DETROIT (Oct. 29, 2013) — In a May evening in 2001, Jacques Nasser sat in his office at Ford Motor Co.'s world headquarters, faced with a choice that auto executives have come to see in their nightmares.
Rollover crashes caused by allegedly faulty Firestone tires on Ford Explorers already had killed more than 100 people, forcing Ford and Bridgestone/ Firestone to jointly recall 6.5 million tires the year before. Mr. Nasser, then Ford's CEO, had been briefed earlier that day by Ford engineers, who had determined that millions of Ford light trucks had Firestone tires that weren't covered by the initial recall but were still prone to disintegrating at highway speeds.
The engineers' conclusion was grim: Eight or nine more people were likely to die in Ford vehicles that summer if the company did not act.
"It's a pretty easy decision, isn't it, Jason?" Mr. Nasser told Jason Vines, then Ford's head of public relations. "Recall the tires."
The tire crisis was a turning point for Ford. The recall of 13 million additional Firestone tires that May cost the car company an estimated $2.1 billion and fractured its decades-old relationship with Firestone. Ford's brand image took a beating. And less than six months later, Mr. Nasser was ousted as CEO, replaced by a Ford heir whose family legacy was suddenly at stake.
It was also a defining episode in the history of auto recalls, spotlighting the huge costs — financial and otherwise — of letting a safety problem spiral out of control.
A costly reality
Industry experts agree that today vehicles are better engineered, safer and higher in quality than they have ever been. Even so, recalls remain a persistent and costly reality, with repair tabs that likely total in the tens of billions of dollars each year. They also gum up the machinery of the automotive industry, tying up the resources of dealers, suppliers, engineers, lawyers, regulators, data crunchers and spin doctors.
The past two years have seen a new light-vehicle recall announced every two to three days on average. That is double the rate of two decades ago, according to an Automotive News analysis of data made available by the National Highway Traffic Safety Administration (NHTSA).
In recent years, the number of cars and light trucks recalled routinely has exceeded the number of new vehicles sold. Last year's tally: 154 recalls, affecting as many as 14.2 million vehicles and spanning 15 model years. That trend has continued in 2013. Through September, auto makers issued more than 140 recalls, covering as many as 18.5 million cars and light trucks.
"These things can be very expensive, depending on what the nature of the problem is," said Dave Sargent, vice president of the quality practice at J.D. Power and Associates. "Even a 'little' recall...it would be hard to think the cost would be less than $100 per vehicle. Plus, there's all of the other costs—the management time that gets sucked up in working it through—so, yeah, they're ferociously expensive."
The vast majority of the 3,303 automotive recalls since 1990 have been initiated by manufacturers rather than regulators. Numbers are through September 2013.
Still, protracted recall crises of the Ford variety are rare today, as auto makers have become more proactive about detecting and correcting safety defects — sometimes before the vehicles leave a dealer lot — and skillfully managing the public relations fallout.
One result of the Ford-Firestone case was the TREAD Act, which ordered auto makers to give U.S. auto safety regulators "early warning" of defects, injuries and deaths involving their products.
So-called track-and-trace technology, meanwhile, allows auto makers to pinpoint quickly the source of a defective part and identify the pool of vehicles to be repaired. And repairs increasingly involve software tweaks rather than the replacement of mechanical parts, reducing costs and easing the burden for owners and service bays.
The rising number of vehicles subject to recalls, experts say, is not because of lower safety standards but rather because of higher ones, along with greater vigilance on the part of manufacturers and regulators.
"Generally speaking, we feel that manufacturers are more likely to recall something now than they were in the past," J.D. Power's Mr. Sargent said. "Nobody wants to be accused of ignoring quality problems, particularly safety-related problems."
Manufacturers with the most U.S. recalls, 1990 through September 2013
1. General Motors — 638
2. Chrysler Group — 451
3. Ford Motor — 441
4. Nissan — 189
5. Honda — 169
6. Toyota — 154
7. Volkswagen — 141
8. BMW — 130
9. Mazda — 103
10. Volvo — 88
Regulator-initiated recalls: 737
Weighing on auto makers are the memories of the Ford-Firestone crisis and the more recent Toyota Motor Corp. unintended-acceleration case—a debacle that pummeled the auto maker's reputation for quality and stuck it with $1.1 billion in repair costs, according to a 2010 company estimate.
Nissan, for example, has a "vital issues" panel that reviews customer complaints, warranty costs and defective parts to decide whether to pull the trigger on a recall. Anything that frightens a customer—such as a steering problem, loss of throttle control or fuel leak—goes straight to the panel no matter what, said Jim Blenkarn, senior manager of field quality investigations at Nissan North America.
"That could be on the strength of one report," he said.
For other problems, Nissan sets a tolerance of 0.05 percent, or 1 in 2,000 vehicles; any defect with a higher incidence rate goes up the chain of command for a closer review.
Sean Kane, president of Safety Research & Strategies Inc., a Massachusetts consulting firm, said there are other reasons why recalls are a persistent problem: Cars are more complex, he said, so there are more components that can fail. Auto makers and regulators also have better data to analyze patterns that may point to a problem.
But Mr. Kane said the biggest driver in the number of recalls may be the Internet.
"Consumers have ways to complain that they didn't have before," said Mr. Kane, whose clients include trial lawyers for car owners. "We have access, electronically and instantly, to a global network that wasn't available in the early '90s. The manufacturer no longer controls the narrative entirely, and I think that's a major factor in why problems get addressed more often now."
Manufacturers with the most vehicles potentially affected by U.S. recalls, 1990 through September 2013
1. Ford Motor — 106.1 million
2. General Motors — 88.3 million
3. Chrysler Group — 65 million
4. Toyota — 30.3 million
5. Honda — 28.4 million
6. Nissan — 19.3 million
7. Hyundai — 8.9 million
8. Volkswagen — 8.9 million
9. BMW — 4.39 million
10. Mazda — 4.19 million
Source: Automotive News analysis of NHTSA data
Regulators, meanwhile, are trying to harness the power of the Internet to get more defective cars fixed. This summer, NHTSA issued a requirement that auto makers make their recall notices more official-looking and, by next summer, set up a searchable online database for customers to see whether their vehicles have been recalled.
The aim is to push the average consumer compliance rate closer to 100 percent — up from 70 percent now.
The rules of what triggers a recall also are changing. NHTSA made that clear this year when it asked Chrysler Group to recall Jeep Grand Cherokees—some from as far back as 1993—and Jeep Liberty vehicles from the 2000s that regulators said were prone to catching fire when hit from behind.
Chrysler initially pushed back, saying the SUVs met federal safety standards when they were sold. But NHTSA argued that auto makers need to be held to standards that evolve over time to meet higher consumer expectations, with data analysis playing a big role in determining whether a vehicle should be considered unsafe.
"It really is based on the notion of unreasonable risk. And that is an evolving notion," NHTSA Administrator David Strickland said in a July interview, shortly after Chrysler backed down and agreed to recall the vehicles. The agency, he said, must reassess a potential risk "if state of the art moves all the peers in one direction, and it appears that there is another part of the fleet that has not made those same moves or improvements."
Mr. Strickland's thinking will be tested in the years ahead as auto makers continue to make cars safer. The rapid introduction of advanced crash-prevention features in new cars could soon make older vehicles stand out as dangerous relics.
Then again, the added complexity of such advanced safety systems could spawn another big wave of recalls. With more of a vehicle's basic safety functions controlled by chips, cameras and sensors, the risks of a potential software glitch could grow.
"Looking back, I would always tell people that I never thought I'd see something as big as (the) Firestone (recall)," Mr. Kane said. "And then there was Toyota. Now I'm convinced that we're going to see another one. These crises are inevitable."
This report appeared on www.autonews.com, the website of Automotive News, a Detroit-based sister publication of Tire Business.