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Condemned word

There seems to be cursed word in commercial software development world: bug. No idea how it works for open source companies, although I believe having bug tracker in the open makes it less of a hassle. Let me explain.
I worked for many software companies, as sysadmin, support engineer, field engineer. It seemed a common policy to ban word "bug" in communication with customer. Use issue, use problem, use deficiency, whatever you want, but not bug. Second policy to follow was often: don't mention bugs at all. If there is an issue with product we sell and you really must admit the problem - deflect customer to sales or manager.
Reasoning behind those policies is obvious, but in my honest opinion flawed. Obviously it is being believed that acknowledging the fault in the product is a bad PR for the company. If you mention an issue or gasp a bug, to customer, they are gonna view the company as less trustworthy and start looking around for other products. Maybe even badmouth the company or a beer in the evening. My surprise for you is: customer will know without your help or with it. Especially in the world of customers that are technical sysadmins, software admins, developers etc.), it is painfully obvious, they are going to see the problem, if we tell them or not. Denial is not going to help, not at all. I've done many remote i nstallations and maintenance and quite some on site and there is one thing that is clear: bad PR starts to rise the moment the company denies problem or tries to deflect the communication. To all of the customers I've talked with issues were clearly visible. Sooner or later the moment of awkward silence or staring at each other came and there is absolutely nothing you can do about it but to admit: yes, we have a problem here. Surprise of the decade: they did share their grievance over a beer in the evening with their colleagues working for other companies, colored with disappointment that we would not admit to the problem. It wasn't long before I understood that to create a good PR for my employer through showing the customer we actually care about their experience, I had to often go against the mentioned policies and go for honesty. Any time I decided to disregard company policy and openly admitted we had a problem, is it known or not, are we working on it or gonna work on it, the customer esteem for my employer went up. For having cojones to admit it and for being cooperative. They did share their frustration over a beer in the evening anyway, had I broken the policy or not, but when I did, it was tinged with awe and satisfaction. So here goes my thought of the day for all support managers out there: it is professional attitude to allow your staff to talk with customers about issues in your product. Educate engineers about more diplomatic ways of admitting it, but it's only going to help your company in the future, especially if your customers are people that understand technology they are buying.