Total recall – The Economist (blog)
IN ONE of the largest safety-related announcements in recent years, Toyota said on April 9th that it plans to recall nearly 6.4m vehicles, or closer to 7m if you include cars that the Japanese company produced for others, including General Motors and Subaru.
In recent months, big recalls have seemingly become the norm, rather than the exception. GM itself has recalled about 6.3m vehicles so far this year, including more than 2.5m for problems with a faulty ignition switch linked to at least 31 crashes and 13 deaths. Anyone who keeps on top of the news is likely to be overwhelmed by what one veteran car industry analyst is calling a “frenzy” of recalls that, during seemingly any week, covers hundreds of thousands, or even millions of vehicles.
The list of manufacturers issuing recalls is an industry who’s-who, from mainstream Ford and Toyota to exclusive brands such as Rolls-Royce. Last year, in America alone, the total surged to more than 22m vehicles, 20% more than the year before.
The immediate question is whether this signifies an industry-wide quality problem. Data suggest that is really not the case. Studies from J.D. Power and Associates indicate that both initial quality and long-term vehicle reliability have never been better. So, why more recalls?
For one thing, there’s more to go wrong as vehicles get more complex, notes David Cole, a long-time industry analyst and director-emeritus of Michigan’s Centre for Automotive Research. But a bigger problem is that manufacturers have become fixated on driving up economies of scale, shaving costs by sharing the manufacture of a water pump or an airbag module, for example, on a wide range of products rather than literally reinventing the wheel for each model. As a result, if something does go wrong, a problem that might once have involved only 50,000 vehicles might today mean a recall covering more than a million.
Meanwhile, there has been a significant change in attitude towards handling safety-related defects. In past decades, manufacturers would issue recall notices for only the most serious issues, industry veterans note. For other problems, they might go with a less severe “service bulletin,” advising dealers to make repairs only if customers complained. That approach may still be the case with, say, a rough-running engine, but it is less likely to fly when it comes to safety-related problems such as the flawed GM ignition switch.
The situation appears to have changed significantly in 2009 and 2010, after Toyota announced a series of recalls ultimately involving more than 10m vehicles due to so-called “unintended acceleration.” During a congressional hearing Toyota’s chief executive, Akio Toyoda, promised to take more aggressive action, a position reinforced last month by Toyota’s agreement to pay $1.2 billion to settle a criminal investigation launched by America’s Justice Department.
GM strategists have closely studied the Toyota flap and are already copying many of their rival’s moves, such as appointing a “safety tsar” who can sidestep the usual corporate bureaucracy and get a recall ready fast.
“Transparency is important,” says Don Tanner, a reputation specialist with TannerFriedman, a consulting firm in Detroit. “Hiding a defect will eventually come back to haunt you.” And where recalls were once seen by the public as a major sign of trouble, Mr Tanner adds, they’ve become so common that they are usually little more than reputational speed bumps today—unless they become weekly occurrences or, worse, are revealed to have been delayed more than decade (as happened at GM), because a carmaker decides to put costs ahead of customer safety.
Ironically, it is often consumers who are the most blasé about taking action. According to the National Highway Traffic Safety Administration, only around 70% of motorists ever bother to take their vehicles in for recall repairs. The number can run higher on truly critical issues, but Mr Cole notes that in the event of minor problems, the consumer response rate can slip to as low as 20% to 30%.