Case Study 26

You are the CEO of a leading automobile company in India. Your company has launched a new car which is first of its kind in its design and features and thus, has become an instant hit among the buyers. Your company has already sold two lakh cars and one lakh more have been booked in advance.

However, within the first two months of launch, the head of the technical department approaches you with a complaint about the airbags which inflate during the time of the accident and save the passenger from getting injured. He told you that the airbags are over-inflating due to some technical glitch and thus, are getting exploded. This explosion will hurt the passenger more rather than save him from the jerk of the accident.

However, this problem will be difficult to get identified as at the time of the accident, everything happens very quickly, and the passenger will not be able to observe the problem with the airbag. The company has also not received any complaints in this regard. The glitch can be removed but it will cost huge money and recall of all the cars. The glitch can be removed from the upcoming cars and the probability is very low that it will get caught in the already-sold cars.

The situation has put you in a dilemma as calling back cars will have huge repercussions. What action you will take to resolve the situation? Justify your action.


Since I am the CEO of the automobile company, I have the responsibility to ensure profitability and customer confidence.  Due to this, I have ethical dilemmas on various levels –

  1. Ensuring profitability of the company vs. justice to the customers.
  2. Value of loyalty towards company vs. value of honesty towards society.
  3. Professional well-being by the higher sale of cars vs. personal well-being by maintaining integrity.

To overcome the ethical dilemma, I must do an ethical evaluation of the situation using some ethical standards:

  1. Using the utilitarian principle, hiding the technical glitch will not serve society well. This will be unethical.
  2. As per Kant’s categorical imperative hiding critical information from customers is wrong, even if the company has to suffer loss.
  3. Sooner or later the truth will come out. The social capital of the company will be lost. This will mean an absolute loss of the market for the company. For short-term gain, the company will face long-term loss. This will lead to a permanent loss of reputation and brand value.
  4. The legal penalty for misinformation may be much higher than the cost of recalling the vehicle and fixing the glitch.   
  5. Gandhiji once said, “A customer is the most important visitor on our premises. He is not dependent on us. We are dependent on him.…. We are not doing him a favour by serving him. He is doing us a favour by giving us the opportunity to do so.”

In the light of above moral analysis, I will take the following steps –

  1. Public declaration of the technical glitch. Also, announcing that the technical glitch will be fixed at no extra charge. The honest declaration will increase the company’s reputation and social capital.
  2. The decentralised mechanism, if possible, to reduce the cost, to fix the glitch in authorised service stations.
  3. Proper testing of the cars is yet to be delivered.
  4. Inviting customers to the company and showing them the proper functioning of airbags and other features, as a confidence-building exercise.

There must be some long-term measures taken –

  1. Stronger quality checks mechanism to avoid such lapses in future.
  2. Steps to develop social capital through CSR to build greater trust among customers.

Intellectual spirit can take us to the top but moral spirit will keep us there.

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