Auto Recall Bundling: What is it? Why is it Dangerous?
A recent study showed that automakers tend to hide their own recalls by announcing recalls at the same time other companies announce recalls. This causes a delay in initiating the recall and can potentially leave dangerous vehicles on the streets longer. However, from the automaker’s perspective, they can hide behind the recalls of others. So PR departments will wait until a major recall is announced in the press to initiate their own recall.
This causes their stock prices to drop less than they potentially would if they announced the recall without due attention paid to other recalls. The danger, of course, is that a dangerous or defective vehicle will remain on the roads longer than it should.
According to the study, auto manufacturers announce their recalls in clusters. This gives them the ability to hide in the herd, and prevent their stock prices from dropping at least as much as would be likely if they announced the recall in a recall vacuum.
It’s true that recalls can hurt the stock prices of auto manufactures. The auto manufacturers incur major expenses simply to restore the vehicle to its proper functionality. In some cases, the cost of the recall is so high that the auto manufacturer figures it would be cheaper to simply pay off personal injury claims under gag orders than it would to correct the potential defect.
This is what happened to Takata. Eventually, however, it was discovered that their airbags had a potentially fatal defect that caused the airbag to explode in the faces of drivers and passengers. Nearly 30 people died in accidents related to this airbag and several more were severely injured with many having facial disfigurements for the rest of their lives.
The incident resulted in the company that manufactured the airbags losing personal injury lawsuits to the tune of several billion dollars. It became known that the company knew about the defect but did not alert either their customers (other auto manufacturers) or the NHTSA. Several died as a result of that choice. The company now exists as a shell that pays out personal injury claims related to their defective airbags.
The study was similarly skeptical that clustering recalls improves vehicle safety. In fact, clustering recalls are more likely to make the roads less safe. As a result, the study recommended requiring companies to list the date that they became aware of the problem when they initiate the recall. Ostensibly, if too much time passes between their awareness of the problem and their announcement, the company can be held accountable for their failure to initiate the recall in a timely fashion.
Kia and Hyundai were both hit with fines related to failing to report a manufacturing defect in a timely fashion.
Talk to a Florida Auto Safety Lawyer Today
If an auto part malfunctions resulting in an accident or injury, call the Coral Gables tire defect attorneys at Halpern, Santos & Pinkert today to schedule a free consultation and learn more about how we can help.