It’s been called GM’s (expensive) Toyota moment

It may be the NewYork Auto Show this week, with CEO Mary Barra hoping to deflect escalating concerns surrounding the recalls and a potential US Criminal probe (GM Chief Can’t Shake Recall Furor Wall Street Journal), but I wonder if the embattled leader and/or her team have paused to consider the reputational impact of this issue. A brief study by Reputation Dividend has shown that mounting liabilities aside (which will not be inconsequential), GM’s reputation value as of today is $53.5bn, with reputation contributing 16% to the overall market cap.

Further, if the perception of GM’s ‘product quality’ rating was to collapse to the level of the lowest in the category (i.e. Ford), it would wipe something like $3.6bn off its market cap (close to 7%). If ratings for the ‘quality of management’ were also to fall and lose what premium they have (had), then its market cap would be some $4.3bn down.

Lesson: as Barra faces a mounting financial hit in relation to fixing the problem (including lost revenue and liabilities), she and her team should recognise the opportunity cost of failing to deal with the reputational hit as well. GM’s next steps will see if they have learned anything from Toyota and others not a million miles from where they are.