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How Much Is Your Reputation Worth? If You’re Chrysler, Quite a Bit.

On Monday, June 3, Chrysler had a choice to make. The National Highway Traffic Safety Administration asked them to recall 1993-2004 Jeep Grand Cherokees and 2007 Jeep Libertys, according to this article in USA Today.  In this case, Chrysler didn’t agree with the data presented.  Not only that; but due to the reason for the recall; many speculated that Chrysler didn’t know how to fix the problem based on the vehicles’ design.

 

So now Chrysler had a dilemma. Should they comply with the NHTSA and issue a recall that they believe is based on bad data and which could cost hundreds of millions of dollars. Or should they refuse the recall, take their chances in court and expose themselves to what could be years of bad PR and severe damage to their reputation?

 

What is an automakers reputation worth? In this age of “safety first,” I would argue that “perception is reality.” A public that perceives a manufacturer’s vehicles to be unsafe will be less inclined to purchase their vehicles. This of course hurts sales across the board, increases ammunition for their competitors and will inevitably cost them market share.

 

I’m relatively certain that their public relations firm advised them that an event of this magnitude would take years to overcome. Chrysler has rebuilt itself from the brink of bankruptcy in 2009, (with more than a little help from the U.S. Government and taxpayers) to a company that is worth almost $6 billion today. To now turn around and defy the same administration that helped it would be akin to a stab in the back. With Fiat currently owning 58.5% of Chrysler and looking to purchase another 41.5% from the auto worker’s union, the PR damage would extend beyond Chrysler. Fiat intends to merge the two brands, which will create the 7th largest auto-group by sales.

 

[note: The recall mentioned in this sentence is unrelated to the initial recall that was refused. I was in error relating the two.] Two days after their initial refusal to recall the vehicles, Chrysler did an about face and agreed to recall the vehicles.

 

I’m sure that Fiat didn’t want to begin their purchase with damaged goods.  Even though the recall could end up costing hundreds of millions, that’s nothing compared to the $30 billion+ that Fiat has spent to acquire the remaining percentage that they will soon own.

 

From a public relations perspective, not only would the refusal to comply with the NHTSA have hurt the Chrysler brand; it could also have affected the Fiat brand. Fiat is currently the majority stakeholder in the automaker and consumers will inevitably end up equating any negative actions by Chrysler with the Fiat brand and visa-versa.

 

I believe Chrysler and Fiat made the right decision in preserving their brand integrity despite the high price tag.  Hopefully, Chrysler will make the decision to preserve their brand integrity despite the high price tag. Consumer trust is hard to gain but easy to lose. 

Views: 294

Tags: NHTSA, branding, chrysler, consumers, fiat, perception, public, recall, relations

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Comment by sara callahan on June 12, 2013 at 4:20pm

Thank you both for your comments. I was mistakenly relating the two separate recalls, you are correct. My perspective on the matter (on whether they should comply or not and whether losing consumer trust vs. saving money is more important) remains the same but I apologize for the error. I guess we'll have to still wait and see which path Chrysler chooses.


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Comment by Cliff Banks on June 12, 2013 at 10:33am

Chrysler has till June 18th to decide whether to comply and then NHTSA may hold a public briefing on the matter to determine whether to force the recall. 

A couple of days after refusing to issue the recall on the 1995-2004 Jeep Cherokee and 2002-2007 Liberty (the vehicles in question) Chrysler issued a recall for the 2010-2012 Jeep Patriot for a separate issue. The two are unrelated. 

Comment by Eric J. Yoder on June 12, 2013 at 9:29am

Actually, Chrysler is still refusing the intial recall you mentioned.  The link you gave is for unrelated issues.

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