Tuesday, April 1, 2014

Post Bailout Power Failure for GM (2014)

General Motors logo

Just as fuzzy dice and mirror disco balls have been prohibited from dangling by law in passenger cars, accessorized key holders may follow suit because of General Motors. The Chevrolet Cobalt, Pontiac G5, Chevrolet HHR, and Saturn Ion have incremental lapses with ignition switches and locks. The four-door and two-door cars out of production have ignition switches that that will kill power in three ways. Not only do these switches house the key, but actually are able to shut the car off, disable the air bags and ABS systems, and turn the ignition to another one of five positions. The accessorized key rings will twist the spherical mechanism while driving, and rough driving may cause the car to die and/or disable airbags. Two different websites, CNN and USA Today, mention thirteen and six deaths respectively when talking of the ignition switches housed in wrecked Cobalts and G5's. 

The stakeholders of this situation are GM, shareholders, GM car owners, Ray DeGiorgio, Gary Altman, the victims' families, and the CEOs, current and pre-bailout, and Utilitarianism, economic theory, Kantianism, and virtue theory will tattoo the GM ignition scandal in this blog post.

The first ethical theory in which to parallel GM ignition switches with is that of the economic model (Desjardins-“the role of business management is to maximize profits within the law” p. 53). GM appears to have failed the economic theory because of information discovered on management.fortune.cnn.com. “GM’s recall scandal: A scorecard on CEO Mary Barra” by Fraser Seitel states the following: “. . . the company announced that it would take a $300 million first-quarter charge for its recall repairs -- again, unprecedented for a company as tradition-bound as GM” (Seitel, np). This $300 million first-quarter charge is a failure of the economic theory because it proves Desjardin’s statement “Accordingly, the economic model of corporate social responsibility directs business management to pursue maximum profits” (p.56). Furthermore, Aljazeera America has reported that GM increased the withdrawal by one billion dollars ($1.3 billion currently) and is under a fine of $7000 per day because of communicative breaches with the NAHS as of April 3rd (Aljazeera America, np).
However, as mentioned by author Rana Foroohar, GM chose to bypass any ignition repairs in 2005 because of a ninety-cent company charge on each compact car. Similar to cases by my peers, GM was maximizing profit by saving $1,440,000,000 (multiply .9 by 1.6 million cars and $1,440,000,000 is produced) as indicated by the email. GM’s gross margin in this case is +$139,846,000 minus lawsuits, about which the New York Times states are kept private between lawsuits. (Aljazeera America, np). Inferable from the information, it can be assumed that GM actually produced a negative gross margin and negative net income because of the lawsuits as well as the $1.3 billion dollar withdrawal and daily fines as 
mentioned by Aljazeera America. 
Car crashed caused by power failure
However, GM is able to pass and fail the modified Economic Model: “…business managers must first meet certain moral obligations which, once met, open the door to the pursuit of profit…People have a strong ethical duty to cause no harm, and only a prima facie duty to prevent harm or to do good” (Desjardins, p.65). GM’s failure of this definition came through the sales of the Cobalts and G5s. GM did not establish a stable ignition first or even until 2014. GM used a rotating ignition while selling the soon-to-be-wrecked cars. Profit through the sales of the four-cylinder Chevrolets and Pontiacs was first. However, GM was able to pass this through the “prima facie duty to prevent harm or do good.” Prima facie (at first impression) is established by GM through author Aaron Smith’s documented quotation: “The automaker added that all of the fatal crashes “occurred off road at high speeds, where the probability of serious or fatal injuries was high regardless of airbag deployment.” GM depicts the idea that the prima facie innocence is because of “high speeds and off road” (Healey, np)(Smith, np).

The second ethical theory in which to parallel the GM ignition switches with is that of Utilitarianism, which Jeffrey Beatty states "Utilitarianism is, in some ways, an almost mathematical approach to ethics" and states "units of happiness" (Beatty, p. 20). Also, ". . . social institution. . . Utilitarianism tells us that we can determine the ethical significance of any action by looking to the consequences of that act. Utilitarianism is typically identified with the policy of "maximizing the overall good". . . the economy exists to provide this highest standard of living for the greatest number of people, not to create wealth for a privileged few (Desjardins, 29-30).” Similar to the idea of happiness that peers have elaborated on, 780,000 was a rounded number of Cobalt and G5 cars blacklisted in the USA. If one analyzes this case using the “units of happiness” approach, then Utilitarianism is sunk in this case because of the actual units of happiness using the year 2014. The initial units of happiness between GM and an owner would have produced two units of happiness with economic profit for GM and a compact car with a durable EcoTech engine for the owner. At least 1.6 million units of unhappiness were manufactured in the ignition scandal currently, possibly 3.2 or even 4.8 given the second and third owners mentioned by author James Healey. GM is losing $1.3 billion dollars, plus $7,000 a day, plus lawsuits after the transactions, which turns the initial transaction to at least one unit of unhappiness (GM) and possibly more depending on how an owner perceives the recall difficulty.
The second aspect of Utilitarianism in the GM ignition scandal involves is “The law of supply and demand tells us that economies should . . . produce goods and services that consumers want. . . the goal of free market economics is to optimally satisfy wants” (Desjardins, p. 32). The recall of the ignitions in the Cobalts and G5s cannot be categorized as a want because the ignition is not a preference that was bargained for by customers in a free market. The ignition switch will rotate and recuse the airbags, which are disadvantageous because they prohibit crowded key rings and inversely act with potholes for a fragile circuit of electricity in the wiring harness (Healey, np). It is a commonplace idea that private sellers will advertise lemons and “their own problems” within a used car listing. If that commonplace idea is accurate and the common evaluation of the sale of a defected car is also not a guarantee of car functionality, then it can be postulated that units of happiness will not be maximized because Cobalts and G5s for sale may not have had the ignitions replaced.
Also, GM produced units of unhappiness in its own company via the ignition scandal. Mary Barra has apparently been left “holding the bag” after it is insinuated that she did not cause the ten year ignition misstep (Foroohar, np). Aside from Mary Barra, it has also come out through Aljazeera America that Gary Altman and Ray DeGiorgio have been severed from the engineering department of GM because of DeGiorgio’s design, approval of a change but not of a serial number, and DeGiorgie’s participation in the email opting to save $1,440,000,000 instead of spending that same amount and Altman’s knowledge of that email. Unhappiness units were produced again in GM because each engineer lost their job, but also because GM has apparently more than quadrupled a $300,000,000 withdrawal to $1,300,000,000 and is under a penalty of $7000 a day because of cooperation failure with the NAHS (Aljezeera America, np).

Mary T. Barra, CEO of General Motors

The third theory in which to parallel GM’s ignition switches with is Kantianism. A definition of Kantianism is included in the paper “Kantian Business Ethics”: "As members of humanity, we each have value that stems from our rational and moral capacities and we all ought to act so as to show appreciation for that value" (Salazar, 1-3). In addition, “Kantian Business Ethics” defines the Formula of Universal Law (Kant's first formulation, the Formula of Universal Law, uses the rule of consistency to eliminate those maxims that are internally inconsistent, or impossible to will if everyone willed them) (Salazar, p. 3-4). Secondly, the definition of Kantianism in relation to “having rights against” people is elicited by Joseph Desjardins (Desjardins, p. 41). The initial transactions for Pontiac G5s and Chevrolet Cobalts bypassed the maxim to be willed (because of failed uniformity) and the black boxes contained on these GM models contributes to the failure of the Formula of Universal Law.
The definition of the Formula of Universal Law is “uses the rule of consistency to eliminate those maxims that are internally inconsistent, or impossible to will if everyone willed them” (Salazar, 3-4). The maxim for action in this instance would be “I am going to install an ignition that will shut off airbags and break the car’s circuit of power.” If that maxim is universalized the result would be as follows: “Ignitions will cycle away from Power and disengaged airbags and ABS systems and will kill drivers on impact with other cars that have the same limited control of electricity.” Basically, accidents and deaths would be cyclical with an automobile, reducing the amount of customers and manufacturers of the cars in the world. Also, the Formula of Universal law also states this: “It thus forbids, in general, all actions that rely on others not knowing what you are doing, which is a form of deceit” (p.4). This definition is proven specifically in the Brooke Melton lawsuit. GM’s lawsuit with Brooke Melton included the “black box” from the Cobalt, showing the ignition’s failure when Melton crashed (Healey, np). The black boxes of the cars would make the maxim stated above un-universal because each car’s black box would uncover what the manufacturers were doing. Secondly, the ten year period described and the solution developed but not nationally dished out would be equivalent to “not knowing what you are doing.”
However, Kantianism is also passed in one specific example amid its three failures. Kant’s statement in An Introduction to Business Ethics is phrased as “These formulations restate the commitment to treat people as capable of thinking and choosing for themselves’ (Desjardins, p. 38). This definition can be exemplified through GM’s solution employed by individual dealers after a Q&A session with a customer. Through installing the oval insert on Cobalts, G5s, and other models (i.e. Saturn) after the Q&A with a customer, GM is seemingly following the Kantian statement above of “…capable and choosing for themselves” (Desjardins, p.38). The “right against” purchasers that GM would have would be to sell Cobalts and G5s, but the “right against” GM that individuals would have would be for compensation for accidents with Cobalts and G5s.

Virtue TheoryThe final ethical theory to parallel GM’s ignition switches with is Virtue Theory: "An ethics of virtue seeks to develop the character traits and habits that will lead us to live a meaningful and happy human life" and lists four virtues of courage, justice, temperance, and honesty (Desjardins, p.42-45). The GM ignition switch scandal passed the virtue of courage, half the virtue of justice, and failed temperance and honesty. According to an article by Healey, a lawsuit by a woman named Melton is one of the six deaths reported. The article by Healey stated a lawsuit after reviewing the “black box” of a crash that occurred because of ignition rotation with “Melton was (sic) observing the speed limit” (Healey, np). However, Aaron Smith’s CNN article states the following: “The automaker added that all of the fatal crashes “occurred off road at high speeds, where the probability of serious or fatal injuries was high regardless of airbag deployment.” Through these quotations, it is clear to see that GM failed the virtue of honesty, but passed the virtue of courage because it still put forth the generalized quotation. Honesty was also violated by GM in the ignition switch scandal because of mens rea (guilty mind) for ten years with approximately five automobile genres. The virtue of justice was half-passed because of the settlements through GM Spaulding that Mr. Seitel stated in his article, but half-failed because a percentage of the ignition lawsuits and settlements have not been rendered by GM Spaulding. Basically, “just dealing” has not received acceptance in the pool of ignition complaints Lastly, the virtue of temperance was also half-passed and half-failed. The example of GM’s statement in Aaron Smith article shows a failure of temperance, but information of GM’s oval remedy for the ignition not given out unless requested by a driver exemplifies a success of temperance.

Basically, this Western New England student and owner of a 2008 Pontiac G5 with a replaced ignition feels surprised. GM failed Utilitarianism because of position benefits and units of happiness as the results of a market exchange. GM lost to Individualism because of market failure and order of profits and the moral minimum under the edited economic model, but did pass the edited economic theory because of the prima facie argument. GM also was repudiated by Kantianism and Virtue Theory. Kantianism forked away from GM’s ignition scandal because of the Formula of Universal Law. The postulated maxim would have failed statements of the Formula of Universal Law envisaged by Professor Heather Salazar. Lastly, the GM ignition scandal and Virtue Theory butted heads because of GM’s failure of honesty and half-passing of three virtues of justice, courage, and temperance.

Seitel, Fraser. "GM's Recall Scandal: A Scorecard on CEO Mary Barra." Fortune Management Career Blog RSS. N.p., 21 Mar. 2014. Web. 30 Mar. 2014.

Healey, James R. "6 Killed in GM Cars with Faulty Ignition Switches." USA Today. Gannett, 14.Feb. 2014. Web. 30 Mar. 2014.<http://www.usatoday.com/story/money/cars/2014/02/13/gm-recall/5448319/>
DesJardins, Joseph R. An Introduction to Business Ethics. New York: McGraw-Hill, 2014. Print.

Salazar, Heather. "Kantian Business Ethics." 1-6.

Healey, James R., and Fred Meier. "Lawsuit: GM Knew of Cobalt Ignition Problem." USA Today. Gannett, 19 Feb. 2014. Web. 31 Mar. 2014. <http://www.usatoday.com/story/money/cars/2014/02/18/gm-cobalt-g5-faulty- ignition-switches-recall-deaths-airbags/5582241/>.

Smith, Aaron. "GM Recalls 778,000 Cars for Faulty Ignition." CNNMoney. Cable News Network, 13 Feb. 2014. Web. 31 Mar. 2014. <http://money.cnn.com/2014/02/13/autos/gm-recall/>.

Beatty, Jeffrey F., Susan S. Samuelson, and Dean A. Bredeson. Introduction to Business Law. 4th ed. Mason, OH: South-Western Cengage Learning, 2010. Print.

"General Motors | History & Heritage| GM.com." General Motors | History & Heritage| GM.com. N.p., n.d. Web. 12 Apr. 2014.

Ackerman, Frank, Neva Goodwin, Julie A. Nelson, and Thomas Weisskopf.Microeconomics in Context. Armonk, NY: Sharpe, 2009. Print.

Rushe, Dominic. "General Motors Executives to Face Congress over Car Recall Scandal.”

Theguardian.com. Guardian News and Media, 31 Mar. 2014. Web. 25 Apr. 2014.

"GM Suspends Two Engineers in Wake of Ignition Switch Scandal | Al Jazeera America." GM Suspends Two Engineers in Wake of Ignition Switch Scandal | Al Jazeera America. N.p., 10 Apr. 2014. Web. 25 Apr. 2014.

Foroohar, Rana. "Here's Who Is Really to Blame for the Epic GM Scandal." Time. Time, 2 Apr. 2014. Web. 25 Apr. 2014.

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