1. General Motors
General Motors has been under fire over a faulty ignition switch that has been connected to 31 accidents and 13 deaths. Executives, it appears, may have been aware of the defective parts. The iconic automaker recalled 2.6 million cars in February, most of them older Chevrolet Cobalt and Saturn Ion models. As a result, CEO Mary Barra and other top GM executives were called to appear before Congress in early April to address accusations that GM knew about the faulty parts when it sold those cars. While Barra claimed the recall “did not have a meaningful impact on sales” during a first quarter conference call, the company’s operating loss totaled $535 million in the quarter, compared to a nearly $1 billion operating profit the year before. The company also incurred a $1.3 billion charge, largely attributable to the ignition switch problem. The recall is the latest blow to the reputation of the embattled car maker, which emerged from a government-led bankruptcy shortly after the financial crisis.
2. Bank of America
Bank of America’s reputation took a beating during the financial crisis and in the following years, as many of its actions — as well as those of the companies it acquired — became known and led to numerous fines and lawsuits. Recently, the firm’s reputation took another hit after the bank disclosed that an accounting error led it to incorrectly report that it had an extra $4 billion on its books. Even though the Federal Reserve stated that Bank of America likely has sufficient capital to withstand another financial crisis, the admission has raised the ire of investors. The bank has suspended its share buyback program, as well as a pending increase of its dividend to five cents per share. Bank of America has been dogged by numerous legal actions since its acquisitions of Merrill Lynch and Countrywide Financial, with the recent error reigniting concerns the bank is too big to be effectively managed.
Nintendo has sold slightly more than 6 million Wii U consoles since its release in 2012, less than the number of PlayStation 4 units sold in the first five months it was available. Sales of the portable 3DS console have also been disappointing. Following the poor performance of the Wii U and 3DS, Nintendo lowered its sales forecast for the recently ended fiscal year from 920 billion yen to just 572 billion yen. According to several analysts, Nintendo’s hesitation to enter the mobile market, which has drawn a growing share of casual gamers, has damaged the company. Nintendo’s brand value dropped 13% between 2012 and 2013, according to Interbrand, one of the largest declines of any top 100 brand. In a recent presentation outlining the company’s long-term plans, Nintendo indicated it would not enter either the mobile or the “wearable” markets. Instead, it will seek to reorient its entertainment business around products that promote good health.
Twitter went public in November, at a price of $26 per share, and immediately shares soared. In its first day on the New York Stock Exchange, shares rose nearly 73%. However, recent news from the micro-blogging service company has been far worse. Growth in monthly active users — a commonly used metric for social media companies — disappointed Wall Street in both the fourth quarter of last year and the first quarter of 2014. Although Twitter’s first-quarter revenue more than doubled, from $114 million last year to $250 million this year, investors were not terribly impressed. As soon as the company’s lock-up period ended on May 6 and private investors and company employees were allowed to sell shares, the company’s stock dropped more than 18%.
Target suffered a massive data breach at the end of last year that compromised approximately 40 million credit and debit card accounts, as well as the personal information of as many as 70 million people. The store chain’s CEO, Gregg Steinhafel, resigned at the beginning of this month due to the public fallout from the breach. The retailer reported $61 million in expenses to deal with the breach, including investigation costs, increased call-center staff and legal fees. After the breach was announced, the company reported negative sales growth compared with the period before, although the decline was moderate and could have been the result of a number of factors. Despite the bad press, Target was still Interbrand’s second most valuable North American retail brand for 2014, after Walmart, with brand value actually growing 8% from a year ago.