Business Disasters: Who Is To Blame?

The following are eight infamous business disasters:

1.         British Petroleum

There’s plenty of blame to go around in the massive Deepwater Horizon oil spill that impacted the U.S. Gulf Coast. But British Petroleum is drawing the most ire. BP had to pay for the cleanup and is sued for billions by affected industries (ranging from tourism to seafood farming). How did it happen? Cost cutting measures at BP ended with lowering of standards leading to a massive blow-out!

2.         Merck

Merck’s popular anti-inflammatory drug Vioxx eventually caused more pain than it cured. The company yanked Vioxx off shelves in 2004 after concluding it increased the risk of heart attacks and strokes. Patients and shareholders alike were angered by what they considered Merck’s slow response. The pharma giant paid $4.85 billion in 2007 to settle patient lawsuits. An appeals court in Philadelphia ruled in April 2010 that shareholders can sue for losses incurred during Merck's stock free-fall. The company lost 27 percent of its value after the recall.

3.         Exxon

The 1989 Exxon-Valdez oil disaster was an environmental catastrophe. That the company's response has gone down in history as what not to do didn’t help. The 11 million gallon spill cost Exxon $4.3 billion, which includes both the tab for mopping up the oil and punitive damages. The latter number (around $500 million) would have been higher today. Exxon’s tone-deaf response generated fierce opposition to its merger with Mobil a decade later.

4.         Ford Motor Co./Firestone

When, in 2000, it was discovered Ford Explorers with Firestone tires were prone to fatal rollovers, each corporation blamed the other, and both companies’ reputations suffered.

Firestone recalled 6.5 million tires. Ford recalled 13.5 million cars, a move that cost the automaker $3 billion. The cost of the recall was estimated at $500 million for Firestone.

The backlash got so bad, Firestone’s PR agency threw up its hands and fired its client.

5.         Aventis

            This biotech firm (now called Sanofi-Aventis) admitted in 2000 that some of its Starlink corn was genetically modified and only approved for use as animal feed. Yet it had made its way into the human food supply. Aventis initially spent $100 million buying back the tainted corn, but estimates of the total cost — which included recalls and factory shutdowns for companies like ConAgra and Kraft — are as high as $1 billion.

6.         American Home Products

In 1997, this pharmaceutical company (now Wyeth) pulled its popular diet combo Fen-Phen off store shelves when it was found to cause fatal heart problems. Thousands of lawsuits were filed by victims and their families. AHP settled for a total of about $21 billion over a period of several years. The financial blow was compounded by the PR damage from insensitive employees.

7.         Toyota

The Japanese automaker is still taking stock of the full impact of the massive recall of its vehicles.  The company's vaunted safety and quality-control record have already been damaged. Toyota estimated the cost of the recall at around $2 billion, and that's not counting class-action damages, which could easily climb into the billions as well. More recent news that a Lexus SUV could be prone to rollovers as the result of faulty stability-control equipment triggered a second recall and a fresh round of media scrutiny.

8.         Union Carbide

This 1984 gas leak in an Indian pesticide factory in Bhopal takes the dubious honor of being the worst chemical accident on record. Roughly 4,000 died within days, and authorities estimate the long-term death toll at 15,000, with hundreds of thousands more stricken with health problems. The catastrophe cost Union Carbide (bought by Dow Chemical in 2001) $470 million in restitution payments to the Indian government, but the cost to its reputation was much higher. The anniversary of the leak is still marked by vigils and protests.

Then there are other business “disasters” in more recent years, including Shell (in Nigeria), Goldman Sachs and a host of others.

For 2019, the key (5) ones that damaged well-known brands include:

1.         Facebook

Brand image collapsed in 2019 because of three events:

-security breach in late 2018

-spread of toxic disinformation

-content moderators underpaid

2.         Wells Fargo

Faked sales numbers with fraudulent accounts created without consent. Company was fined USD525m and paid USD15 billion in settlements.

3.         Uber

A poster boy for sexual harassment. Uber is underperforming, underwhelming, and maybe underwater.

4.         WeWork

When its aspirational crap was filed for an IPO, it became clear that the business model was from cuckoo land. The IPO filing was then withdrawn.

5.         Boeing

When two 737 Max planes crashed on takeoff, hundreds of lives were lost. The ensuing massive cover-up was not an answer, especially when the plane was “designed by clowns and supervised by monkeys”. That threatens its existence. Why would any airline buy a Boeing? Or, someone fly in one?

The key issue in all the cases was trust or integrity. Every one of them had a moral deficit! Why? Profit before lives!

References:

1.  8 infamous business disasters, NBC News

2. The biggest business disasters of 2019, Geoffrey James, Inc.com