A tale of two companies: Can Boeing, Cruise rebuild customer confidence?

When companies make an honest mistake, customers are usually willing to forgive. When they make a series of errors or are found to be lying about a practice or a mistake, it’s harder to rebuild trust.

That’s the dynamic now playing out at two U.S. companies – old-guard Boeing charged with skirting safety rules with its 737 Max jets, and upstart Cruise, a driverless car company now under investigation over its handling of a robotaxi collision. The failures highlight ethical concerns at a time when public confidence in institutions generally – and in large tech companies specifically – has deteriorated. 

This deterioration may complicate the prospect of corporate redemption for both Boeing and Cruise. “The FAA will consider the full extent of its enforcement authority to ensure the company [Boeing] is held accountable for any non-compliance,” Michael Whitaker, administrator of the Federal Aviation Administration, told a House of Representatives committee Tuesday in prepared remarks. It may also make it harder for other tech companies to push innovations – from artificial intelligence to gene therapies to robots – on a doubting public. 

Yet public confidence remains as important to business as it is to society.

“Trust is kind of like the grease of a productive and positive relationship and a positive reputation,” says Jonathan Bundy, a management professor at Arizona State University. “Once that trust starts going away, it becomes much more difficult to just say you’re sorry.”

Boeing’s most recent problems began on Jan. 5, when shortly after takeoff from Portland, Oregon, a panel of one of its 737 Max 9s blew out. Despite loss of pressurization, passengers suffered only minor injuries, and the Alaska Airlines crew was able to return to Portland. The FAA grounded all the Max 9 planes with the special panel – actually a “plug door” used to seal off unused emergency exits – after loose bolts were found on other Max 9 plug doors. 

On Tuesday, federal investigators, in a preliminary report, said there was evidence that four bolts designed to hold the plug door in place on the Boeing 737 Max 9 were missing when it blew out.

A day earlier, The Boeing Co. said it needs to address a new problem with fuselages on some unfinished 737 jets. Two holes on each plane not drilled to required specifications will force the company to rework about 50 planes, raising further concerns about quality at the manufacturer and its suppliers.

The grounding was similar to an earlier Boeing debacle, when the FAA forced the company to ground its 737 Max planes after two crashes in 2018 and 2019, resulting in 346 fatalities. In those crashes, Boeing initially blamed pilot error. But investigators pinned the cause on software changes that took control of the planes away from pilots without their knowledge – a problem Boeing knew about a year before the first crash but did not tell airlines, pilots, or regulators. Boeing lost billions in sales to rival Airbus. 

Eventually, the company apologized, instituted new safety procedures, and brought on a new CEO to clean up the mess. It is that CEO, David Calhoun, who faces the task of rebuilding trust once again. 

Some travelers have avoided booking on Boeing’s 737 Max planes, even if that means paying extra for a different flight. Public forgiveness will depend, at least in part, on whether people believe the latest problems represent unrelated mistakes or reflect a pattern in which the company consistently puts profits ahead of safety.

“There’s lots of research that says that a breach of trust based on competence is something that is easier to recover ... from,” says Sandra Sucher, a professor at Harvard Business School and co-author of a 2021 book “The Power of Trust: How Companies Build It, Lose It, Regain It.” But “persistent breaches of competence begin to look almost like a breach of integrity.”

And moral failure is much harder for a corporation to recover from.

“Even if they address this one specific issue with the doors, if the broader culture is not changed to address the safety issue, then why would we place faith in the organization?” asks Peter Kim, a professor of management and organization at the University of Southern California’s business school and author of the 2023 book “How Trust Works: The Science of How Relationships Are Built, Broken and Repaired.”  

High-tech products are complex, involving so many parts and procedures that it’s not fair to jump to conclusions before all the facts are in, Dr. Kim adds.

“A flawed corporate culture”

Sometimes, it’s a fine line between mishap and a flaw in corporate culture.

On Oct. 2, 2023, a driverless taxi owned by Cruise was moving through an intersection in San Francisco when another driver hit a pedestrian, propelling her into the path of the robotaxi, which ran over her. The initial collision was clearly the fault of the human driver, who fled the scene. Anxious to prove it wasn’t at fault, Cruise quickly provided the press the portion of the video that it could download remotely from the robotaxi, which showed only what happened up until the Cruise taxi hit her. 

Hours later, when Cruise employees could download the full video from the car, they found something more chilling. After running over the pedestrian, the car stopped, and then immediately started up again to pull over to the side of the street, dragging the woman some 20 feet, even though she was visible to one of the car’s left-side cameras.

While even an attentive human driver might have accidentally hit the woman in the first place, they certainly would have investigated the situation before starting up again, a third-party technical analysis later determined.

Cruise made no effort to alert the media to the dragging incident. The following day, when it showed the full 45-second video to regulators, employees let the video speak for itself, according to a third-party investigation of the incident paid for by Cruise and released late last month. That decision not to speak up about the incident proved the company’s undoing.

In three initial meetings with government officials, internet connectivity issues probably made it difficult – or impossible – to see the dragging incident, the report concluded. The California Department of Motor Vehicles, claiming it was not shown the full video, suspended Cruise’s permit to operate driverless cars. The company may not have intended to deceive regulators, the report says, but neither did it tell the whole truth.

Reluctance to admit mistakes is not unusual among corporations. “Top executives at the firm, directors, the one thing in their mind, I suppose, when they wake up and when they go to bed is litigation risk,” says Sandra Vera-Muñoz, professor of accountancy and a fellow at the Notre Dame Deloitte Center for Ethical Leadership at the University of Notre Dame. “So of course they’re going to try to find ways of denying responsibility.”

But Cruise’s actions were also the result of a flawed corporate culture, the report concluded, including “poor leadership, ... an ‘us versus them’ mentality with regulators, and a fundamental misapprehension of Cruise’s obligations of accountability and transparency to the government and the public.”      

Restoring confidence 

General Motors Co., which owns Cruise, has taken the first steps to rebuild confidence, trust researchers say. It paused all autonomous vehicle operations. It has apologized: “We are profoundly remorseful both for the injuries to the pedestrian, as well as for breaching the trust of our regulators, the media, and the public,” it said in a Jan. 25 blog post. It has made efforts at transparency by releasing the report and a redacted version of the third-party technical analysis. A dozen key Cruise executives, including co-founders Kyle Vogt and Daniel Kan, are gone. GM has named a chief safety officer to the operation.

Boeing, grappling with its more recent plug door incident, is following a similar path. On an earnings call on Jan. 31, the company’s CEO, Mr. Calhoun, owned that Boeing was responsible for the equipment failure. “An event like this must simply not happen on an airplane that leaves one of our factories.”

The company has put in place more quality controls and inspections, appointed an adviser to independently review its quality control, and allowed client airlines access to its factories in a bid to increase transparency as it awaits a federal investigation’s findings. 

“It’s saying the right things, but I think it’s too early to tell how much better their inspections are,” says Bill Benoit, author of “Accounts, Excuses, and Apologies: Image Repair Theory Extended.” 

If customers conclude that the problem lies in the corporation’s character, the repair process could take years, trust researchers say.

The flip side is that companies that do the hard work of real reform can become stronger as a result. For example, in the 1990s, accused of working with Asian contractors using child labor in sweatshop conditions, Nike initially denied the reports. Eventually, it owned up to its mistakes and instituted quality controls to ensure Nike’s contractors and subcontractors treated workers fairly.

“They internalized the mistake to say ... ‘We’re going to change the culture of the organization to ensure that something like that never happens again,’” says Professor Bundy. “Now, they’re generally celebrated as a bit of a champion on this issue.”

Such trust is sorely needed at a time when confidence in big business and large tech firms is at record lows, according to Gallup. Trust in tech firms is key because the public is looking to these companies to manage technology, according to the 2024 Edelman Trust Barometer, released last month. But the international survey found that most respondents felt innovation is poorly managed, which will require companies to address public concerns. 

“Innovation is accelerating and should be a growth enabler,” Richard Edelman, CEO of Edelman, said in a press release. “But it will be stymied if business doesn’t pay as much attention to [public] acceptance as it does research and development.’’