As consumers, we like to think that automakers will alert us as soon as a safety defect has been discovered. However, a new study from Indiana University finds that automakers often delay recall announcements until a competitor issues a recall, unnecessarily leaving some customers in the dark about safety issues for an extended period. Let’s take a look at what the study found and how these results may impact consumer trust.
The Formation of Recall “Clusters”
Researchers analyzed over 3,000 auto recalls spanning from 1966 to 2013 to look for patterns or trends. They found that 73 percent of recalls happened in “clusters,” meaning that multiple recalls were announced within a concentrated period. On average, a cluster would appear after a 16-day gap in which no recall announcements were made. Over the 48 years studied, researchers identified 266 separate recall clusters.
Mirroring the Competitor’s Actions
One of the study’s co-authors interpreted this data as an indication of the auto industry’s desire to bury their recall among those of their competitors. By waiting for a competitor to announce a recall, an automaker could add their recall to the news cycle and avoid concentrated attention on their single recall. This strategic move also allowed the automakers to avoid significant stock penalties associated with the recall. In fact, the study found “as much as a 67 percent stock market penalty difference between leading recalls, which initiate the cluster, and following recalls, who follow recalls and hide in the herd to experience a lower stock penalty.” Additionally, companies with the highest reputation often triggered the biggest recall clusters.
A Focus on Transparency Moving Forward
So, what do these findings mean for consumers and automakers moving forward? The study’s researchers recommended that the National Highway Traffic Safety Administration (NHTSA) should compel automakers to report each recall’s specific defect awareness date to a searchable and publicly available database. Consumers need to trust that auto companies will prioritize safety over finances, and more specific actions should be taken to encourage transparency and accountability.
If you have questions about your rights as a consumer in the Oakland or Berkeley area, contact Lemon Law Partners, LLP today at (510) 944-0336 to arrange a free case evaluation.
