Are Auto Manufactures Really of Delaying Recalls to ‘Hide in the Herd’ of Other Auto Recalls to Avoid Bad PR?
THE UNITED STATES – A news story posted on caranddriver.com is reporting that a new study discovered that some automakers delay announcing safety recalls until other manufacturers report their recalls in order to “hide in the herd.” The study suggests that releasing recall news amongst other recalls “lessens the attention paid to their recall and the negative impact on their stock price.” However, the practice could potentially put their customers at risk of an accident.
The study called “Hiding in the Herd: The Product Recall Clustering Phenomenon” reviewed 3,117 automotive recalls over the past 48 years and discovered that around 73 percent of those auto recalls were published in clusters. The study found recall clusters lasted for an average of 34 days, and an average of 7.6 recalls was reported. According to the study, the first auto manufacturer to announce a recall suffered a 67 percent larger drop in stock value than other automakers making recall announcements shortly after.
The study investigated the six publicly traded automobile manufacturers in the United States. They include “Chrysler, Ford, General Motors, Honda, Nissan, and Toyota.” The researchers discovered that of these six auto manufacturers, only around 9 percent of their recall announcements lead the “recall clusters.” Toyota was the only exception because it was observed that Toyota’s recalls appeared to be more random. The researchers believe that Toyota’s recall announcements “acted as a trigger” for other auto manufacturers to publicize their recalls since Toyota is considered the industry’s quality leader. The data is only speculative at best.
The study’s authors also recommended that the National Highway Traffic Safety Administration (NHTSA) create new regulations that mandate automakers to announce auto recalls the first day that they become aware of a safety defect that warrants a recall. This requirement is mandated by the U.S: Food and Drug Administration (FDA).
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