Effectively managing vehicle recall is critical to Automotive OEMs. Here is how you can strategize to be a step ahead.
Carfax, which generates vehicle history reports on used cars, announced that over 47 million vehicles in the US have at least one unfixed safety recall. That is one in five cars. Shocking? Not after 2014, when the US witnessed a record-breaking 63.5 million recalls.
These figures are a broad indication of the direction in which the automotive industry is headed. There is increasing regulatory scrutiny, higher fines and penalties for product defects, and immense pressure to improve recall completion rates. Original equipment manufacturers (OEMs) and suppliers are trying to tighten operations and are re-evaluating traditional risk management models. Will their concerted efforts eliminate vehicle recall altogether? We doubt it, but automakers can certainly streamline performance with an in-depth understanding of changing industry trends.
Following the Vehicle Recall Trail
Lets take a look at the events of 2014 that underlined key shifts in the automotive industry, and will continue redefining performance in the years to come.
Vehicle Recall scenarios will continue to increase in frequency: Recently, Volkswagen, BMW, and Daimler (the three largest German automakers) announced that they will recall 2.5 million vehicles that have Takata Corp airbags. This follows the announcement by Takata a month earlier about defective airbags in 5.1 million US vehicles. While the vehicle recall figures are still staggering, customers can take comfort from the fact that stricter regulations and proactive legislators will enforce tighter quality norms. Whistleblowers are being encouraged to report vehicle defects, and even offered a part of the fine as an incentive. Simultaneously, it is encouraging to note that OEMs are also being cautious in their recall approach. In 2014, many recalls were initiated by them, as opposed to investigation-based recall. For example, Mitsubishi recalled around 12,000 Lancer and Raider models, and GMs total recalls for US cars come to over 28 million (including 25 million in the US alone)! Some car components, such as airbags, brakes, and steering systems have shown a higher propensity for vehicle recall and are being investigated accordingly to address their performance issues.
Vehicle Recall completion will be faster and more dynamic: In 2014, General Motors (GM) engaged in desperate damage control measures with the revelation that over 2.5 million cars were fitted with a faulty ignition switch. This often shut down the engine and prevented airbags from inflatingand could result in serious safety issues for passengers. In the aftermath of this crisis, the company adopted tactics often employed by retailers to reach out to customers. GM sent messages on social media, offered gift cards, and sent out personal letters to employees. The growing awareness of recall incidents due to increased media coverage, and stricter enforcements for car owners to ensure recall repairs are gradually ensuring that completion rates rise. However, completion rates are higher for newer cars, as opposed to vehicles that are outside the warranty period. Vehicles that are more than three years old have a 59% completion rate while relatively newer ones have an 80% completion rate.
With adequate planning, automakers can manage recall effectively: Automobile manufacturers are constantly racing to scale up production and develop sophisticated vehicles. As the number of innovations and technology integrations increase, so do the risks involved. Companies need to step up their game and be on the alert for potential recall scenarios, implement predictive risk models, ensure regular financial assessment, and finally, react swiftly to adverse situations. For instance, GM announced a multi-year financial strategy soon after its ignition-switch fiasco, to offer investors more clarity on financial targets and how the company intended to spend on assets.
Being Recall Ready
It comes as no surprise that vehicle recall management has been widely dissected across the mediaputting brands at risk. Although recall instances are on the rise, companies can avoid damage to their reputation by responding effectively to such a situation. By emphasizing their focus on customer safety, and keeping stakeholders informed at every step of the recall journey, automakers can convert a recall into a positive opportunity. Our paper, A Strategic Approach for Panic-Free Recalls‘, outlines a framework that manufacturers can use to manage recalls effectively.
Tell us about your organizations vehicle recall strategy and how you are geared up to manage this challenge. Write to us at email@example.com.