Recalls Cost the Car Companies Bigtime. Is There a Pattern?

October 29th, 2010

Here are the larger recent recalls, and these are just for October.

  • Nissan: 2.2 million vehicles worldwide (747,000 in the U.S.): ignition relay problem
  • BMW: 130,000 vehicles: faulty fuel pump in the twin-turbo inline 6
  • Honda: 470,000 cars in the U.S.: faulty seal in master brake cylinder
  • Mercedes-Benz: 85,000 E-Class cars: possible power steering connection fitting problem
  • Toyota: 1.53 million cars worldwide (740,000 in the U.S.): faulty seal in master cylinder
  • GM: 392,000 Chevrolet Impalas: faulty front seat-belt anchors.

In addition, NHTSA (National Highway Traffic Safety Administration) recently issued a repeat advisory reminding Ford owners of 17.5 million vehicles of the fire risk in a faulty cruise control switch (some cars dating back to 1992).

There does seem to be, in fact, a pattern in all this. Each recall—including Toyota’s 2-million-car sticking accelerator/floormat fiasco—seems to stem from a small, simple, highly mass-produced part, typically made under high tolerances by external suppliers.

Here’s how one U.K. company analyzed the problem: If only one out of 1,000 such parts is at “the edge of acceptable performance” when new, then under continuous use and service, it might well go over the edge.

If there are half a million vehicles with marginal performance through the accumulation of life, that translates into 500 cars with a serious safety critical problem. That normally means a recall of half a million cars to isolate and replace the defective items.

Then you change out the parts, one by one, at the dealer, which operation costs the company bags of money. But how can you root out those needle-in-the-haystack bad parts before they fail?

Toyota set aside something like $1.12 billion for its Big Fix, but that didn’t include the legal costs of individual and class action suits, the lost sales, and the damage to the carmaker’s image and brands. Back in April, Moody’s cut its credit rating on Toyota, adding another hit to its reputation and making it more expensive to finance the company’s $36-billion outstanding debt.

So, while recalls have become commonplace, they can and do have big consequences.

Is NHTSA doing a good job with its recall program? The jury is still out on that one, but anything that can reduce the 33,808 highway deaths per year in the U.S. (still an incredible number, though declining) is and should be worth doing.

Too many recalls? Too few? About the right number? Is NHTSA doing its job? Tell us what you think.

—jgoods

Find Used Cars in Your Area at CarGurus

Be Sociable, Share!

  1. No comments yet.
  1. No trackbacks yet.