Wednesday, February 21, 2018

2016 Set Recall Records as Auto Manufacturers Ignore Quality

2016 clocked in at the highest number of recalls in recent decades – both in number of recalls and number of vehicles affected. One report says it’s because auto manufacturers ignore quality and can’t put a number on the cost of non-compliance.

Study Shows Recalls on the Rise

In January 2018, Alix Partners, LLP, a corporate management consultant firm, published a report, “The auto industry’s growing recall problem – and how to fix it.” The report looked at automotive recalls from 1995 to 2016 and found that quality control problems were costing the industry billions of dollars. The report showed that original equipment manufacturers (OEMs) and suppliers in the U.S. spent $11.8 in recall claims and another $10.3 billion in warranty and recall accruals.

The numbers for consumers were up significantly as well. In 2016 there were 300 separate recalls affecting 30 million vehicles – that’s 1 in 5 registered cars on the road. Many of these were subject to the Takata airbag recall or the GM ignition investigation. But the Alix study says these big-news items were only part of the story.

Electronic Recalls Affect Millions

The study reveals a trend: electronic and electrical systems automotive recalls had grown 30% in recent years, hitting 53.1 million vehicles in 2016. 300,000 were recalled because of their infotainment unit, 100,000 had faulty relays, and 80,000 were plagued with software bugs.
System-based recalls usually affect 100% of the product line, rather than just one plant or region. Because of this, electronic and system recalls are each likely to affect millions of vehicles, driving the numbers even higher.

Manufacturers Ignore Quality as Markets Grow

The study went beyond the numbers, explaining why the auto industry may be facing record-breaking numbers of recalls. The answer is all a matter of priorities. Mark Wakefield, Managing Director of Alix says:

“Despite the mounting expenses and bad press, OEMs and their suppliers remain preoccupied with cost reductions and innovations.”

When the recession happened in 2008, OEMs and their supplies cut costs by firing quality assurance professionals – often reducing their quality functions by 30% to 50%. The automotive sector has rebounded financially, but they haven’t reinvested in quality controls. 

Auto Companies Can’t Measure Quality

The recall problem facing the automotive industry breaks down to an inability to put a value on quality. The report says that manufacturers by and large can’t quantify the cost quality shortfalls are imposing on the company. Industry metrics and incentives “prioritize sales volume, customer satisfaction, and profit over quality”. OEMs and suppliers don’t know how to measure the cost saved by preventing manufacturing defects and the recalls that result from them. The study report, which was directed at OEMs recommended:

  • Calculating and comparing the cost of conformance, identifying issues in-house, and warranty and recall costs
  • Identifying and eliminating the root causes of quality failures
  • Making reducing non-conformance a top priority

By doing so, the Alix Partners suggests that auto manufacturers can reduce the number of defective vehicles that are sold to consumers, and reduce the recalls needed to correct their quality control errors. 

Avoiding Auto Recalls Isn’t Just Good Business

The Alix report makes quality compliance sound like a best practice. But state and federal regulations and consumer protection laws make quality control mandatory. Recalls like the ones affecting 20% of U.S. vehicles in 2016 are the result of companies falling short of state and federal product regulations and expectations. By ignoring quality in their products, auto manufacturers are selling their customers short.

Dani K. Liblang is a lemon law lawyer at The Liblang Law Firm, PC, in Birmingham, Michigan. She helps the victims recover damages from defective vehicle malfunctions. If you have been seriously injured by your car, or have been unable to get a recall repaired, contact The Liblang Law Firm, PC, today for a consultation.

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