Shape Up, Sears, and Do the Right Thing : Consumers: A good-faith campaign of compensation is the retailer’s best offense against auto-repair fraud charges.

Sears, Roebuck & Co. may be permanently bruised by fraud charges leveled last week in California. Unfortunately, the company is doing itself still greater damage by toying with its most valuable asset: consumer trust.

Sears’ first mistake was getting defensive. Management denied the allegations, accused the California Department of Consumer Affairs of conducting a witch hunt and blamed the whole mess on state politics. Then they called in their attorneys to fight back, in the media and in court.

Last Sunday, Sears made what looked like a smart move. Edward Brennan, chairman, president and CEO, bought full-page newspaper ads to acknowledge the problem and reassure customers. However, Sears neither explained the screw-up nor expressed real concern. Their message? It isn’t true, and even if it were, it’s not serious, and even if it’s serious, don’t worry about it, we guarantee our work.

That’s not good enough. Thousands of Californians trusted Sears to service their cars and install good parts--and only when necessary. If anything disturbs customers more than being bilked, it’s having their safety threatened. That’s exactly what these fraud charges sound like to consumers.

Sears is stumbling because top managers hate admitting mistakes in public. They’d much rather listen to their lawyers, who comfort them with the possibility of vindication in a court of law. Sears may very well win in court, but management should concentrate first on protecting and getting customers.

After all, forgetting the customers got Sears into the soup in the first place. Sears, like other giant retailers, has been under brutal pressure in recent years to improve profitability. Wal-Mart and Kmart are eating Sears’ lunch. Last year, after competitors like Carter Hawley Hale and Macy’s came apart, Sears seemed to wise up. They cut staff, shut stores and seemed to be turning the corner. Even their quarterly reports started to improve.

But Sears’ cost-cutting efforts were so relentless that they drew blood. Now it looks like Sears surrendered to temptation and stressed volume and profitability over customer satisfaction by putting auto repair people on an incentive basis.

Sears has sold itself for years as a family store that stands behind its merchandise, a trusty pillar of the retailing community. If Sears hopes to survive this crisis and prosper, top managers need to get their priorities straight. Their No. 1 task right now is preserving credibility.

The public will measure Sears’ integrity by the way its actions match its words. If the company says it cares about customers, it needs to show it and pay for it. When customers believe that their comfort, safety and interests count, they’ll give Sears the room to work out its problems.

What makes the Sears fiasco unique? Nothing. It’s startling, in fact, to see such a big retailer repeating the errors of less able companies. The mystery is why Sears is so unprepared to respond effectively to a garden-variety crisis. Plenty of companies have set good examples of coping in recent years, including H.J. Heinz’s StarKist and British Petroleum. Sears might have learned by watching Johnson & Johnson properly manage the Tylenol poisonings, or Exxon bungle the Valdez spill.

Here’s the good news, Sears. Your company has been a reliable fixture in American life for more than a century, and the public may be pulling for you. There’s still time to do the right thing. Start by leaving your lawyers in the background--they will parade you right off the cliff, as they did at the A. H. Robins Co. (the Dalkon Shield) and the Manville Corp. (asbestos). Ed Brennan, come forward, we need to see you. Make it right in California. Pay for an independent investigation and fix anything amiss. Set up a claims center for customers who feel they have been bilked, and offer restitution on the spot.

Sears has survived over the last few years, but now it’s time to show leadership. If it does, Sears can rise above political and legal maneuvering and win with the public. In the end, that’s what counts.