THE BLOG
04/14/2014 05:56 pm ET Updated Jun 14, 2014

Pennywise, Pound Foolish

General Motors is the latest example, and a dramatic one.

Cutting corners. Skimping today. Tempting the future. None of it worked before and it sure doesn't work now.

Perhaps those at GM who made the decision not to recall 2.6 million cars and fix the ignition switches had been students who dozed off or were distracted during a crucial moment in their English literature class when discussing the 17th century writings of British philosopher Robert Burton.

Born in Leicestershire, Burton lived a quiet life studying at Christ Church. His studies led to writing his most famous book The Anatomy of Melancholy, under the pen name Democritus Junior.

It is in the preface to that book where Burton first penned the phrase: Pennywise, pound foolish (p. 91).

The admonition resonates today as strongly as it ever did.

When it comes to GM and the ignition switches, the facts appear pretty clear. In a Reuter's story, carried by the Huffington Post early this month, reporters Paul Lienert and Marilyn Thompson wrote (found here).

General Motors Co. in 2005 decided not to change an ignition switch eventually linked to the deaths of at least 13 people because it would have added about a dollar to the cost of each car, according to an internal GM document provided to U.S. congressional investigators.

The U.S. House Committee on Energy and Commerce released the documents on Tuesday as lawmakers asked CEO Mary Barra why GM failed to recall 2.6 million cars until more than a decade after it first noticed a switch problem that could cut off engines and disable airbags, power steering and power brakes.

...Reuters obtained what appeared to be a separate document, a series of 2005 emails between GM engineers debating whether to make a change to the ignition switch. The change would have cost an extra 90 cents per unit and additional tooling costs of $400,000, one email showed. Those tooling costs typically are amortized over several years.

According to the Associated Press, GM then put two engineers on paid leave (found here).

The action came after allegations during congressional hearings last week that at least one engineer tried to cover up the switch problem by fixing it without changing the part number.

And when GM announced that it would up its first-quarter 2014 charge, the number almost doubled: (found here).

General Motors Co (GM.N) on Thursday [April 10, 2014] said it will take a charge of $1.3 billion in the first quarter to cover recall-related repairs and costs, which includes $750 million charge the company previously announced.

"GM said it told U.S. safety regulators it will replace lock cylinders on the 2.2 million cars recalled in the United States for ignition switch problems.

Even though in office for only a very short time, GM CEO Barra clearly understands the impact on so many and the tragedy that GM has caused.

It also appears that she understands the importance of tackling the crisis head on with a view toward doing the right thing and rebuilding the reputation of GM. In a company press release headlined "Barra Vows to Rebuild Customer Trust" that was issued following Ms. Barra's testimony before Congress on the ignition switch recall, she concluded by saying: "...We will continue doing all we can to repair out customers' vehicles and rebuild their trust in GM."

She is absolutely correct. But words are not enough. And this is just the beginning of her challenge. Her reputation as a leader -- and the reputation of GM as a car company focused on quality and safety -- depend on what she does next.

It might be easy just to do the numbers and compare the pennywise decision of a decade ago to the pound-foolish impact today.

But it's not the math that really matters. It's the lives. And it's the fall from grace.

Right now, rebuilding trust and reputation is the most important task at hand. And only time will tell.