business

Now, The Court Of Public Opinion Has Gm Worried

It wasn't enough that an Atlanta jury on Feb. 4 ruled that General Motors Corp. owed the family of Shannon C. Moseley $4.24 million. The sum was to compensate for the teenager's death when his pickup truck erupted in flames after a drunk driver broadsided it. Attorney James E. Butler also wanted to send GM a message to fix the sidesaddle gas tanks that the jury ruled had contributed to Moseley's death. How about $20 for each of the nearly 5 million suspect 1973-87 GM pickups still in use? The jury agreed, awarding another $101 million in punitive damages. GM says it will appeal.

GM faces more trials over its pickup trucks in the months ahead--and not just in court. While the huge award could be reduced, few of the some 100 pending cases over the gas tanks are likely to be settled, as most were in the past. The National Highway Traffic Safety Administration is investigating whether to order a recall. Consumer groups are demanding one.

DEFECTOR. GM's biggest case will be tried in the court of public opinion, with customers in the jury box. The stakes are huge. Last year, GM sold nearly 600,000 full-size pickups, with a profit of $4,000 to $5,000 apiece, says Furman Selz Inc. analyst Maryann N. Keller. Until now, pickup owners have been among the most brand-loyal. Could that change? "The legal costs, whatever they might be, are insignificant compared to the company's image and what it might mean to sales," says Keller.

The obvious open question is whether GM's 1973-87 pickup trucks are safe. The evidence is mixed. The Atlanta jury was swayed in part by testimony from Ronald E. Elwell, a former GM engineer. In prior cases, he had defended the design that placed the gas tanks outside the vehicle's heavy frame, leaving only the exterior sheet metal to protect them in a crash. Ford Motor Co. and Chrysler Corp. pickups, as well as the current, redesigned GM trucks, place the tanks inside the frame.

Elwell switched sides in the Moseley case, however, claiming that GM had withheld data from early 1980s tests that showed the gas tanks burst open in side-impact collisions. GM depicted him as a disgruntled former employee. The settlement of a lawsuit over his discharge from GM bars Elwell from testifying in future gas-tank cases. Still, lawyers can call on data from the insurance-industry-funded Insurance Institute for Highway Safety. Those data show that in side-impact crashes with occupant deaths, fires were about twice as likely with GM pickups as with those of its rivals.

'DELIBERATE DECEPTION.' An open-and-shut case, right? On the road, however, trucks get into all sorts of wrecks, not just side-impact ones. The Insurance Institute found that GM's pickups statistically are neither safer nor more dangerous than Ford's or Chrysler's overall.

Nonetheless, on Dec. 8, 1992, the NHTSA--responding to prods from consumer groups--opened a formal investigation into whether the GM pickups have a safety defect. GM won't say how much a recall might cost, but analysts guess the cost at $300 million to $1 billion. Since NHTSA recalls go back only eight years, any government-mandated recall would affect only trucks made after 1985. No action is expected for months.

Meantime, GM's pickups will stay in the spotlight. The Center for Auto Safety, a group partly funded by trial lawyers, on Feb. 9 launched a publicity drive called "Campaign GM Firebombs" to press for a recall. It claims there have been 778 accidents in the GM trucks from 1975 through 1990 where a fire occurred and at least one occupant was killed.

GM, on the other hand, launched a media blitz of its own. Four days after the Moseley verdict, it sued NBC Inc. In an elaborate demonstration, GM Executive Vice-President and General Counsel Harry J. Pearce claimed that a Dateline NBC broadcast on Nov. 17 misrepresented the trucks' safety by rigging two simulated crashes. The next day, Dateline anchor Jane Pauley apologized on the air and said NBC had settled the case.

Settling owners' concern about their trucks might not be as easy. GM seems insulated from a direct hit on new-truck sales because the problem is limited to older vehicles. But plunging used-truck values can slam new-truck reputations--and owners' wallets. Even before the Moseley verdict, class actions had been filed in California, Texas, and Pennsylvania on behalf of owners of the 1973-87 models who say their resale values fell because of the gas-tank issue.

Few truck buyers, though, seem worried. At the Feb. 6-9 annual dealers' convention in New Orleans, two Pennsylvania dealers, while sympathizing with the Moseleys, said that GM's policy on fixing peeling paint had their pickup customers more riled than any gas-tank fears.

Even so, Chevrolet is monitoring how many calls on its customer-service line deal with the question of safety and its 1973-87 pickups. Tally for the day after the Atlanta verdict: 114 calls out of 1,200. "We're greatly concerned that our customers understand that we care about their safety," says Roy S. Roberts, GMC Truck Div. general manager. Might that include a voluntary recall or some other goodwill gesture? "We'll do it if it's the right thing for the customer," Roberts says. Now that the Atlanta jury has sent its message, GM is waiting to hear what message the market sends.

GM TRUCKS ON TRIAL
      NATIONAL HIGHWAY 
      TRAFFIC SAFETY 
      ADMINISTRATION
      The agency is investigating whether fuel tanks on GM's pickup trucks initially 
      met federal regulations but later developed a defect. Recall is possible
      PRODUCT LIABILITY SUITS
      The score is GM 3, plaintiffs 4, with many out-of-court settlements on suits 
      charging that a design defect caused death or injuries. But a recent $105.2 
      million verdict might make it tougher to settle
      THE MEDIA In a suit filed on Feb. 8, GM alleged that NBC's Dateline program 
      misrepresented the trucks to 11 million viewers as unsafe by rigging its crash 
      demonstrations. One day later, NBC apologized
      PUBLIC OPINION Publicity over the pickups might depress new-truck sales or the 
      resale value of used trucks unless buyers conclude that GM's trucks are no 
      worse than Ford's or Chrysler's. Lost sales could dwarf courtroom damages
      DATA: BUSINESS WEEK
      
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