Diagnosing GM’s Media Coverage Ailments
by Matthew Merlin, Research Account Director, Delahaye
It’s no surprise to hear that the year 2005 was bad for General Motors. I’m sure you remember how the company took a beating in the media due to losses, layoffs and liabilities. In addition, the prognosis for the long-term health of the company came into question, as trend stories warned of how Japanese cars were gaining market share.
Before you jump to conclusions about GM’s 2005 yearly coverage, consider this: GM scored in the top 10 of the 2005 Delahaye Index, which tracks media coverage of the largest U.S-based companies. In fact, the tone of GM’s news only collapsed in the last quarter of the year. Its news for the majority of 2005 was quite balanced.
Defining the Unfavorable News Syndrome
GM, like Wal-Mart and Microsoft, suffers from the same media syndrome that most large, newsworthy companies do—that a percentage (five to ten percent) of its coverage will usually be negative, even though the majority of news will be positive or neutral. After all, it’s nearly impossible for well-established, multi-national corporations to have all their constituents appeased at all times.
Unfortunately for GM, its ailment has been getting worse over the past few years due to multiple issues, including healthcare costs, market share loss and stiff competition. But overall, GM’s yearly ranking is still quite favorable, (No. 9 out of 100) helped by its employee discount hype and record sales figures in the summer.
While companies suffer different degrees of illness depending on their ability to prevent negative news, others are better able to manage this ailment, as people do with chronic disease.
“Q4 Flu”
Toward the end of 2005, a watershed event took place. GM’s negative news dramatically increased as its positive news decreased. The company had twice as much negative news as positive news for the fourth quarter. This caused GM’s Delahaye Index ranking to plummet from No. 4 in Q3 2005 to No. 99 in Q4 2005. The events of November 11, when GM announced massive layoffs, contributed heavily to this downward grade.
So far in 2006, GM’s news has been more balanced, despite its latest losses. There’s been positive news about the company’s new hybrids and its cost-cutting measures to turn-around the company. The GM dip in its Delahaye Index score for Q4 2005 was most likely a one-time event, like a bad flu, but like all influenzas, symptoms can linger for a long time.
Another example of a quarterly flu was in Q1 2004, when Disney’s Delahaye Index ranking dropped from the top of the Index. Its CEO, Michael Eisner, was under fire, and the company received a hostile takeover bid, although the company regained its position.
Long Term Prognosis
Don’t expect a Disney-like recovery from GM though. General Motors will certainly improve its score from its extremely low fourth-quarter ranking since the constant barrage of negative news decreased. It’s uncertain if GM will ever recapture its top-ten position in 2006, but this severe “Q4 Flu” is a more temporary condition. A lingering effect of the flu is that analysts and journalists will question the long-term health of the company.
General Motors Yearly Ranking Out of 100 Largest U.S.-based Companies
While GM’s precipitous decrease in the Delahaye Index ranking for Q4 2005 is surely a newsworthy story, the more important figure to examine is its decreasing yearly ranking. If the company’s Unfavorable News Syndrome can’t be controlled, it may soon be bedridden, as its ratio of negative to positive news slowly grows.
“The Drop”
Comparing the Tone of GM stories from Q3 and Q4 2005
A Major Increase in Negative Coverage in Q4
This graph shows GM’s Q3 2005 coverage compared to its abnormal volume of negative coverage in Q4 2005. (Data from the 2005 Delahaye Index)
Matthew Merlin is a Director at Delahaye, analyzing media that comprise the Delahaye Index of corporate reputation, which tracks the largest 100 U.S. companies. He can be reached at mmerlin@delahaye.com.