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A tale of 2 crises: When safety scandal hits, strategy is critical

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A tale of 2 crises: When safety scandal hits, strategy is critical

Automotive News -- February 8, 2010 - 12:01 am ET

You never know about the long-term effects of big, ugly safety scandals on car companies. The bad karma can disappear quickly or linger for years.

Business students pore over management crises like Toyota's, but our observation of the auto industry points to the importance of a speedy response, decisive action -- and a good deal of contrition.

Here are two examples of vastly different strategies -- and starkly different results.

Audi was hitting its stride in this country in the mid-1980s when word circulated that 5000-S sedans were prone to accelerate at high speed from a dead stop when drivers shifted from park into drive or reverse. The cars, it was said, were racing out of control and causing deaths and accidents. There were lawsuits, a damning segment on CBS' "60 Minutes" and terrible word-of-mouth.

Audi engineers insisted it was driver error, not a vehicle flaw. They said drivers were hitting the accelerator when they meant to step on the brake.

In fact, no mechanical problem was ever found, and "60 Minutes" apologized many years later.

But blaming the customer got Audi nowhere. U.S. sales plummeted and took about 15 years to recover.

Mercedes took a different route in 1997 after a Swedish auto writer flipped the new Mercedes A class during a test maneuver. The incident got massive publicity in Europe, hammered the image of the three-pointed star and almost killed Mercedes' new model.

Rather than blame the magazine, parent company Daimler-Benz quickly got out in front of the problem, first retrofitting the car with electronic stability and replacing the tires. Then Daimler CEO Juergen Schrempp took the radical step of suspending sales and re-engineering the car.

The strategy worked. Worldwide, only 4,000 customers canceled orders. The revised car was relaunched after four months and is now on its second generation.

Two Mercedes executives were under tremendous pressure: brand boss Juergen Hubbert and the company's young sales and marketing boss, Dieter Zetsche. Zetsche had been Mercedes' product development head when the A class was developed so was especially vulnerable. But Hubbert was ready to take the fall.

"Dieter is a young man with a young family," Hubbert told a colleague at the height of the crisis. "I've had a great career. I'll go."

In the end, neither had to leave. Hubbert retired on schedule in 2004. Zetsche survived to lead the Chrysler group a few years later and eventually become Daimler's CEO.

Read more: http://www.autonews.com/article/20100208/RETAIL03/302089973/-1#ixzz0exXvbMWh

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