Since 2014, automotive recalls have transitioned from several large but sporadic instances (think Firestone and Takata) to an ongoing systemic industry challenge that no longer can be ignored. In the past eight years, more than 7,000 safety recalls were issued affecting nearly 250 million vehicles.
The challenge confronting the industry is twofold. First, vehicles are increasingly complex, with a growing number of safety-related technologies. Second, government and even manufacturer information sources contain errors and timing delays.
A 2014 AutoAp review of NHTSA’s recall information showed a 30% error rate, which persists today. Why? A key factor is the size and complexity of government and OEMs processes, systems, and databases. Manual processes, communication among departments or divisions (and between the OEMs and the government) and back-end processing amplify the issue.
Besides data errors, there can be significant delays in publishing safety recalls. In fact, 20% of all recalls are delayed. In some cases, it can be months before information makes it from the manufacturer to a government website. The net result? At any given time, 20%-25% of all vehicles on the road have an open recall.
Many of these vehicles find their way – unknowingly to dealers – onto used-vehicle lots. Consider that a dealership with 200 vehicles in inventory and a 15% Open Rate means that their lot has approximately 30 vehicles with one or more open safety recalls. These are cars and trucks the dealer may not realize have such recalls and shouldn’t retail.
Dealers Want Recall Results, But Old Processes Hold Them Back
What do dealers think about the current situation? AutoAp found dealers do want to address recall issues through:
• Avoiding sales of recalled vehicles
• Making money.
• Implementation of time-saving practices
• Ready access to inventory recall status.
Dealer practices vary significantly. When asked about how and when they check for recalls, fewer than 30% check for open recalls when acquiring or selling a vehicle. Anecdotally, some dealers report they have interns or entry-level employees manually check some vehicles “every once in a while,” but none of the respondents checked every inventory vehicle, every day.
Recall Challenge Likely to Get Worse
The industry now faces a perfect storm: Vehicles continue to rely on more advanced technology, which in turn may increase the number of safety recalls. The persistent errors and timing delays in government safety recall resources mean even the most diligent dealers are likely to miss recalls. And the sheer volume of future recalls will pressure current dealership efforts to identify vehicles with open recalls.
Before the ongoing increases in vehicle complexity led to a boom in recalls, the systems in place at most dealerships, OEMs and NHTSA were adequate. But as the number of recalls continue to grow, systems cannot keep up with the volume and delays creep in.
Even diligent dealers can benefit from managing recalls better. The benefits can far outweigh the costs. Dealers who put systems in place to track safety recalls achieve:
- Lower dealer liability.
- Lower consumer risk.
- Additional warranty reimbursements.
- Higher profits.
- Bringing back lost customers (a source of inventory!)
What Can Dealers Do?
Dealers who do not adequately track and manage safety recalls are open to potentially costly lawsuits and, worse, put customers at risk. Further, they leave money on the table. Reimbursement for warranty repairs provides a nice stream of additional income.
While the ecosystem is clearly broken and there are complexities beyond dealers’ and industry groups’ ability to manage recalls, there are strategies that can help them reduce safety recall liability. In addition, proactive dealers can turn safety recalls into revenue streams, higher customer satisfaction scores and other competitive advantages.
To begin, dealers and industry leaders must take responsibility for addressing the rising number of recalls.
With safety recalls at a tipping point, due to the broken recall ecosystem and increasing vehicle complexity, dealers should consider these four steps which will pay large dividends:
- Make a commitment to improving.
- Assign a point person to ‘own’ recalls.
- Develop your safety recall management policy to ensure employees are aligned.
- Automate, using a multisource solution to catch more recalls.
Mark Paul (pictured, above left) is CEO of AutoAp, a Beaverton, OR-based company providing recall management solutions to help franchised and independent auto dealers, automotive solutions providers, fleet management companies, corporate and government fleets and rental car companies.