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Study Finds Safety Recalls of New Cars Increasing

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Neil Steinkamp, a managing director at Stout Risius Ross

Neil Steinkamp, a managing director at Stout Risius Ross

Automakers recall an average of 54% of their models in the cars’ first year of production, according to a study by financial advisory firm Stout Risius Ross Inc., of Southfield, Mich., reports Mark Clothier for There has been an increase in car recalls because of three factors, Clothier writes: “a surge in new car models, increasingly complex technology, and heightened regulatory scrutiny” because of safety concerns.

Ford Motor Company and General Motors Company are releasing a total of 30 new or revamped models in North America in 2014, Clothier writes, and as the number of models increases, there is a greater risk of increased quality issues, as Neil Steinkamp, a managing director for Stout Risius Ross, told him. For example, Clothier writes, Hyundai Motor Company had the highest number of recalls — 67% — in the first year the models were released; at the other end of the spectrum, Toyota Motor Corporation had the lowest number of recalls, with 42%. Clothier notes that the study used the National Highway Traffic Safety Administration’s definition of safety-related vehicle components, including acceleration, air bags, brakes, child seat parts, seat belts, steering, visibility, and wheels.

At the same time, writes Nathan Bomey for Detroit Free Press, warranty costs for the U.S. auto industry are falling, according the new study. By examining publicly available data (automaker and NHTSA recall data, as Clothier reports), Stout Risius Ross found that warranty claims as a percentage of revenue fell from about 2.7% in 2003 to 1.9% in 2013, Bomey reports. GM and Ford had similar rates, less than 2%, at the end of last year. Bomey writes:

Some industry observers regard warranty costs as a more accurate measure of quality than third-party surveys by sources such as J.D. Power and Associates and Consumer Reports.

Steinkamp told Bomey that quality problems cost automakers billions of dollars.

The study was released as General Motors is dealing with the recall of 1.6 million small cars from the model years 2003 through 2007, after a defective ignition switch on some of those cars (as this blog reported) was blamed for 13 deaths in more than 30 accidents. U.S. regulators are investigating why it took GM a decade to recall eight affected models after discovering the ignition switch defects in those cars, Clothier writes.

In another Detroit Free Press article, Bomey writes that GM’s new CEO Mary Barra has “launched an internal review to examine how the automaker delayed reporting defective ignition switches.” In a statement on GM’s website, Barra said GM will be accountable for the problem and improve its processes, Bomey writes. Barra, who became GM’s CEO in January, pledged to cooperate with NHTSA’s investigation, Bomey adds.


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