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U.S. Recall Stats for 2015 Tell a Chilling Tale

by Roger Lanctot | Mar 20, 2016

The global automotive recall crisis is bad and getting worse. It’s bad enough that car companies are resorting to desperate measures to locate cars with open, potentially life-threatening recalls requiring immediate repairs.  The latest twist is for car companies to halt the sales of new cars with recently discovered problems.

This was the case two weeks ago when GM stopped sales of the Chevrolet Colorado, GMC Canyon and Chevrolet Malibu.  Combined with new rules preventing rental car companies from renting cars with open recalls and ongoing efforts to prevent used car dealers from selling used cars with open recalls, the crisis has the potential to have a significant negative impact on vehicle sales just as the industry is hitting its stride following the downturn of 2008. 

Autonation took the pro-active step of promising not to sell any used cars with outstanding recalls.  The bold announcement was an indication that recalls have become a source of important new marketing messages.

The National Highway Traffic Safety Administration (NHTSA) has estimated the total number of vehicles recalled in 2015 at a record 51M. CX3 Marketing took a close look at recalls in the U.S. for the past several years, and their 2015 automotive recall infographic reveals several startling facts:

  • The data uncovered by CX3 shows 83M total recall events, meaning some vehicles were involved in multiple recalls and possibly even more than 51M total vehicles were affected.
  • In the past two years some car companies have recalled more cars than they have produced in North America.
  • Software-related recalls have spiked upward in the past two years on a trajectory to match mechanical problems as a key source of recalls.
  • Takata’s recall is the single biggest recall ever – and still growing.
  • The annual number of recalls is increasing with no obvious end in sight.

The most startling finding in the CX3 analysis of the source of vehicle recalls is the 6.4% attributable to software, a figure that rises to 17% of all recalls if the Takata airbag is excluded. Modern automobiles have millions of lines of code that must not only be maintained – they must be protected.

The emergence of software, in the past two years, as a primary source of vehicle recalls helps to raise the awareness of the need for software updates – either over the air or at the dealer – to combat software flaws and security vulnerabilities.  While Tesla has demonstrated its ability to deploy software updates to add features and correct vehicle flaws, the industry can be expected to see much wider application of software update technology.

And let’s not forget how recalls can impact a carmaker’s brand. Last week, a JD Power study examined the customer satisfaction impact of recalls. Not surprisingly, they have determined that the ever-increasing rate of recalls is beginning to take its toll on consumer satisfaction scores.

Carmakers have gotten both the recall message and the software update message.  By the end of 2016, most car companies will have at least some kind of software updating capability in place.

Strategy Analytics analysis shows most major carmakers will have deployed on at least one of their cars the ability to update the software in infotainment systems and embedded telematics control units.  Within three years, most car companies will have Tesla-like software updating capacity able to pre-empt recalls saving the companies and the industry hundreds of millions if not billions of dollars in warranty expenses. 

At the same time that the industry will be coming to grips with the demands of software updating, automakers will be finding ways to mollify dealers.  In a world being redefined by over-the-air and Wi-Fi software updates for cars, dealers will want to be assured that they have an ongoing role to play in keeping vehicle software up to date.

According to the Automotive News, carmakers American Honda Motors and General Motors have taken to scanning social media, hiring private detectives and staging publicity events at college football half-time shows to get the word out on un-closed recalls.  The bigger problem facing the auto industry is not identifying problems requiring recalls but actually locating the vehicles and their current owners to get the recalls corrected.

Recall rates in the U.S. and elsewhere around the world have surpassed previous records in the past two years thanks to high profile automobile call backs from General Motors for its flawed ignition switches and, the monster of all recalls, Takata’s airbags, touching nearly every auto maker.  The high profile recalls have revealed the limitations of the current recall process including the process of identification and notification as well as the act of performing the required recall repairs.

Recalls are sought by NHTSA to repair vehicle flaws that pose a safety risk to drivers up to and including the potential loss of life.  While recalls have previously represented an annoyance for consumers, who must bring their cars in to dealers for repairs, the latest high profile recalls have death tolls associated with them.

As many as 140 deaths have been attributed to the ignition switch failures in GM vehicles.  About a dozen fatalities have been associated with failed Takata airbags.

With lives on the line as never before, the NHTSA, under the leadership of administrator Mark Rosekind, was able to broker a multi-car-maker agreement to resolve problems associated with the recall process and improve “close rates” – the rate of recall completion.  The agreement included four points while also seeking comment from the public.

The four principles comprising the voluntary agreement with auto makers included a higher penalty ($105M) for failing to comply with NHTSA recall regulations, , improvements in Early Warning Reporting data usage, “maximizing” recall completion rates, and tackling cybersecurity concerns.

“These commitments we make today will help catch safety defects before they explode into massive recalls,” U.S. Department of Transportation Secretary Anthony Foxx said in a recent appearance with top automaker executives. “They will help improve the quality of data that automakers and NHTSA analyze to seek defects today. And they will also help to find ways to generate better data in the future.”

Company executives met with Foxx and National Highway Traffic Safety Administration Administrator Rosekind before the announcement. They had also met with Foxx in Washington in December.

The DOT, NHTSA, American Honda, BMW, Fiat Chrysler, Ford, GM, Hyundai, Jaguar Land Rover, Kia, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Porsche, Subaru, Tesla, Toyota, Volkswagen and Volvo signed onto the agreement. “As we sat around the table here today, none of us could recall a moment quite like this, a moment in which the global automotive industry came together to determine how we can make vehicles that are safer than ever become even safer in the future,” Foxx said.

Foxx has pressed the companies to create voluntary measures they could agree to outside of the agency's traditional regulatory framework.

The agreement encourages collaboration among automakers to address safety concerns. For instance, automakers will share best practices to encourage the public to have recalled vehicles repaired, according to the Automotive News report and NHTSA.

The growing implementation of OTA software update capabilities throughout the industry assists the recall effort through another key capability that is rarely mentioned—the ability for the OEM to directly contact the consumer on recall issues. Even when a vehicle’s problems cannot be fixed by a software update, OTA allows the vehicle to determine if it matches the necessary criteria for a needed mechanical recall, and to persistently inform the owner that the vehicle requires servicing. This direct OEM to consumer link will be critical to improving recall close rates.  

Compared to aviation

Foxx pointed to the aviation industry, which shares safety data and information, as an example of what could happen if the auto industry works collectively to enhance safety. “Real safety is finding and fixing defects before someone gets hurt rather than punishing them after damage is done,” Foxx said.

As part of the agreement’s cybersecurity measures, automakers agreed to “support and evolve the auto industry’s information sharing and analysis center” by expanding membership to include suppliers to share “common/generic countermeasures” against cybersecurity threats.

GM CEO Mary Barra told reporters following Foxx’s remarks that the agreement marks a “historical moment” for the industry.

“We’re proud to be a part of this, working on some common best practices,” Barra said. “… I see it as a real opportunity and a foundation that we can build upon.”

The news followed NHTSA’s announcement that it will allow automakers with safe autonomous vehicles to apply for exemptions to certain rules. It’s part of the new approach by the agency designed to ensure government doesn’t stand in the way of technological progress.

Some safety experts blasted the plan.

Joan Claybrooke, a former head of NHTSA, said the agreement was "toothless" and "a step in the wrong direction" following a year of record recalls and an increase in motor vehicle fatalities.

"There is nothing preventing the auto industry from disregarding or outright violating these principles," she said, adding they could be considered subterfuge to violate reporting requirements by doing “data dumps.”

Claybooke, head of Public Safety, warned the American public "will not be best protected with a kumbaya between the federal agency charged with issuing regulation and the industry seeking to avoid regulation."

Safety grants

Regulators also announced their intention to award $4 billion in grants to fund demonstration projects that can help speed the reality of self-driving cars.

Last year, 10 companies committed to make automatic emergency braking standard in all new vehicles. The companies made the commitment rather than waiting for a federal mandate, Rosekind said in Detroit on Tuesday.

The effort is a model of how the industry and U.S. regulators should work together in the future, Rosekind said, an effort he calls “proactive safety.”

The direct confrontation of the recall crisis has helped to highlight the need for software updates, including the vital role software updates will play in preserving vehicle cybersecurity integrity.  But it’s clear much work remains to be done.

Automotive News’ John Irwin, Bloomberg, and CX3 Marketing contributed to this report.

CX3 Marketing is a technology marketing agency for companies targeting the automotive industry.

Roger C. Lanctot is Associate Director in the Global Automotive Practice at Strategy Analytics.  More details about Strategy Analytics can be found here: 

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