Should All Car Companies Encourage Whistleblowers?

Volkswagen will give whistleblowers amnesty. Workers aware of how the cover up of emissions cheating was done can provide information about how that cheating was engineered. No layoffs, no individually being charged with damages will occur. Other car companies might want to adopt similar policies, and should have in the past.

The best example of how a whistleblower system should work is the General Motors Co. (NYSE: GM) ignition switch scandal. The faulty switches caused over 120 deaths and triggered a series of recalls of approximately 30 million cars. America’s largest car company’s management said repairing the cars would cost as much as $4 billion. While it is impossible to say that one or more whistleblowers would have informed management and regulators about the ignition problem, if informants knew they would be pardoned it was more likely.

In 2009 and 2010, Toyota Motor Corp. (NYSE: TM) recalled over 16 million cars worldwide, many of them for faulty floor mats and sticky accelerator peddles. Toyota was accused of covering up the problem. The debacle cost Toyota hundreds of millions of dollars and tainted its reputation as the highest quality manufacturer in the world.

And, finally, the most recent scandal is the problem of deployment of Takata airbags. The New York Times reported that engineers from Honda Motor Co. Ltd. (NYSE: HMC) and Takada may have known about the defects as early as 2004. Had the danger been disclosed at that time, millions of recalls could have been avoided, injuries would not have happened and Takada management would not be scrambling to keep the company alive.

Whistleblowers have served other industries, the most notable among them tobacco. Tobacco risk analyst Merrell Williams Jr. took information he had gotten about the dangers of cigarette smoking and turned it over to government officials in the late 1980s. His efforts are often cited as among reasons the tobacco industry had to admit smoking is addictive and entered into a settlement with the U.S. government that forever changed the public’s mind about cigarettes.

A system of auto company whistleblowers would have served the industry and the public as well.

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