INTERACTIVE GRAPHIC

The road to a recall

Recalls can start in one of two ways. In some cases, automakers act on their own. In others, they get nudged by regulators.

Here's the process by which vehicles are called back to the dealership. Hover your mouse pointer over each step to learn more. CLICK HERE to read our special report: Total Recall

A defect can come to light in many ways. Perhaps a part keeps getting returned as defective. Or a technician notices a strange problem in a car brought in for repair. Or a surge in warranty costs makes it clear something has gone wrong. Lately automakers have gotten more savvy about crunching data and using the Internet to spot problems. Nissan, for instance, assigns every component in its cars to an engineer, who monitors a database that is updated with every complaint and warranty claim. Employees also monitor online message boards for gripes about problems with Nissan products.
Car companies do rigorous testing before putting cars on sale, but they will never be able to catch every problem with their parts and assembly processes. On top of that, tests will never capture the range of problems that can pop up in the real world. Owners live in different climates with different road conditions, and they use their cars in different ways. Until customers leave dealers' lots, automakers will never know exactly how well their products will fare.
There are many ways regulators can spot a defect. There is safercar.gov, a NHTSA Web site that gets thousands of complaints from car owners every year. There is the Fatality Analysis Reporting System, or FARS, a database that includes police reports on all fatal car accidents in the United States. And under the TREAD Act, a law passed by Congress in 2000, automakers must provide regulators with reams of "early warning" data on quality problems. On top of all that, any person or group can file a formal petition asking NHTSA to look into an alleged safety defect.
Decades ago, recalls were like searching for a needle in a haystack. An automaker would know some of its cars were defective, but not which ones. So the company would recall many cars that turned out to be fine. These days, identifying affected cars is much easier. As a car moves down the assembly line, data points are generated at hundreds of steps, letting the manufacturer track exactly which parts and machines were used to build the car. The track-and-trace data are linked to the vehicle identification number; and if a part or process is found to have been defective, only the affected VINs will pop up in the database.
It is extremely rare for NHTSA to order a company to recall its cars. Usually, the automaker will decide to take over and perform a recall without a formal order. For that reason, it is sometimes called a "voluntary" recall - but it is not quite voluntary. Even if a car company disagrees with NHTSA about the existence of a defect, it knows that a dispute can unleash scathing criticism from the public and the press and make the automaker vulnerable to lawsuits. Automakers are especially averse to the public meeting step because the detailed data NHTSA releases from its investigation at that point could be used against an automaker in court.
When a potential defect is discovered, NHTSA may start an inquiry. First is a "preliminary evaluation," during which the agency gathers information and allows an automaker to make its case. Within four months, the agency usually has decided whether to end the investigation or upgrade it to an "engineering analysis." That is a more rigorous review, often involving inspections of cars and laboratory tests. It usually takes another year. At that point, NHTSA will decide once again to close the investigation or move forward.
Once the automaker has settled on a fix, it submits a formal notice to the NHTSA. A recall notice may not go out to customers for several months, however, because the automaker needs to gather tools and parts and distribute them to dealers. Once those items have been delivered, an automaker will send a letter to the owners of the affected cars advising them to visit their dealerships for needed repairs. In the summer of 2013, NHTSA put out strict new guidelines for such letters to make them more forceful because for the average recall just 70 percent of affected cars are repaired.
New-car dealerships perform the repairs prescribed in the recall notice and are compensated based on the number of jobs they do. Automakers usually will recover the cost from suppliers. Sometimes there is clear evidence that a supplier delivered a defective part; but when it is unclear what party is to blame, a protracted legal battle can follow. General Motors said in August 2013 that it plans to change its purchasing policy so parts suppliers must cover the cost of recalls, even if they built parts to GM's specifications.
If at the end of the engineering analysis investigators are convinced that a defect exists, NHTSA's associate administrator for enforcement can come out with an "initial decision" that says so. All of the supporting data behind the initial decision will then be released, and the agency will hold a public meeting at which the manufacturer and the public can make arguments. Afterward, the public record will go to the NHTSA administrator, who can make a final decision that a safety defect exists and order the car company to recall its cars.

You can reach Gabe Nelson at gnelson@crain.com.



Rocket Fuel