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How to Meet the Challenge of Auto Recalls

Spencer Lentz Principal, Capgemini
By Spencer Lentz Principal, Capgemini

Automakers in 2018 launched 341 light vehicle safety recall campaigns—the most ever recorded in the U.S. That’s 28 million vehicles recalled, including:

  • 6.3 million vehicles recalled for electronic defects
  • 4.8 million vehicles recalled for speed-control units
  • 8 million vehicles recalled for software-related defects

Automotive recalls are costly, generate unwanted negative media attention, and harm a brand’s reputation if handled poorly. And yet, it’s a problem that can be notoriously hard for automakers to effectively address.

Auto Recalls: A Growing Problem?

The National Highway Traffic Safety Administration (NHTSA) reports manufacturers recalled 29.3 million vehicles in 2018—which, remarkably, was a drop from 30.6 million vehicles in 2017.

Systems-based failures accounted for the majority of the recalls, rather than manufacturing-based failures. In other words, the failures leading to most auto recalls were not factory-specific problems; they were issues that impacted a broad range of classes and models of vehicles. The Takata airbag recall, for example, affected 40 million vehicles across 12 vehicle brands.

This means that suppliers and parts manufacturers are increasingly the reason for vehicle recalls. In fact, the number of suppliers named in recall notices has doubled since 2013, and their share of total recall costs has tripled.

Three primary factors appear to be driving the increase in automotive recalls:
Automobiles are becoming more and more complex, particularly as software and electronics run more of the systems in vehicles, increasing the chances that a system will fail.

Automotive parts are increasingly designed to fit multiple brands and models, increasing the impact of failures.

Shareholder pressure to cut costs and increase profitability has reduced quality assurance budgets by up to 50 percent.

Most recalls are straightforward, almost routine, issues that are easily resolved and generate little media attention. In those circumstances where recalls are tied to injuries or even deaths, the impact on the automaker’s market performance can be severe.

Interestingly, the automaker’s existing brand reputation can be a factor here. Take, for instance, one leading auto manufacturer’s record-setting $1.3 billion settlement in 2010 related to unintended acceleration in its vehicles. Because the automaker had such a strong reputation for quality and safety prior to this, the result was very damaging to their brand.

Fortunately, there is good news on the horizon: Automakers appear to be getting better at self-policing their industry. According to NHTSA data, of the 914 auto recalls that were announced in 2018, 93 percent (859) were initiated by the automakers and just 6 percent (55) were recommended by the NHTSA.

Clearly, automakers are increasingly making safety a priority. However, the damage that an automotive brand suffers in the marketplace following a recall is usually determined by how well the company responds to the crisis. As recent experience has shown, some companies react to auto recalls better than others.

Challenges of Recall Management

There are three reasons why recalls can be so difficult to manage:

Early warning signs don’t always look like warning signs. Companies often find out about issues with their vehicles only when customers complain on social media rants, in dealerships, during phone calls with service departments, and when submitting warranty work orders. The challenge for automakers is to recognize these early indicators quickly enough to respond in a timely manner. The longer these signs go unnoticed, the more collateral damage to the brand the automaker is likely to face.

Organizational and procedural silo. Automotive recalls are a complex process. They involve suppliers, manufacturers, dealers, outreach agencies, regulatory bodies and car owners. And yet recalls remain a highly manual process, still managed to an alarming degree using spreadsheets. There is little to no systems integration connecting the NHTSA, dealers and partner ecosystems, making it exceedingly difficult to communicate effectively across these ecosystems.

A difficult-to-reach public. Car owners are notoriously difficult to reach with recall notices. Roughly 35 million Americans change their address each year. And car owners are increasingly apt to ignore recall notices, quite possibly because it is challenging to distinguish which issues really need to be addressed versus superfluous noise. The result is that as many as one in five vehicles on the road today have been recalled but are not fixed. According to data compiled by J.D. Power, more than 45 million vehicles that were the subject of safety recalls issued between 2013 and 2015 had yet to be brought in for covered repairs in 2016.

Follow The Leaders

Despite the challenges of managing a recall, the potential impact associated with these recalls is significant enough that manufacturers should be prepared with a recall strategy in place and ready to go when needed.

This strategy should consider three key elements:

Enhance social media listening and analytics. Today, when consumers have a gripe, they turn to social media —so that’s where automotive manufacturers really need to be listening. Step one in a robust recall management process is early detection by monitoring the brand’s reputation in the marketplace in real time on such platforms as Facebook, Twitter and Instagram. Several approaches and tools can help, and many companies have already started to invest resources in social media listening as part of their customer support efforts.

Once the groundwork has been done to be able to gather these early warning insights, the next challenge to be addressed is connecting those insights to actions. Leaders are winning based on agility; they have created timely connections from insights and threats into corresponding adaptation in their operational systems and processes.

1. Invest in technology that supports a connected recall experience. It is now 2020—meaning it is time for auto companies to recognize that the complexity of a recall shouldn’t be managed with spreadsheets and sticky notes. New digital tools and software platforms are available to help OEMs, parts manufacturers, suppliers and dealers reduce their recall liability, lower costs, and eliminate the confusion associated with the complicated recall process.

Manufacturers should look for solutions that:

Connect across the entire network of those affected, including customers, dealers and outreach agents.

Engage customers and dealers in the recall journey in transparent ways.
Provide self-service options for customers.

Integrate with dealer and customer portals and with third-party data and services.

Consider customer contact preferences (text versus phone, for example) and engage them in multiple ways.

Leverage emerging capabilities in artificial intelligence throughout the process to provide guidance to people on the next best action to take given the context.

2. Utilize analytics to improve compliance and efficiency. Regulatory compliance must be included in any recall strategy, particularly since recalls typically involve extensive reporting to regulatory bodies. The next generation of recall systems should include automated creation of audit trails and improved analytics and operational reporting to not only be compliant with the NHTSA and regulatory bodies, but to also improve operational efficiencies.

3. Utilize analytics to improve compliance and efficiency. Regulatory compliance must be included in any recall strategy, particularly since recalls typically involve extensive reporting to regulatory bodies. The next generation of recall systems should include automated creation of audit trails and improved analytics and operational reporting to not only be compliant with the NHTSA and regulatory bodies, but to also improve operational efficiencies.

Safe Driving Ahead

If the current trends continue, approximately 340 light vehicle safety recalls can be expected in 2020. That’s almost one recall per day, affecting 28 million vehicles. To stay ahead, companies should be prepared to enhance their social media listening, invest in technology that supports a connected recall experience, and improve their analytics capabilities to become process masters. When they do this well, they’ll safely be on the road to mitigating the negative impact of automotive recalls.

Spencer Lentz is a principal at Capgemini where he is responsible for growing the portfolio of Capgemini’s Artificial Intelligence, Digital Process Automation, and Digital Customer Experience solutions.

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