General Motors’ well-crafted, post-bankruptcy image as a more efficient, product-savvy, financially prudent, customer-focused automaker is being damaged.

The cause is GM’s failure until this year to recall more than 1 million older vehicles it now reports had potential safety defects. According to chronologies in defect reports the automaker submitted to NHTSA, GM approved an ignition switch for production that did not meet its own specifications. It then launched new vehicles with those out-of-spec switches.

After the vehicles were on the road, it attributed post-launch complaints and potential safety concerns about the switch to customers inadvertently bumping and turning off the ignition. It issued a service bulletin to address the issue, then later revised the switch design but failed to give the component a new part number.

These actions have resulted in a large product recall, nine years after the fact, then the doubling of the recall population to include vehicles that may have had their switches replaced during service, because GM could not tell whether good or bad switches were used due to the common part numbers. Worse yet, during the delay GM received claims the switches were linked to injuries and deaths.

Members of Congress, safety advocates resurrected from the ’60s and ’70s and the news media since have accused the automaker of being narrowly and entirely focused on cost and profit at the expense of motor-vehicle safety. Senator Claire McCaskill was even harsher, accusing GM of having a “culture of cover-up.”

Whether there is any merit to these charges or characterizations, they demonstrate the immediate and intensely negative impact a publicized safety issue can have on a manufacturer’s image and business.

In fact, even contrary facts are doing little to minimize these accusations. For example, GM has internal product-development, engineering, manufacturing, product-analysis, product-safety and compliance procedures that have been in place for years.

These procedures were designed to prevent just the type of alleged internal actions described above from occurring and routinely have resulted in vehicle designs that perform well in government safety testing.

They also have led to timely filing under the TREAD Act of claims GM received about injuries or deaths that occurred with its vehicles and ultimately have resulted in the company recalling nearly 17.5 million vehicles between 2005 and 2013 due to safety and non-compliance issues.

Still, the accusations continue to fly. This highly charged assault on the automaker highlights the significant effect failing to resolve product-safety issues can have on a company, even one that appears to play by the rules.

The failure to fully identify, disclose or resolve potential product-safety concerns certainly is not a problem that impacts only the OEMs. Suppliers can make mistakes or overlook issues that can affect the safety of not only their own products but also those of their supplier or OEM customers.

Suppliers are an integral part of the design process for OEMs. Like the automakers, they are subject to the same business issues that at times can be overwhelming, including concerns about the company’s image, product deadlines, production demands and budgets.

If not kept in check, these demands can influence, delay or even trump the identification, disclosure and resolution of potential safety issues.

If a supplier is not vigilant, it might do the following:

  • Agree to an OEM engineer’s request it not provide a report on a revised version of a vehicle that failed a test at the supplier’s test facility.
  • To meet a deadline and address a manufacturability concern, use engineering judgment, rather than additional testing, to clear a slightly revised part for production.
  • Engage in an overly extensive and lengthy product root-cause analysis of a defective part in hopes of finding a cause that allows a recall to be avoided or that shifts blame elsewhere.
  • Fail to disclose a short-term production issue to either supplier or OEM customers.
  • Let supplier or OEM customers learn about a product issue on their own, instead of promptly reporting it.
  • Ignore defect-reporting requirements.

All of these examples have the potential to create or conceal product-safety concerns or stall necessary remedial actions. The variety of these examples demonstrates many activities and groups within a company can cause or contribute to those outcomes.

So what are the lessons to be learned from GM’s experience? What should a supplier do to avoid the same fate?

  • Stress throughout the company the quick discovery, disclosure and resolution of product issues is as important, or even more important, than budgetary, timing and other concerns. Quick identification and resolution of product concerns improves a company’s image, saves money and avoids unknown risks in the long run.
  • Don’t ignore red flags concerning your suppliers or your customers.
  • Publicize the product issues within the company and to affected supplier and OEM customers so that everyone is aware of the issue and can participate in decision-making about its scope and significance. Those in the supply chain potentially affected by the product issue should have equal if not greater interest in solving the problem.
  • Designate someone to monitor the evaluation and resolution process through to conclusion.
  • Follow and fully document your compliance with internal procedures and protocols.
  • Preserve all communications with your customers about product issues and resolutions.
  • Be aware of your legal obligations.

The GM scenario highlights in the extreme how consequences and costs of not resolving product-safety issues can mushroom out of control.

No one can doubt GM rather would have paid the extra development and launch costs associated with resolving its issue prior to launch than to face the recall and other costs and potential penalties it now will incur.

And, undoubtedly, the supplier of those switches to GM is watching how the scenario plays out with some concern.

Richard A. Wilhelm is a Member at law firm Dickinson Wright PLLC in Detroit. He can be reached at 313-223-3550 or rwilhelm@dickinsonwright.com.