10 MILLION CARS AND COUNTING
Why are there so many auto recalls lately? The short answer is globalization,
If it seems like more vehicles are being recalled lately, that’s because the numbers are on the rise. But does it mean more cars are less safe? Not necessarily. “I would say cars are safer than they’ve ever been,” said Ross Mckenzie, managing director of the University of Waterloo’s Centre for Automotive Research.
Tougher regulation and mounting lawsuits have made automakers more cautious, prompting them to announce even minor problems in hopes of avoiding future litigation, experts say.
Recalls are also larger because so many vehicles are made with the same components as automakers moved to “global platforms” to cut costs.
Cars are also becoming more complex with computer components being used to monitor and control everything from lane changes to backup cameras, so glitches are more common.
Since mid-February, the world’s two largest automakers, General Motors Co. and Toyota, have between them recalled more than 10 million vehicles, for defects that have already cost them billions of dollars.
General Motors has said it expects to take a $1.3billion (U.S.) charge against first quarter earnings to pay for the cost of replacing defective ignition switches in nearly 2.6 million small cars, and other defects in larger vehicles.
But that could be nothing compared to the cost of fighting and settling various lawsuits, along with possible criminal prosecution over how long it took the U.S.-based automaker to announce a defect now linked to 13 fatal accidents.
GM is already being fined $7,000 a day by the National Highway Traffic Safety Administration since April 3 for its failure to respond to the regulator’s questions in a timely fashion.
The automaker has since recalled another1.6 million larger cars for various issues, none of them linked to injuries or crashes. It has also hired an outside investigator to review what went wrong, appointed a new chief safety officer and apologized to the victims’ families.
Meanwhile, Toyota has agreed to pay $1.2 billion (U.S.) to avoid criminal prosecution over its poor handling of sudden acceleration problems in 10 million vehicles made between 2009 and 2010.
Auto safety advocates have called the Toyota fine, levied by the U.S. Justice Department, a “game changer” for the industry, noting the maximum fine highway safety regulators could impose was just $35 million.
The Japanese auto maker has since issued five new recalls for 6.39 million vehicles worldwide for a variety of issues, none linked to injuries or fatalities. Toyota is also facing unresolved civil lawsuits. “The number of recalls hasn’t changed much,” says Tony Faria, a professor in the Odette School of Business at the University of Windsor. “But the number of vehicles has changed drastically.”
As recently as the 1990s, a recall might involve 20,000 to 80,000 vehicles Faria said.
Much of the increase is due to the automakers’ move
“The number of recalls hasn’t changed much. But the number of vehicles has changed drastically.” TONY FARIA PROFESSOR IN THE ODETTE SCHOOL OF BUSINESS AT THE UNIVERSITY OF WINDSOR
to “global platforms,” he said.
Car companies used to order unique parts for every model they built, Faria explained. Now they use the same components across multiple models in dozens of geographic regions.
Instead of 50,000 units, an automaker will order 500,000 or even five million of the identical component to gain efficiencies of scale, Faria added.
As a result, when something goes wrong it can affect millions of models, sometimes across more than one automaker, Faria noted. Recalls were issued for some Pontiacs and Subarus that share the same components as Toyota recalled last month, for example.
“The industry is global and near identical vehicles are sold in dozens of markets around the world so volumes can be very large,” Canadian auto industry analyst Dennis Desrosiers wrote in a recent note on the topic. “The industry uses common components across many models as a way to save on cost . . . so with global mandates and common components it doesn’t take long for a recall to grow into the millions.”
Automakers are also becoming more proactive.
In the past, many minor defects were handled through service bulletins sent to dealers, who fixed the problem when the car came in for regular service. The owner of the vehicle wasn’t even aware there had been an issue.
Only the most serious defects resulted in public recall, and usually at the insistence of safety regulators.
GM handled initial complaints about the defective ignition switch by issuing a service bulletin to dealers that recommended installing an insert if a customer raised the issue. Only 500 inserts were installed, documents provided by GM showed.
Now, automakers are announcing even minor recalls.
Cars have also become more complex, with sensors and computer software running many of the safety and information systems built into modern cars, Waterloo’s Mckenzie said.
Some 80 million lines of computer code run everything from the onboard navigation system to safety features that warn drivers when they’re following too closely or drifting out of their lane, he said.
“There’s so many more systems and lines of code, there’s more opportunity for things to not always work properly,” Mckenzie said. Does that means cars are less safe? Not at all, Faria says. “Vehicles are clearly better made than they have ever been in the past,” he said, noting cars now last longer and go further, up to 300,000 kilometres in some cases.
“They’re just as safe. In fact, safer,” he added. “While we read about injuries, even fatalities related to some vehicle issues, for the most part we’re talking about very small numbers.”
“They do make mistakes, for sure, and that came out in the GM recall,” he added, noting the company went ahead with an ignition switch in 2001 that didn’t meet its specifications.
Even after receiving complaints the switch could inadvertently move out of the on position, cutting power to the steering, brakes and airbags, the company did not issue a recall for the part until February 2013, he noted.
“Hopefully, companies are no longer doing that,” Faria said.