Why Auto Recalls Are at Record Highs, and What That Means for Consumers

NEW YORK (TheStreet) — Automakers have been recalling vehicles in recent years at a pace race-car drivers would envy, fixing everything from potentially exploding airbags to engines that can cut out dangerously in the middle of heavy traffic.

What's going wrong, and how worried should consumers be?

"A recall means your car has a problem that can be dangerous," says Mark Rechtin of Consumer Reports, which recently analyzed the problem. "Automakers only elevate something to a recall when there's something inherently wrong with the way your [vehicle] operates."

Manufacturers recalled a record 63.7 million vehicles in America during 2014, or about one out of every four cars on the nation's roads. That not only blows away the previous record of 30 million recalls in 2004, but equals more than half of all recalls automakers ordered during the entire 1990s.

Experts say automakers are recalling huge numbers of cars less as a result of poor workmanship and more to avoid the bad publicity, massive government penalties and costly lawsuits that insufficient responses to problems can bring.

"High-profile recalls have detrimental impacts on automakers' sales in both the long and short term, so it behooves them to stay on top of [problems]," says Jeremy Acevedo of car-buying site Edmunds.com."

Rechtin says industry norms about when to issue recalls changed after Toyota agreed over the past two years to pay $2.8 billion to settle private and U.S. government claims over alleged sudden-acceleration problems with the Japanese automaker's cars.

The big payout stemmed in part from allegations that Toyota had dragged its feet before recalling more than 9 million vehicles amid claims that some models inexplicably accelerated on their own, causing accidents and deaths.

Rechtin adds that most of the past year's record volume of recalls stem from just two big incidents:

  • Takata recall. Toyota, BMW, Ford and nearly a dozen other brands have recalled more than 33 million cars that used allegedly defective airbags built by parts supplier Takata. Critics say some Takata airbags have sent shrapnel flying when they deployed, causing injuries and deaths.
  • General Motors recalls. GM recalled nearly 30 million vehicles over the past year, including some 2 million with ignition problems that some say can cause engines to turn off unexpectedly — disabling power steering, power brakes and airbags in the process. That allegedly led to some fatal crashes.

The good news for consumers, Rechtin says, is that the big bucks and bad publicity that major recalls entail have made manufacturers more likely than ever to acknowledge — and fix — problems.

"It's actually a great sign in that it means automakers are playing closer attention to customer concerns and pulling the trigger [more readily] on recalls," he says.

By contrast, Consumer Reports believes some companies previously tried to minimize expenses by launching "secret" recalls.

Rechtin says automakers would sometimes send dealers "technical service bulletins" saying that a given model had a problem that service departments should fix for free — if consumers brought their cars in.

Manufacturers would sometimes notify an affected vehicle's original owner of the available free maintenance, but often fail to track down used-car owners. Unscrupulous dealers would sometimes charge unwitting customers for the repairs, Rechtin adds.

Consumer Reports says car owners can protect themselves from automotive defects by:

  • Never ignoring recall notices. A 2012 government-sponsored study found that up to a quarter of U.S. consumers didn't respond to recall notices on 2006-10 models. Rechtin says that's "dangerous," but admits that some consumers suffer from "recall fatigue" these days and ignore notices — incorrectly assuming the required repairs aren't that crucial.
  • Checking online for problems. You can see if your car needs recall work by typing its vehicle identification number into the U.S. Department of Transportation's SaferCar.gov database. Rechtin says that's particularly helpful if you own a used car and don't know if previous owners had all required repairs done. Manufacturers will do recall work for free even if you're not a vehicle's original owner.
  • Reporting suspicions. Automakers and regulators rely on consumers to spot problems. Consumer Reports recommends telling a manufacturer's customer-service department and the DOT about any flaws you find.
  • Fixing hazards ASAP. Get anything dangerous fixed immediately. If your car's manufacturer later issues a recall, it'll likely reimburse you for any repairs done at a dealership.

This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.

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