CASE STUDY [30 Marks] GM recalling 7 million vehicles for airbag problems after losing fight with safety regulator GM is

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Case Study 30 Marks Gm Recalling 7 Million Vehicles For Airbag Problems After Losing Fight With Safety Regulator Gm Is 1 (167.04 KiB) Viewed 60 times

Case Study 30 Marks Gm Recalling 7 Million Vehicles For Airbag Problems After Losing Fight With Safety Regulator Gm Is 2 (110.92 KiB) Viewed 60 times

Case Study 30 Marks Gm Recalling 7 Million Vehicles For Airbag Problems After Losing Fight With Safety Regulator Gm Is 3 (63.75 KiB) Viewed 60 times

CASE STUDY [30 Marks] GM recalling 7 million vehicles for airbag problems after losing fight with safety regulator GM is recalling 7 million pickups and SUVs worldwide with airbags made by the same manufacturer whose airbags are linked to at least 17 deaths in the United States. The National Highway Traffic Safety Administration ordered a US recall on Monday, rejecting GM's argument that this version of the airbags didn't need to be replaced. The recall centers on a defect in airbags made by Takata, a now-bankrupt Japanese manufacturer, that caused the bags to explode, spraying shrapnel through the vehicle. In addition to the deaths, other drivers or passengers have been blinded or maimed. The decision comes more than six years after initial recalls linked to the Takata airbags began in 2014, ultimately becoming the largest auto recall in history. Prior to Monday's announcement, the US portion of the recall had already reached 63 million airbags in roughly 40 million vehicles. The airbag scandal has led to a slow and painful demise for Takata, which started out as a textile manufacturer more than 80 years ago and later came to specialize in seat belts and other auto safety equipment. "The sad saga of Takata ... has resulted in the implosion of one of the automotive industry's oldest and most successful suppliers due to technical hubris, mismanagement and a systemic corporate culture of manipulation," said Scott Upham, the CEO of Valient Market Research. Earlier this year, Takata admitted to manipulating and withholding key information about the faulty inflators for years, even after they started exploding in people's cars. It pleaded guilty in the U.S. to a criminal charge of wire fraud for which it will have to pay $1 billion, including a $125 million fund to compensate victims and their families. GM had previously recalled nearly 800,000 vehicles with Takata airbags, but had argued that its tests showed the airbags in these additional vehicles, which have a different kind of inflator than the devices in the earlier recall, did not pose a threat. The dispute between GM and the safety regulator has been going on for four years. On Monday, NHTSA rejected GM's
argument and ordered it to recall 5.9 million of the vehicles registered in the United States. "NHTSA concluded that the GM inflators in question are at risk of the same type of explosion after long-term exposure to high heat and humidity as other recalled Takata inflators," said the agency. GM said it would comply by recalling those domestic vehicles and another 1.1 million of the same models elsewhere in the world. But it said it remains convinced the airbags do not pose a threat. "We believe a recall of these vehicles is not warranted based on the factual and scientific record," said GM. "However, we will abide by NHTSA's decision and begin taking the necessary steps." The latest recall will be expensive for GM, costing the automaker about $1.2 billion according to its most recent annual financial report early this year. Because of Takata's bankruptcy, GM will have to pay all costs itself. The company expects to spend about $400 million next year, and the additional funds in subsequent years. Only about 75% of the earlier recalled GM vehicles have been brought in to be fixed despite the fact that the recall started more than six years ago. The recalls are done at no cost to the vehicle owners. There is no deadline by which recalled vehicles must be repaired or replaced. The recall covers the Cadillac Escalade, the Chevrolet Avalanche, Silverado, Suburban and Tahoe and the GMC Sierra and Yukon, with model years 2007 to 2014.
Question 1 (12 Marks) According to the case above, it is clear that Takata did not meet all the criteria for supplier for a good supplier. Citing evidence from the case, explain the factors that GM did not consider when selecting Takata as a supplier. Question 2 (18 Marks) Supply management must maintain a number of communication flows and linkages between other key groups within and external to the organisation. Explain GM's supply management's relationships with internal linkages, within the organisation as well as external linkages that may have been important in avoiding the mistakes in supplier selection.