Why Do Auto Manufacturers Wait to Issue Recalls
Product recalls exist to keep consumers safe by informing them of dangerous hazards and risks of severe injuries. So you might assume that automobile manufacturers would issue a recall as soon as they are aware of a problem, right? Not in this case. According to a new Notre Dame study, “Hiding in the Herd: The Product Recall Clustering Phenomenon,” manufacturers time their auto recalls to minimize stock price penalties.
In analyzing over 3,000 recalls throughout 48 years, researchers determined that automobile manufacturers issue their recalls in clusters – one after another. According to researchers, many manufacturers will wait for the first company to come forward with a problem. In the automotive industry, this is known as the leading recall. Leading recalls are associated with as high as a 67 percent larger stock market penalty than the recalls that follow.
For this reason, 73% of recalls announced from 1966 to 2013 occurred in clusters. When one company recalls a product or vehicle, the other companies follow suit – regardless of when each company discovers its respective defect.
This may be good for stock prices but it certainly is not good for consumer safety. Any delay in announcing a recall and alerting the public to safety issues results in more injuries occurring.
The Defect Awareness Date
The U.S. Food and Drug Administration (FDA) requires companies to be transparent about their recalls. In fact, the FDA requires manufacturers of prescription drugs and medical devices to report known defects immediately. This process allows the FDA to regulate how long it takes the company to issue a recall and provide a reasonable solution after becoming aware of the problem.
Currently, the National Highway Traffic Safety (NHTSA) does not require automobile manufacturers to provide a defect awareness date. However, an article by Ars Technica suggests NHTSA may be planning to follow in the FDA’s footsteps in the future.
Why Is Recall Clustering Dangerous for Consumers?
On average, a recall cluster forms after a 16-day gap in which there are no recalls announced. This means potentially deadly defects are endangering consumers for more than two weeks at a time.
Most Dangerous Automobile Recalls in History
- Defective Tires, Seatbelts, and Seatbacks
- Defective Airbags
- Exploding Gas Tanks and Leaks Fuel System
- Vehicle Rollovers
- Vehicle Roof Collapse
- Faulty Ignition Switches
- Park-to-Reverse Malfunction
- Unintended Acceleration
What Can I Do?
For now, check the NHTSA’s Safety Issues & Recalls page regularly and address any recalls you see there as soon as possible. You can search for recalls that affect your vehicle by using its 17-character Vehicle Identification Number (VIN).
If you suspect your vehicle is defective, you should protect yourself by filing a vehicle safety complaint with the NHTSA. The NHTSA will screen and investigate your complaint and issue a recall if necessary.
If you were injured in an accident due to a recalled vehicle or defective product, contact our legal experts immediately. At Clark, Fountain, La Vista, Prather & Littky-Rubin, our firm has a history of successfully litigating complex cases against automobile manufacturers. Our attorneys are board-certified and have more than 200 years of combined litigation experience.