The automotive industry is among the highest-regulated sectors in the United States, with motor vehicle manufacturing governed by several federal agencies. The National Highway Traffic Safety Administration (NHTSA) is the one that handles product recalls and compliance issues for faulty tires, malfunctioning mirrors, broken baby seats, and other vehicle components. Learn why the auto industry should care more about product recalls and compliance issues and test recall readiness with mock recall planning.

But just how much do product and quality control managers like you care about recalls? And do you truly realize the consequences of poor recall management? You might think that recall notices impact a select few manufacturers, perhaps the big car brands, and it’s rare for OEMs and car parts manufacturers to receive fines from the government. But the NHSTA and other agencies are getting stricter, hitting companies like yours with enormous civil and criminal penalties.

Here are three reasons to care about automotive product recalls and compliance issues.

#1. Penalties are Severe

Automotive companies receive higher penalties for product safety non-compliance than almost any other sector. The NHTSA, in particular, hands out multi-million-dollar fines like they are going of fashion.

Consider Daimler Trucks & Buses, one of the world’s largest commercial vehicle manufacturers, which received an eye-watering $30-million fine for recall non-compliance, one of the highest civil penalties in American automotive history. The NHTSA said Daimler failed to collect potential safety information correctly, and the company must now implement an advanced data analytics program that identifies future safety defects.

But that $30 million fine is small fry compared to the one received by Hyundai and Kia Motors after failing to comply with recall notices. The NHTSA issued penalties to both companies that totaled a record-breaking $210 million.

Again, you might think these are one-off cases where the government targets big brands with bulging budgets and lets smaller companies like yours off the hook, but that’s not the case at all. OEMs, car parts manufacturers, and other small- and medium-sized organizations receive penalties from agencies all the time. The NHTSA even keeps a list of penalized companies here.

Why You Should Care

Civil and criminal penalties from the government for product recall management non-compliance can cripple your organization. Can you afford to pay thousands, or even hundreds of thousands, of dollars in fines?

Recommended Reading: Vehicle Recall Management Software

#2. Non-Compliance Damages Your Reputation

As well as the financial consequences, product recall non-compliance has a detrimental impact on your reputation. As previously mentioned, agencies like the NHTSA name and shame non-compliant organizations online, and the media often picks up on these cases.

They say all publicity is good publicity, but not in the event of public safety non-compliance. The American public is sensitive about auto accidents and highway safety. Companies that compromise security because of a failure to respond to a safety notice won’t get the best press.

Think of it this way. Would you have dinner in a restaurant that failed a hygiene inspection? The answer is, most likely, no. So why would the public trust your company if you didn’t respond to a public safety notice?

Why You Should Care

You might think enforcement action for a public recall management violation is rare, but agencies like NHTSA issue penalties all the time. Even if you pay a fine, the public relations nightmare is something you can’t afford.

Recommended reading: Top 10 Factors That Determine Media Coverage of a Recall

#3. Lives are at Risk

Many small auto companies forget about the victims of public safety non-compliance: Drivers who have had an accident because of faulty OEM parts or pedestrians killed by cars that shouldn’t have been on the road. Every year, over 38,000 people die in auto accidents in the U.S., while 4.4 million receive injuries so severe they require medical attention.

There are many reasons behind these deaths and injuries, but poor public safety protocols make up a considerable slice of the pie.

Why You Should Care

You might think a federal agency is over-reacting when it issues a safety notice about an OEM part with the wrong label, but there’s a good reason for it:

Actual lives are at risk on the road every single day.

Recommended reading: How to Optimize Different Product Recall Plans

What’s the Solution to Product Recalls and Compliance Issues in the Automotive Industry?

Recall Readiness! Meet Mock Recalls.

MockRecalls is a mock recall planning, training and consulting program to test your recall readiness. We are purely focused on protecting your product investment by working with you to create a new recall plan or analyze your current recall plan and then put it through a mock recall or recall simulation test to insure you are prepared for a possible product recall. We use our on-demand SaaS based recall management platform that eliminates common mistakes manually conducting recalls, by automating the most tedious steps of a product recall. It is a simple to use platform that just focuses on handling product recalls quickly and efficiently. Through our mock recall training using our dedicated recall platform, companies can improve the recall process, increase response rates, and document and communicate with all stakeholders.

Our program can analyze your company’s readiness in many of the typical elements of the recall process including:

  • Initiation, investigation, and communication process
  • Recall working team and decision team composition and dynamics
  • Team roles and responsibilities
  • Process flow and lot traceability
  • And retrieval capability and effectiveness checks

Our recall simulation program is conducted as an escalating model using real product facts and potential issues, with multiple inputs such as consumer complaints, social media, FDA/USDA/local health department and law enforcement. Conducting a recall simulation will also allow the recall team and all involved personnel to become familiar with their responsibilities throughout the recall procedure. This gives them time to effectively communicate any concerns about the plan while the company isn’t dealing with the pressure of an actual recall.

Automobile companies like manufacturers, resellers, and design and development agencies can track the latest product safety recall notices in real-time and avoid non-compliance.

Before You Go

Smaller auto companies think the government only targets big vehicle manufacturers, but this isn’t true. Business owners of all stripes might trigger penalties or enforcement action from authorities, so they should know their product recall responsibilities. Being prepared for a recall optimizes recall responses and recall response times, providing companies like yours with peace of mind.

MockRecalls will help create and/or test your recall program. Click here to learn more or call us!