Corporate Social Responsibility at General Motors

Abstract

This paper examines General Motor’s current corporate social responsibility and its ethical background with employees, automobiles, and the environment. It covers its ignition emissions scandal and the way GM handled the aftermath.  The government’s influence on the scandal and the regulation given to General Motors are discussed. Also mentioned is their internal and external stakeholders and the impact each has on the company. General Motor’s European business culture is compared and the European Union legislation about preventing harmful emissions into the environment. More so, Europe’s legal and political system is mentioned and the reason for General Motor’s ceased sales of two European vehicle brands. Also discussed is my recommendation on how General Motors can improve its CSR for the future.

Founded by William Durant on September 16, 1908, in Flint, Michigan, General Motors was the first American company to make over $1 billion in a single year in 1955. In 1925, General Motors and Stand Oil Company formed Ethyl Gasoline Corp., which added ethyl to produce an increased octane level and cleaner gas. This fuel efficiency advancement added to the prosperity of the organization. In 1991, GM faced a downturn by laying off 74,000 workers and closing 25 plants. The year 2006 brought about shedding close to 48,000 GM and Delphi workers into buyouts or early retirement offers. By 2008, the financial market collapse took its toll on GM in the form of Chapter 11 bankruptcy (Jennings & Trautman, 2015). They also achieved sales worldwide of 9.9 million automobiles for the year 2014, making their market share the largest in North and South America for that year (Jennings & Trautman, 2015). In 2018 the company reported positive revenues of  $147,049 million for the December 2018 year-end with net profits being $8.01 million, in comparison to a net loss of $3.8 million in 2017 (“General Motors Company SWOT Analysis”, 2019). Today GM is a worldwide automaker with brands that include Cadillac, Buick, Daewoo, Chevy, Hummer, Saturn, Pontiac, and Saab.

Growth and Stability

General Motors has produced consistent and stable overall growth levels in recent years. The request for hybrid electric vehicles is steadily rising stemming from carbon emissions reduction concerns in relation to increasing fuel prices (“General Motors Company SWOT Analysis”, 2019). GM has continued to create FlexFuel vehicles that run on gas-ethanol blended fuels and currently offer 11 vehicles that use FlexFuel (“General Motors Company SWOT Analysis”, 2019). Furthermore, their significant investment in numerous technologies that offer vehicles electrification fuel and hybrid technology can enable it to take advantage of beneficial market trends. This can also help in boosting market shares and revenues.

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GM Recalls

In recent times, general motors have faced lawsuits for emission rigging in their Silverado and Sierra diesel trucks. This was done to pass the emissions tests by installing cheat defect devices. Real-world situations showed these trucks emitted up to five times the legal limits of deadly pollutants (Hagen Berman Sobol Shapira, 2017) with over 700,000 of those trucks having been on the road. This cheat defect made GM vehicles more competitive and appealing in the market by increasing profits and sales. Reversing the original order of exhaust components and putting the Diesel Particulate Reduction could obtain higher efficiency and power from the engines while surpassing the cold start emissions test (Hagen Berman Sobol Shapira, 2017).

Furthermore, 2014 brought about General Motors admitting it took over ten years to recall automobiles due to a cover-up in defects from switches in the engine ignition. The organization failed to disclose and address the evidence at early stages which resulted in over 100 deaths stemming from this failure (Jennings & Trautman, 2015). The recall began with defective ignition switches in the 2005-07 Cobalt and G5 vehicles. The company noted that the airbags of these vehicles will not deploy if the key was inadvertently moved out of the run position (Jennings & Trautman, 2015) even though the ignition switch performance was already not meeting General Motor’s requirement. Nonetheless, in 2005, an engineer projected redesigning the ignition’s key head but his proposal was rejected by management (Jennings & Trautman, 2015). After questioning on the ignition switch problem, GM’s CEO Mary Barra described this incident as the “GM nod”. Barra described the GM nod as everyone nodding in agreement to a projected action plan, but then leaving the room without any intention of following through, and the nod being an empty gesture (Jennings & Trautman, 2015). With the compensation of executives tied to the reported profitability, pressures could have persuaded the decision not to take immediate action once the switch failure problem was known (Jennings & Trautman, 2015). These troubles couldn’t have stayed as extensively and long as they did and without more than one individual being involved.

Stakeholders

Two external stakeholders that are influenced by General Motors are suppliers and consumers. Both of these groups have an enormous interest in the company if this interest is missing, General Motors could face major issues in survival. More so, since both shareholders either use, control, or contribute the products produced by GM, losing a relationship with them could make for a hard time in receiving supplies to produce the merchandise. Suppliers want the organizations to continuing purchasing material from, while consumers want to be provided high0quality services or goods at low costs. If the suppliers are running low or have no product to ship, GM can’t assemble automobiles which in turn in affect sales and halt production. The suppliers affect their operation and material availability along with doing business with GM (“General Motors 2018 Sustainability Report”, 2019). If consumers do not like a car’s design, reputation, or simply are not purchasing GM vehicles, GM will not make money due to reduced sales, and have much more on-hand inventory. More so, if quality and safety are compromised, GM faces losing its loyal repeat customers and potential new ones.

Two internal stakeholders that are influenced by General Motors are employees and investors. Employees make up General Motors. Whether in office or production, they are the spine of the corporation and needed to make it run daily. The employees are at the top as they define the competencies in GM’s business aspect and are concerned with opportunities and compensation (“General Motors 2018 Sustainability Report”, 2019). If employees go on strike, the organization loses money by the day. Investors is another internal stakeholder who has an interest in the organization. These individuals invest their monies into General Motors and will be continuously worried about if the company will stay in operation, opportunities for advancement, and possible income increased. Furthermore, GM engages with its investors so the company’s financial and nonfinancial performance can be measured together (“General Motors 2018 Sustainability Report”, 2019). More so, the investors are interested in the continued growth and values of the company and can affect business processes.

Government Stakeholders and Regulatory Environment

The government’s influence within General Motors can leave for major changes which will ultimately trickle down to the consumers and the public. The U.S. House Energy & Commerce Committee and the Senate Committee on Commerce, Science and Transportation held a hearing in 2014 over the GM ignition switch recalls. The regulations imposed consisted of charges against General Motors in 2015 involving concealing a potentially deadly safety defect from the U.S. regulate, the NHTSA and misleading consumers about the safety of certain GM cars (Jennings & Trautman, 2015). More so, the US Department of Transportation also intervened in the emissions scandal.

The company was severely impacted when GM admitted it failed to reveal safety defects. The terms of their agreement with the government require the organizations to assist with the federal government and create independent monitors to assess and review GM’s procedures and policies in the areas of safety recalls and issues (Jennings & Trautman, 2015). The main reasons the government decided to suspend prosecution on the basis that GM takes action to demonstrate acknowledgment and acceptance of responsibility. This included providing timely cooperation in the government’s investigation, terminating wrongdoers, and creating victim compensation programs to pay out close to $600 million in awards (Jennings & Trautman, 2015).

Approaches to Ethics

With Mary Barra being the current CEO of General Motors, her approach to ethics included replacing GM’s 10-page dress code to a mere 2-word code of “dress appropriately” (Colvin, 2014). Of course, management didn’t agree with this drastic decision which made Barra initiate a worldwide new manager training to incite them. More so, she fired 15 employees and moved 7 high-level executives in the wake of the Valukas report (Colvin, 2014). Barra wanted a change from the emission scandal but for GM to permanently remember what happened as not to repeat it. Her effectiveness stems from being a second-generation automotive worker and knowing both sides of the company (production and office) personally. The turnaround from the emission scandals and lawsuits has bought Mary Barra to establish new policies and requirements from every department as well as holding individuals accountable for their actions.

CSR Policies and CSR Reporting

In looking at the CSR policies and reports, General Motors information includes its transformation in progress, safety, supply chain, ethics, and governance to measure substantial impact areas and actions to move the company forward. The organization is reporting its acceleration toward an era of better, safer, and more sustainable mobility by changing how the organization proceeds in every business aspect (“General Motors 2018 Sustainability Report”, 2019). Their approach to producing safe automobiles is in a safe work environment where workers are accountable for the safety of individuals around them as well as their own. Today’s decision-making methods for issues in safety include high-level executives and employee engagement at all levels to recognize possible safety concerns (“General Motors 2018 Sustainability Report”, 2019).

Global Issues: Legal and Political Systems

General Motors currently does business in Europe. They share cultural similarities in which the European Union’s legislation minimizes the number of emitted pollutants from new engines and engines sold in the EU. Just as in America, the auto industry in Europe is influenced by a range of regulations that govern the emission levels of carbon dioxide, exhaust fumes, recycling restrictions, noise level limits, and safety standards (“General Motors Company SWOT Analysis”, 2019). Furthermore, stringent new Stage 5 emissions standards were put in effect for vehicle registrations in 2011 while Stage 6 requirements were applied in Fall of 2014 (“General Motors Company SWOT Analysis”, 2019).

As GM operates outside the country, they also must take into account foreign currency rates on financial conditions. In preparing a consolidated financial statement, GM translates expenses and revenue outside the U.S to the USD using the foreign currency rate for that period and the liabilities and assets using the foreign currency rate at the date of the balance sheet (“General Motors Company SWOT Analysis”, 2019). This can result in currency fluctuations and these transactions can have unfavorable effects on GM’s financial and operating conditions.

In dealing with political systems in Europe, General Motors sold its two European brands, Vauxhall and Opel that have been in operation since the 1920s. GM’s executive and CEO pointed to Brexit and changing geopolitical landscape as key reasons for selling. Furthermore, the company has lost $22 billion in the past 17 years (Isidore, 2017). The decision to sell stemmed from posed risks by Europe’s political uncertainty outweighed the chance for political profit. European models are too small to sell in large markets like China and the United States and cost too much for competitive pricing in emerging economies like India. Thus far, most of the automotive sales impact was due to the British pound devaluation versus the euro (Isidore, 2017).

Trends and Challenges

General Motors opportunity produced consistent and stable overall growth levels in recent years. The request for hybrid electric vehicles is steadily rising stemming from carbon emissions reduction concerns from increasing fuel prices (“General Motors Company SWOT Analysis”, 2019). GM has continued to create FlexFuel vehicles that run on gas-ethanol blended fuels and currently offer 11 vehicles that use FlexFuel (“General Motors Company SWOT Analysis”, 2019). Furthermore, their significant investment in numerous technologies that offer vehicles electrification fuel and hybrid technology can enable it to take advantage of beneficial market trends. This can also help in boosting market shares and revenues.

The current challenges shown is General Motor’s having high debt, with the company having a long term debt of over $94 million in 2017 (“General Motors Company SWOT Analysis”, 2019). This raise in levels of debt shows that General Motors can suffer a higher future interest expense which can affect profitability. More so, government regulations that control the fuel economy and carbon dioxide standards, exhaust fume level of emissions, limitations on noise levels, and safety standards. The U.S. Federal Clean Air Act puts limits on the number of regulated pollutants that can be discharged by new automobiles produced for sale (“General Motors Company SWOT Analysis”, 2019). Additionally, 13 states adopted the light emissions vehicles standard. These types of regulations could result in major costs and limit the types of vehicles for sale. This will trickle down and affect GM’s operations and can result in lower employment, facility closing, and increase product costs.

Recommendations

Based on my research, there are present recommendations for General Motors to improve its CSR. First is communication and the possible lack thereof. The absence of communication from the bottom up can stem from communication trickling down from the top (Jennings & Trautman, 2015). Those at the top often fail to see the messages sent by indirection communication that can result from emphasis. If GM’s discussions, interactions, focus, and discussions with employees emphasize performance, results, and schedules, they will notice that employees focused on these issues (Jennings & Trautman, 2015). Leaders who are accessible to employees and interacting with everyone are less likely to be blindsided with problems.

Another step is to adopt a new or revised code of ethics and actions to take when product issues arise. This can prevent another recall from happening and fix the matter before it can escalate. More so, GM can commit to environmental protection by developing practices that allow not just the organization to recycle and be sustainable, but internal ways its employees can do it as well.

Conclusion

In conclusion, General Motors was founded in 1908, in Flint, Michigan. They were the first American company to motors have faced lawsuits for emission rigging in their Silverado and Sierra diesel trucks. This was done to pass the emissions tests. Furthermore, 2014 brought about General Motors admitting it took over ten years to recall automobiles due to a cover-up in defects from switches in the engine ignition. Two external stakeholders that are influenced by General Motors are suppliers and consumers. Both of these groups have an enormous interest in the company. Two internal stakeholders that are influenced by General Motors are employees and investors. Employees make up General Motors. They are the spine of the corporation and needed to make it run daily.

The company was severely impacted when GM admitted it failed to reveal safety defects. The government’s influence within General Motors can leave for major changes which will ultimately trickle down to the consumers and the public. The main reasons the government decided to suspend prosecution on the basis that GM takes action to demonstrate acknowledgment and acceptance of responsibility. The turnaround from the emission scandals and lawsuits has bought Mary Barra to establish new policies and requirements from every department as well as holding individuals accountable for their actions. Their approach to producing safe automobiles is in a safe work environment where workers are accountable for the safety of individuals around them as well as their own.

General Motors currently does business in Europe. In dealing with political systems there, GM sold its two European brands, Vauxhall and Opel and pointed to Brexit and changing geopolitical landscape as key reasons for selling.  Present recommendations for General Motors to improve its CSR include environmental and communication methods. Those at the top often fail to see the messages sent by indirection communication that can result from emphasis. Leaders who are accessible to employees and interacting with everyone are less likely to be blindsided with problems.

References

• General Motors Company SWOT Analysis. (2019). General Motors Company SWOT Analysis,               1–9. Retrieved from https://search-ebscohost-com.southuniversity.libproxy.edmc.edu/login.aspx?direct=true&db=bth&AN=137265526&site=eds-live
• General Motors 2018 Sustainability Report. (2019). Retrieved from https://www.gmsustainability.com/
• Hagens Berman Sobol Shapiro LLP. (5AD 2017). Hagens Berman: Consumers Sue General Motors for Allegedly Installing Multiple Emissions-Cheating Defeat Devices in over 705,000 Duramax Diesel Trucks. Business Wire (English). Retrieved from https://search-ebscohost-com.southuniversity.libproxy.edmc.edu/login.aspx?direct=true&db=bwh&AN=bizwire.c78882812&site=eds-live
• Isidore, C. (2017). Brexit pushes GM to pull the plug on Europe. Retrieved from https://money.cnn.com/2017/03/06/news/companies/gm-opel-vauxhall-brexit/index.html
• Jennings, M. M., & Trautman, L. J. (2015). Ethical Culture and Legal Liability: The GM Switch Crisis and Lessons in Governance. SSRN Electronic Journal. doi:10.2139/ssrn.2691536