Shadow Over GM Recall Grows Longer

 Shadow Over GM Recall Grows Longer

THE PR VERDICT: “D” (PR Problematic) for GM.

The news from General Motors continues to get worse. Last month the carmaker began a worldwide recall of over one million of its vehicles, including the Chevrolet Cobalt and Saturn Ions, due to faulty ignition switches that resulted in 12 deaths. Then, a federal review of those GM vehicles dating from 2003 to 2012 found that faulty airbags were responsible for an astonishing 303 deaths.

Lawmakers are pressing for answers as to how long GM knew about the issues and what they did about them. GM’s answer has been to launch what chief executive Mary T. Barra calls an “unvarnished” investigation. Leading this investigation will be the law firm of King & Spalding – the same firm that had been defending GM in wrongful death lawsuits.

Conflict of interest? Whether it will be in reality or not isn’t really the question. The firm will have to do enough digging to preserve their reputation while still being able to call GM one of their main clients. But if anyone asked internal PR what this move would look like to the outside world, GM apparently ignored that information as well.

THE PR VERDICT: “D” (PR Problematic) for GM.

THE PR TAKEAWAY: Even in times of triage – perhaps especially so – appearances matter. When faced with a product issue that has resulted in death, companies must quickly go into damage control. The smartest take immediate measures to prevent further injury or loss of life, own up, and set their PR firms to work on image rebuild. In GM’s case that time is over. And ironically, the company’s goal – preserve the bottom line by presenting the image of taking action – can shoot itself in the foot with the implication of more coverups, this time by the company’s trusted law firm. It’s an action, but it’s hardly a strategy, and it may cause more damage than it controls.

Bad News, Good PR: Law Firm Airs Its Own Dirty Laundry

 Bad News, Good PR: Law Firm Airs Its Own Dirty Laundry

THE PR VERDICT: “A” (PR Perfect) to Weil Gotshal & Manges.

When it comes to managing bad news, the smartest folks are usually the attorneys. A lesson in managing bad news came last week from Barry Wolf, executive partner and chairman at legal firm Weil Gotschal & Manges. The firm released an internal memo announcing 60 junior-level and 110 staff layoffs, as well as ”meaningful compensation adjustments for certain partners ” – PR code for pay cuts.

Weil freely shared the memo with reporters, and the news received extensive coverage, including page one of the Wall Street Journal and the lead BusinessDay story in the New York Times. No one was surprised that Weil was  committed to sustaining its $2.2 million annual profit-per-partner metric and while some lawyers lamented that the elite firms, known as “Big Law,” have succumbed to the realities of big business, the firm positioned itself as being ahead of the business curve, actively managing a business undergoing macro changes.

That’s a message its corporate clients understand all too well. Weil effectively neutralized most of the potential bottom-line impact that might have initiated a loss of confidence. Internally, the firm may have more work to do. Morale will continue to suffer as departures leave behind empty desks and lawyers reassess their careers, but for the outside world, the firm looks ahead of its peers.

THE PR VERDICT: “A” (PR Perfect) to Weil Gotshal & Manges for candor, transparency and proactive management of bad news.

THE PR TAKEAWAY: Address a difficult issue head on – before others do it for you. While this wasn’t a case of crisis management, it could have been a serious reputational blow if facts emerged slowly, forcing the firm to go on the defensive. Instead, Weil comes out a leader for addressing a difficult issue, laying out the rationale and taking careful action. Ironically, given that other firms are likely to follow suit, a management decision to shrink the firm enhances Weil’s leadership for both the long and the short term.

 

Irving Picard’s Pricey Pickle Post Madoff

Irvingpicard1 300x159 Irving Picards Pricey Pickle Post Madoff

The PR Verdict: “C” for Irving Picard.

Irving Picard is in a pickle.  The trustee seeking to recover funds for victims of Bernard Madoff is caught in his own headlines.  How much has been repaid to bilked investors so far?  Around $330 million.  And how much has been charged in legal fees by the trustee (ie Picard) to return that sum? Why  since you asked, around $544 million.  What a pricey pickle!

Eyebrows are being raised that Picard has been more successful at collecting fees for himself and chummy colleagues than returning money to investors.  The NY Times yesterday claimed that though settlement deals totaling $9 billion have been reached, only $330 million has been paid out.  The vast bulk remains tied up in endless court challenges.

Picard declined to be interviewed. His spokeswoman pointed out that so far he has recovered over $7 million a day for cheated investors.  Nice one but let’s face it, rather theoretical until the monies are paid out.  In any case, went the response, the legal fees are drawn from a fund provided by the securities industry to pay for precisely this sort of thing.  Bottom line? The money doesn’t come from recovered Madoff funds.  The securities industry is paying trustee Picard’s fees.

The PR Verdict: “C” for Irving Picard.  Is there a cheaper way to do this? With over $500 million in fees no explanation sounds particularly convincing but adding mitigating factors and some context helped.

PR Takeaway:  When things look bad, add context.  Yes the fees are large but they are paid out of  a fund provided by the securities industry to cover precisely this sort of issue.  Claiming $7 million a day has been recouped for Madoff investors is a nice headline – even if most of it is still held up in the courts and unpaid. Next time why not talk about the other side? Mention was made by Picard’s PR of the relentless attacks by “opposing law firms and their clients with deep pockets.”   A few more metrics to describe the squadrons of lawyers assigned to oppose settlements might have bolstered the only credible defense; firepower is needed to beat firepower.

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