Pub. 4 Issue 1

THE ROCKY RECALL ROAD BY BOB SMITH, EXECUTIVE DIRECTOR GREATER LOS ANGELES NEW CAR DEALERS ASSOCIATION Year Recalled Vehicles* New Vehicle Sales** 2015 51,259,648 17,470,659 2014 50,989,948 16,522,663 2013 20,252,849 15,581,519 2012 16,486,229 14,492,277 2011 13,807,119 12,778,940 Total 152,795,793 74,479,213 *Source: 2015 NHTSA Recall Annual Report **Source: Automotive News A s has been widely reported and experienced by dealers, automakers are becoming increasingly aggressive in launching recall campaigns. They are doing so to avoid the massive fines and pub- lic relations hits faced by automakers who have been pub- licly deemed less-than-proactive in recalling vehicles after discovering safety issues. While automakers can voluntarily recall vehicles whenever they see fit, the number of recall campaigns launched in the past several years is striking and unprecedented. The table below breaks down the number of vehicles recalled for safety issues in recent years: Over the past five years, over 156 million vehicles have been recalled (to be fair, some vehicles are subject to multiple recalls and therefore counted more than once). When you consider that the entire US light duty vehicle fleet consists of approximately 253 million vehicles (according to IHS Automotive), that number is astounding. Combining these numbers with the survey results from NADA Used Car Guides (showing that 88 percent of consumers are more aware of recall-related issues now than in the past) and the efforts to broaden existing recall laws, it’s tough to deny that recalls are on everybody’s mind—and new car dealers have found themselves in the eye of the storm. Regardless of the reasons behind the onslaught of recalls, dealers should understand their obligations and exposure relating to recalls affecting their new and used vehicle inventory, and are advised to put in place company policies on how to detect and treat vehicles subject to recall. What is a Recall? The National Traffic and Motor Vehicle Safety Act is the backbone of federal vehicle safety laws. The law authorizes the National Highway Traff ic Safety Administration (NHTSA) to create and update Federal Motor Vehicle Safety Standards (FMVSS) that apply to new vehicles, and provides procedures under which manufacturers recall vehicles and notify vehicle owners and franchised dealers. Under the law, NHTSA can either order a manufacturer to recall vehicles, or manufacturers can proactively do so themselves (most often, NHTSA investigates issues based upon consumer complaints and gently suggests manufacturers “voluntarily” recall the vehicle or face massive penalties and be painted as unconcerned with public safety). [Reference: 49 U.S.C. § 30101, et seq.] Recalls can arise due to one of two reasons: 1) a vehicle does not comply with the FMVSS, or 2) a vehicle has a defect related to motor vehicle safety. Recalls due to non-compliance with FMVSS are relatively rare; after all, automakers spend significant time and money ensuring that vehicles meet legal standards prior to sale to their franchised dealers. The vast majority of recalls are due to defects (defined as “any defect in performance, construction, a component, or material of a motor vehicle or motor vehicle equipment”) affecting motor vehicle safety (defined as “the performance of a motor vehicle or motor vehicle equipment in a way that protects the public against unreasonable risk of accidents occurring because of the design, construction, or performance of a motor vehicle, and against unreasonable risk of death or injury in an accident, and includes nonoperational safety of a motor vehicle.”) Cutting through that bit of antiquated legalese, most recalls relate to discovered problems with a vehicle or a vehicle’s equipment that create a safety risk. This can range from vehicles with faulty airbag mechanisms, to an exhaust pipe that extends slightly too far from the rear bumper and can cause risk of burns to people who may touch it when hot (see the recall notice on the facing page for an example of this). 14 www.glancda.org