BRUSSELS – When an automaker issues a recall, there are a number of short- and long-term implications including the cost of repairing the vehicles, any legal costs that might arise and, of course, its reputation.
But Paul Nieuwenhuis, co-director of the Centre for Automotive Industry Research at Cardiff Business School in the U.K., says companies often decide to cut corners when manufacturing a vehicle, determining the costs associated with issuing a resulting recall would be worth it.
“We have heard records of meetings taking place where people have made that calculation. We like to think these things don’t happen, but in the end it does come down to money,” he says. “And it’s only by threatening the full force of the law and complete loss of credibility and trust in the market that will change that mindset.”
Nieuwenhuis’ comments follow the release of the annual consumer report by the European Union’s rapid-alert system on dangerous consumer products (RAPEX), assessing consumer alerts and recalls made in the federation during 2013. Motor vehicles were among the top categories of dangerous products notified through the system, according to a report by the European Commission, the EU’s executive body.
Of the 2,364 notifications sent through the system last year, 160 were related to motor vehicles. The notified products posed risks of burns, fire and injury, according to the RAPEX report. They represented 7% of all notifications, with the motor-vehicle category holding at the same percentage as in 2012.
A notification is made through RAPEX when an EU member state has identified and taken measures regarding a specific dangerous product. Other member countries can react to a notification by withdrawing the vehicles from the market, banning their sale or recalling them, or by disagreeing with the risk-assessment measures taken by the notifying country. A vehicle declared dangerous that has reached the border will be turned back by customs authorities, according to the RAPEX report.
Germany sent the most notifications related to dangerous motor vehicles last year, 59, followed by Portugal (30), Spain (23) and Greece (21). The manufacturing origin and nature of the problems reported varied widely, including Chinese-made steering-wheel covers infused with potentially dangerous chemicals, a faulty electronic component of a DC-DC converter in some Japan-made Mazdas, a U.S.-made Mercedes-Benz with weak rear seatbelt anchors and weak rotor bolts in Italy-built Lamborghinis.
Design Complexity, Cost Cutting Add Hurdles
One source of safety difficulties for all automakers is increasing complexity of design. The average car now has about 15,000 parts, coming from a global network of suppliers. Between 60% and 80% of a car’s value comes from suppliers outside the manufacturer, Nieuwenhuis notes.
Manufacturers “want to subcontract more, and that (is) done really to cut costs and simplify the organization, but they are beginning to realize that, by doing that, they lose sight of what goes on, and they lose control, to some extent, of what goes on,” he said.
This means safety issues often lie in the individual parts of a car, rather than how it was assembled. For instance, in February 2013, Germany warned RAPEX it was recalling Citroen C4 Picasso models from France because of a single part of the vehicle, a faulty cable leading to the starter motor.
Andreas Mai, director-smart connected vehicles at U.S.-based computer-networking company Cisco Systems, argues more intricate technology in cars might cause problems now, but it eventually will lead to more thorough quality control.
“With vehicles becoming more connected, you have a wonderful opportunity to do remote diagnostics and see if there is any malfunction in your vehicle’s architecture,” he says. “The more vehicle manufacturers move toward connecting their vehicles and building this capability into their vehicles, we will have, actually, less recalls at the end of the day.”
National authorities should use similar information systems to track safety issues, according to EU Consumer Protection Commissioner Neven Mimica.
“Non-compliant unsafe consumer goods still circulate on the market in Europe,” he says at a briefing in Brussels, noting government market-surveillance authorities should check each time if a dangerous product notified by another country is present within their own territory.
Recalls often can mean months of damage control and public-relations initiatives, but Louise Wallis, head of business development for the U.K.-based Retail Motor Industry Federation, says in some cases a recall can improve a company’s reputation, depending on how it handles the action and its aftermath.
“If they do it right, it can work for them,” she says. “Whendid their big recall a couple of years ago, they’ve actually built a lot of public trust out of it because they did a very good job with the recall. They were very organized (and) they kept customers informed.”
Bruce Belzowski, director of automotive analysis at the University of Michigan agrees, adding the increase in product recalls in recent years means concerns about recalls’ effect on consumer loyalty no longer is as serious.
“In the early days of recalls, that might have been a problem, but not anymore. Consumers are used to it now, and they give the manufacturer credit for getting it right.”