MEDIA: Media Watch - DaimlerChrysler treads carefully around tire crisis

As if the Ford/Firestone debacle wasn't enough, the automotive industry has faced another scandal these past weeks, with Mitsubishi Motors taking criticism in the US press for covering up consumer complaints and defects.

As if the Ford/Firestone debacle wasn't enough, the automotive industry has faced another scandal these past weeks, with Mitsubishi Motors taking criticism in the US press for covering up consumer complaints and defects.

As if the Ford/Firestone debacle wasn't enough, the automotive industry has faced another scandal these past weeks, with Mitsubishi Motors taking criticism in the US press for covering up consumer complaints and defects.

Exemplifying once again the global reach of a PR scandal, German automaker DaimlerChrysler was pulled into the crisis because of its 34% stake in Mitsubishi.

According to research by CARMA International, reports most often focused on the fact that Mitsubishi systematically covered up consumer complaints of defects in cars for over 20 years. Following media coverage of the continuing Bridgestone/Firestone recall, some journalists suggested a taint on the automotive industry overall. 'Now that the national press is awash in shredded tires ... and Mitsubishi is admitting in Japan that it hid car defects for years, we get to ask once again. Is there some way that we can get automobile companies to put safe vehicles on the road - or, at least to try?' reported Newsday (September 3).

Drastic management changes at Mitsubishi were reported to be the recommended course of action. Speculative reports preceded Mitsubishi president Katsuhiko Kawasoe's resignation on September 7, alluding to commentary that DaimlerChrysler may take more managerial control of the company.

While damaging in the short term to DaimlerChrysler's image, analysts noted that the shake-up might turn out to be advantageous. 'This gives Daimler more leverage to push for a restructuring,' noted Deutsche Bank auto analyst Christian Breitsprecher (Detroit News, September 6).

Many reports noted that Mitsubishi's image crisis is being reflected in the company's stock price. While reports also noted a drop in DaimlerChrysler's stock price, the question remained in the media as to whether the drop was related to the company's involvement in the Mitsubishi crisis or the Chrysler unit's slumping sales. However, journalists did not deny that the scandal hurt both Mitsubishi and DaimlerChrysler in terms of corporate reputation.

A number of reports noted that boosting DaimlerChrysler's stake in Mitsubishi from the current 34% to 40% would result in DaimlerChrysler being the largest shareholder in the company. Analysts applauded DaimlerChrysler for taking advantage of its position with Mitsubishi while not taking direct control of the company, and thereby being forced to account for the Japanese company's debt on its own balance sheets. 'There are clear reasons to stick with Mitsubishi especially if you identify Asia as a key growth market,' said auto analyst Erik Burgold (Associated Press, September 6).

While the industry as a whole seems to be suffering from a debilitating number of crises, independent CARMA research has shown that other automakers such as General Motors and Toyota are thriving in terms of corporate reputation.

And while DaimlerChrysler's 'German style' of management was criticized in the US media during the Chrysler merger, it is apparent that in times of crisis, the company's proactive management efforts appeared to help reassure both nervous shareholders and skeptical media.



- Evaluation and analysis by CARMA International. Media Watch can be found at www.carma.com.





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