Auto Dealers Need a Recall Tune-up

Speaking at NADA in Las Vegas this weekend, incoming National Automobile Dealer Association Chairman Jeff Carlson cautioned against legislation to require dealers to fix all recalls on used cars prior to sale, according to the Automotive News.  He added, according to AN, that such a move would ground millions of cars unnecessarily and diminish vehicle trade-in values, because only 6% of recalls are “hazardous,” citing a 2014 analysis by the Alliance of Automobile Manufacturers.

Inadvertently doing his best Donald Trump impression, Carlson inveighed: “Washington must understand that all recalls are not the same.”

The automotive industry is reeling from record-setting recalls.  Regulators and legislators in Washington, DC, are putting immense pressure on auto makers to correct a broken system.  Legislation was recently passed that included a provision requiring rental car companies to correct all open recalls on cars before renting them.

If Carlson wants to learn more about the urgency of correcting all outstanding recalls he can read “Death by Rental Car” – the account of Raechel and Jacqueline Houck who died in a fiery crash while driving a Chrysler PT Cruiser belonging to Enterprise Rent-A-Car – a car which was subject to a recall over a flaw in a power-steering hose.  The Houck family’s legal odyssey ultimately became a legislative crusade which successfully changed the laws governing recalls.

Dealers are most definitely in the rental car business.  Can dealers afford to take the risk of renting a car with an open recall?

The study cited by Carlson was conducted by the Alliance of Automobile Manufacturers presumably to demonstrate that the vast majority of recalls did not come with “do not drive” warnings or other such guidelines – the implication, not overtly stated, being that most recalls – 94% - do not constitute life-threatening flaws.  The sad reality is that a recall, by definition, represents a compromise to vehicle safety.  Any compromise to vehicle safety is intolerable with or without a do-not-drive recommendation.

Astoundingly the NADA appears to be finding common cause with the auto makers.  These two parties rarely agree on anything.  The only problem is that the auto makers have agreed to turn over a new leaf with the National Highway Traffic Safety Administration (NHTSA) – being more pro-active in reporting flaws and more aggressive in seeing to it that recall repairs are made.

Maybe incoming Chairman Carlson should double-check his email inbox.  NADA members need to get on the stick and be strong partners with car makers in closing open recalls.

What Carlson might have said – and sounded equally combative and provocative – is the following:

“Our members are on the front lines of the struggle to close open recalls.  Auto makers have thus far given us few if any tools for locating cars and customers in our markets with open recalls.  We have no marketing dollars allocated to finding these cars and the internal tools for looking up recalls and getting reimbursed for those recall repairs are pitiful.

“If car makers can bring us the dollars and the data we’ve got the personnel and the means to close every single outstanding recall on the road today and end the scourge of recall-related fatalities.  It’s time for the car makers to own up to their responsibility.  This isn’t about private detectives and Facebook, this is about data and CRM systems.  Dealers stand tall with NHTSA in not wanting to see a single car on the road with an open recall.  It’s our product and service reputation on the line just as much as it is the car maker’s.”

One of my sons drives a more-then-10-year-old Saturn for which there was a repair required for the passenger seat seatbelt.  We fixed the seatbelt, after which we learned it was the subject of a recall.  We visited a local Chevrolet dealer and the head of fixed assets couldn’t find the reimbursement information related to the recall (after three visits), so we ate the expense.

The system is broken.  Car makers and dealers are both a part of the problem.  The Alliance for Automobile Manufacturers study appears to have failed to dissuade legislators in the face of recall-related fatalities.  In spite of the fact that 94% of recalls do not come with a do not drive warning (chart pictured above based on NHTSA data), rental car operators must close all open recalls.

https://tinyurl.com/hxgv3dd - Analysis of Light Passenger Vehicle Recalls, 2000–2013 Number of Recalls in Which “Do Not Drive” or Risk Mitigation Advice Given - AAM

The Alliance conducted a further recall study – a survey this time – which found that many consumers were not aware that repairs were free but that most did not regard such notifications as a high priority.  The complete study, based on an online survey, is worth a quick read, but the bottom line is that car owners have picked up on the pervasive mentality among car makers and dealers that recalls are some nanny state NHTSA agenda that bears little relation to reality.

https://tinyurl.com/zkn92ba - New Survey Identifies Factors Influencing Recall Completion Rate - AAM

The record rate of vehicle recalls in 2015 clearly demonstrates that the industry’s desultory attitude toward correcting flaws has contributed to the current crisis.  The industry needs to look no further than Tesla, also in the news this week with the launch of the Model 3, to find an organization engaged with improving and correcting its existing fleet of vehicles on the fly even after they are in the hands of customers and without the help of dealers.

What is Carlson thinking?  NADA members should be charging forward to show what an important customer relationship differentiator and force multiplier they are for car makers.  The Alliance’s own study found:

“People who have a relationship with a dealer participate in recalls more often. Those who bought their vehicle new are more likely to report getting their recall fixed 68% compared to 56% among those who bought their vehicle used. People who service their vehicles at a dealership respond to safety recalls more (74% report getting their recall fixed) than those who take their vehicle for service elsewhere (55% report getting their recall fixed).

There’s your message, Mr. Carlson!  Dealers are the ANSWER to the problem.  Please remember that next time.  NADA should be PUSHING car makers to give them better data tools and dollars to help close open recalls, all of which impact vehicle safety.

Related blog - "U.S. Recall Stats Tell a Chilling Tale" -TinyURL.com - shorten that long URL into a tiny URL https://tinyurl.com/htdqplq

Separately, a bill passed Maryland's House last week allowing dealers to not disclose needed recalls to customers unless customers ask: https://tinyurl.com/zyccvul - "MD House Car Safety Disclosure Bill Does Little to Protect and Inform Drivers" - PRNewswire

Roger C. Lanctot is Associate Director in the Global Automotive Practice at Strategy Analytics.  More details about Strategy Analytics can be found here: https://www.strategyanalytics.com/access-services/automotive#.VuGdXfkrKUk