........................................................................................................3
Task 2. Evaluation of the Situation..............................................................................................................4
Relevant facts and figures........................................................................................................................4
Ignition switches and related problems....................................................................................................5
A similar situation...................................................................................................................................5
Evaluation of the issues...........................................................................................................................6
Task 3. Proposed Solutions.........................................................................................................................8
Solutions..................................................................................................................................................8
Why These Solutions?.............................................................................................................................9
Task 4. Recommendations...........................................................................................................................9
Strategies.................................................................................................................................................9
Quality assurance Tests.......................................................................................................................9
Kaizen Management..........................................................................................................................10
Use of Superior Quality Material in Manufacturing..........................................................................10
References.................................................................................................................................................11
WORK DECLARATION..........................................................................................................................13

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Task 1. Introduction

With the rapid advancement in technology, we are blessed to have so many inventions that help

us in various ways to make our daily life easy and comfortable. Such an invention is the creation

of automobiles that assists us with not only moving ourselves from one place to another but also

helps us in transporting our heavy and voluminous luggage to long and short distances. However,

every coin has two sides and likewise is the case of these inventions and advancements

(automobiles in our case). These can be very lethal if not dealt with proper care and precautions.

In this report, such a situation of inadequate automobiles’ parts, their assembling,

misfunctioning, and defectiveness has been analyzed.

Key Problems and Issues of the situation given

The problems that have been discussed in this report are the effects of ineffective and

malfunctioning parts of automobiles, particularly, cars on general public’s life. These include

brake fails, defective or flat tires, misfunctioning of several parts, ineffective switches, problems

with the child’s seat, shaking steering wheel, too much oil consumption by the car, leaking

radiator and so on and so on.

In addition to this, it poses certain restrictions and brings new challenges to the car

manufacturing companies as car accidents and such incidents soon take the hype and gain the

attention of media and news. As a result, they get delayed for their appraisals, called out for

quality assurance tests, charged with penalties, accused, and blamed of these accidents, faced

lawsuits, bore costs of lawyer and legal procedure, defamed, suffered company reputation,

mistrusted by customers which further leads to losing customers etc. because such a

mismanagement act while assembling a car is life threatening to people.

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Objectives of the Report

 This report has been prepared to analyze the given situation what impact can defective

and inadequate parts of automobiles cause on car manufacturing companies because of

their adverse effects on human life.

 Further to discuss why such situations happen and how can we resolve them.

 Moreover, with the help of this report, we will come to know what legal problems such

situations cause to the companies who do not deal with these problems immediately or in

long run to mitigate and avoid such scenarios to happen in the future.

 This report has been further developed to be able to better adapt the developments of

modern times.

Outcomes of the situation presented

The given situation presents various scenarios in which inadequate automobile parts can be

harmful to us and cause us such injuries which could even be risking our lives or causing us

lifelong disabilities. If any part of a car is defective or dysfunctional like brakes, defective tires,

car switches, or a children’s seat, it can result in deadly car collisions, road accidents, physical

injuries and so on. It can further impact the business of the company producing such cars like

lawsuits against such production.

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Task 2. Evaluation of the Situation.

Relevant facts and figures

One extremely important reason for vehicle accidents which has been overlooked is defective

manufacturing, assembling and malfunction of vehicle parts. As a matter of fact, these defective

vehicle parts do not only result in crashes but can also lead to serious injuries as well as death,

even from minor impacts. (Smith, 2020)

Manufacturing issue or defection in car assembling recall notifications to withdraw some

particular versions which must be fixed to modify a safety issue and prevent accidents. If in case

several complaints regarding a safety issue with a vehicle have been made, then a safety recall

can also be issued by The National Highway Transportation Safety Administration (NHTSA). If

it has not been done so previously, the NHTSA can make a producer to issue a recall for the

vehicle as well. The number of automotive safety recalls which were almost 53 million units in

2016 had declined to 30.7 million units next year according to the report of NHTSA in 2017. In

fact, this was recorded as the smallest number of models, since 2013, which the producers had

taken back in accordance with Forbes Magazine. Approximately 74% more cars as well as trucks

sold to consumers still had to be recalled by the manufacturers provided that only 17.6 million

new cars were sold last year. (Español, 2020)

Although throughout the last few decades safety of automobile has improved significantly there

are still vehicle defects result in car accidents. According to NHTSA factors regarding vehicle

were the serious cause for 44,000 of the 2.2 million accidents evaluated in the National Motor

Vehicle Crash Causation Survey. (Car Accidents Involving Automotive Defects, 2020)

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Ignition switches and related problems

It is also called as a started switch which helps in activation of the central electrical system of a

car. It also helps in giving the power to most of the accessories of a car such as power windows,

stereo system, AC, window wipes and so on. When a car manufacturer uses faulty ignition

switches, it can lead to several serious problems at times such as turning off of the electrical

system and engine of the car all of a sudden which can consequently let the driver be unable to

use power steering and brakes. That is why, several accidents occur due to faulty ignition

switches. One such situation has been represented here. (Smith, 2020)

A similar situation

Since 2002, consumer complaints have been submitted to General Motors for Faulty Ignition

Switches. Still General Motors failed to alert its customers about the Faulty Ignition Switches,

and delayed in timely recall of possible faulty vehicles, as a result General Motors had to reach a

defrayal with 100 of car owners. Due to Faulty Ignition Switch, 100 people were found dead. To

end this criminal inquiry, General Motors pay nine hundred million dollars (equivalent to five

hundred eighty million euros) due to delay in recalling of faulty automobiles. (GM reaches deal

over faulty ignition switches, 2017)

This Faulty Ignition Switch shut down many engines while working, deactivated power

supported steering and brakes, and also shut down the functioning of airbags, resulting in many

injuries. By Feb 2014, nearly 2.6 million cars were found globally which were claimed as faulty.

However, till the end of year 2014, these complaints ballooned to almost thirty million faulty

cars. As a result, they recalled all the possible faulty vehicles. (GM agrees $900m settlement for

faulty ignition switches, 2015)

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Initially, General Motors took the benefit of bankruptcy happened in 2009, said that it should

protect General Motor from claims over the faulty switches, but later on Plaintiff disputed that

company has been receiving complains since 2002. Subsequently, General Motors reach a deal

over Faulty Ignition Switches by compensating victims who suffered death or any harm due to

the defect. (GM reaches deal over faulty ignition switches, 2017)

Evaluation of the issues

The given situation presents other issues of faulty manufacturing and assembling of cars among

which many are being worked at like the safety of driver and children in case of accidents by

exploiting superior-quality material. However, this report discusses the problem of the cited case

which is regarding ignition switches and related problems only.

Among so many car accidents that are caused by improper assembling of different parts, ignition

switches and their faults is a common issue in car assembling. The same issue was also faced by

General Motors which costed company millions of dollars back in 2009 just because of 100s of

deaths and accidents. Along with the loss of money the company also suffered loss in company’s

goodwill and fame, lawsuit scandal in the court, loss of customers, and the huge cost of time that

the company faced in hearing of the case, and after the decision of the court, recalling the faulty

and defected cars, repairing them, and sending them back to the customers to get their trust back,

sustain and retain them as loyal customers of the company. (GM agrees $900m settlement for

faulty ignition switches, 2015)

The company could have mitigated the impact by accepting its faulty ignition switches errors

rather than declining it, filing bankruptcy, and asking for protection against the settlement

sentenced from the court. When the plaintiffs proved that the company had these faults in its

automobiles even before the bankruptcy, then the company was compelled to compensate the

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victims. However, the company realized its mistake and the boss of the company, Mary Barra,

further set a culture of dealing with such issues considering the bigger picture and analyzing the

impacts of denial and faulty car assembling on the public life. (GM agrees $900m settlement for

faulty ignition switches, 2015)

This issue emphasizes on the importance of accurately assembling the various parts of

automobiles and in case of recognition of any faults in any of the parts by the customers, the

company itself or anybody else, the company should take a step forward in resolving the issue to

help the customers rather than denying it. It will work in favor of the company to avoid bigger

issues, lawsuit scandals, and huge costs associated with lawyers’ fees and settlement

compensation.

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Task 3. Proposed Solutions.

The errors and mistakes are part of our daily routine. It is a common practice that we learn from

trial and error and that is why, it is rightly said that “practice makes a man perfect”. However,

the greater part of the problem is not the fault itself, but it is the denial and not acknowledging

the inaccuracies.

Solutions

Firstly, there should not be any fault or defect in such a product which can be life threatening to

the people. This can be achieved by having a proper quality assurance assessment, check and

balance, trials and testing, and other necessary evaluations to detect every possible type of fault

and defect before launching the product in the market.

Secondly, if any such case of any misfunctioning or defect is recognized, the company needs to

pay attention to deal with it as soon as it can to help the customers resolving their issue. The

company should work on preventing such issues in the long run and make a rule of continuous

improvement in the premises of the company so that employees feel motivated to share their

ideas of how they can take small steps to bring bigger and more improvements.

Thirdly, the company should never deny any such case if the fault lies at the end of the company.

The companies should acknowledge that the problem has been caused because of any

discrepancy at the end of the company and avoid going to the court hearings.

Why These Solutions?

The Toyota way Book presents 14 principles to effectively and efficiently manage businesses

among which the first principle states that “Base your management decisions on a long-term

philosophy, even at the expense of short-term financial goals.” (Liker and Franz, 2011)

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In the light of this principle, Liker and Franz (2011) familiarize companies with the bigger

picture that how basing the decisions of management on the long-term philosophies and keeping

in consideration the future consequences by acknowledging their defects and bearing the cost of

compensating the customers in the short run, can help the companies in building the trust of

customers, avoiding lawsuits, millions of dollars’ costs, time, defame, and the sentences from the

court.

By implementing these solutions, the companies in the car manufacturing industry can better

serve their customers and prevent such consequences. This can help them keep their customer

satisfied, happy, and loyal to bring them more business and growth in the long run.

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Task 4. Recommendations.

Strategies

Subsequently mentioned strategies can help mitigating the chances of accidents that happen

because of the defects in assembling and manufacturing of automobiles.

Quality assurance Tests

Most important strategy to be planned and implemented by the car manufacturing companies is

that they should come up with proper auditing of their parts and whole product so that such

discrepancies can be avoided in the future. Any product that has any defect or any possibilities of

causing any accidents should not be sold out in the market.

Kaizen Management

The automobile industry should work on the principle of Kaizen management which is to bring

improvement continuously in the production system to avoid defects and bring efficiency and

effectiveness. (What is Kaizen? - Five S of Kaizen, 2020)

This is another philosophy of Japanese Toyota Management. This process does not focus on the

manufacturing sector of the automobile industry only but highlights the role of every other

department that should work in its alignment too to bring enhancement in the processes. Hence,

it is the responsibility of every single individual in the hierarchy of the company (irrespective of

the designation) to bring small improvements and play their part in

Use of Superior Quality Material in Manufacturing

The situation given sketches an outline of use of bad quality materials like that of plastic in the

seats which also become the cause of the accidents. So, when producing any product of any kind

of any industry, quality is the foremost thing that every company should focus on. The quality is

the trait that should never be compromised. It is the quality of a product that helps the company

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in bringing more customers, spreading positive word of mouth, enhancing sales, growing rapidly,

and dealing with the competition. That is why, a faulty or defective product means a compromise

on quality and cannot be tolerated by the customers in any business. Therefore, companies are

suggested to produce quality product and when it comes to automobile industry, a faulty product

can cost the life to the customer that is why companies in car manufacturing industry should

always use materials of top-notch quality.

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References

BBC News. 2015. GM Agrees $900M Settlement For Faulty Ignition Switches. [online]

Available at: <https://www.bbc.com/news/business-34276419#:~:text=General%20Motors

%20has%20agreed%20to,recall%20vehicles%20with%20faulty%20ignitions.&text=The

%20settlement%20was%20disclosed%20in,at%20a%20Manhattan%20federal%20court>

[Accessed 21 December 2020].

Español, H., 2020. Car Accidents Caused By Defective Car Parts | Warren & Kallianos. [online]

Warren & Kallianos. Available at: <https://www.warren-kallianos.com/car-accident-

lawyers/types-of-car-accidents/accidents-caused-defective-car-parts/> [Accessed 20

December 2020].

Kraft & Associates, Attorneys at Law, P.C. 2020. Car Accidents Involving Automotive Defects.

[online] Available at: <https://www.kraftlaw.com/car-accidents/causes-car-accidents/car-

accidents-involving-automotive-defects/> [Accessed 21 December 2020].

Liker, J. and Franz, J., 2011. The Toyota Way To Continuous Improvement. New York:

McGraw-Hill.

Managementstudyguide.com. 2020. What Is Kaizen ? - Five S Of Kaizen. [online] Available at:

<https://www.managementstudyguide.com/what-is-kaizen.htm> [Accessed 21 December

2020].

Oman Observer. 2017. GM Reaches Deal Over Faulty Ignition Switches. [online] Available at:

<https://www.omanobserver.om/gm-reaches-deal-faulty-ignition-switches/> [Accessed 21

December 2020].

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Smith, E., 2020. Car Accidents Caused By Vehicle Manufacturing Defects. [online]

Autoaccident.com. Available at: <https://www.autoaccident.com/car-accidents-caused-by-

vehicle-manufacturing-defects.html> [Accessed 20 December 2020].

Smith, E., 2020. Sacramento Ignition Switch Defects Lawyer. [online] Autoaccident.com.

Available at: <https://www.autoaccident.com/ignition-switch-defects.html> [Accessed 21

December 2020].

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WORK DECLARATION

I, [Name of Student], hereby declare that the uploaded COURSEWORK through Turnitin is my

own work. I affirm that this has been researched and completed in accordance with the college

rules and regulations on plagiarism.

I acknowledge the advice given by the module tutors on proper referencing to avoid plagiarism

and the rules on the academic unfair practice.

I acknowledge that I read and understand the plagiarism guide written at the end of this

assessment. Any academic misconduct will be handled according to the rules and regulations of

the university.

[Name of Student]

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