KEITH CRAIN

Do recalls also mean profits?

COMMENTARY
Keith Crain is editor-in-chief of Automotive News.
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I have always noticed how whenever the National Highway Traffic Safety Administration orders a new piece of safety equipment, it is installed on new vehicles and customers pay the freight.

If you take the backup cameras recently mandated for installation on most new light vehicles by 2018, I am sure that those costs will be passed on to the customer along with an appropriate profit. There is nothing wrong with making a profit on a mandated piece of equipment.

Yet the government never mentions how much new safety equipment will cost the consumer.

And in the midst of more recalls than ever, we discover that recalls also will be a profit opportunity for American car dealers.

Without question, dealers will suggest other services to folks who bring in recalled cars or will respond to inquiries from those consumers.

Recalls are serious business, but they also are obvious marketing opportunities. Without forcing the customer, it's a great time to increase service business. There will be plenty of chances for customers to trade in their recalled cars for new models. And dealers will repair and sell the recalled trade-ins as used vehicles.

Fiat Chrysler CEO Sergio Marchionne has suggested that if the pace and volume of recalls keep up, the cost could be shifted to consumers.

Consumers probably are paying for the recalls already. I imagine that every car company has funds set aside for estimated recall costs -- although General Motors didn't anticipate making this many recalls so far this year.

Unfortunately, many consumers don't seem to understand or appreciate the seriousness of recalls. The number of vehicles that never are brought to dealerships for no-cost repairs is surprisingly high. Often, they fall out of an automaker's view and never are repaired, regardless of how severe the issue might be.

I'm not sure how to make voluntary compliance any higher. You can't force the owner of a recalled vehicle to take it to a dealership.

But to improve compliance, federal safety regulators last year set strict new rules for automakers to keep consumers better informed of recalls.

Increasing compliance is in the customer's best interest.

You can reach Keith Crain at kcrain@crain.com.


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