There's big money in the recall crisis

LAS VEGAS -- If this year is anything like last year, U.S. automakers will be mailing millions of official invitations to consumers to visit their local dealerships.

Welcome to the era of the vehicle safety recall cashbox.

The volcanic eruption in the number of safety recalls is a golden opportunity for car dealers to make money, retailers and vendors say.

"It's a chance to bring customers into the showroom who probably haven't been in for a few years," observes Mark Thimmig, an industry entrepreneur and investor who believes auto companies can zero in on recall business.

"Vehicle safety is obviously the primary issue here," he acknowledges. "But there is also potential business."

Dave Bellando, service and parts director for Sullivan Brothers Toyota in Kingston, Mass., says that after the dealership created an in-house "recall department," service business jumped. The department focuses on owners of recalled models, encouraging them to come get their problems fixed and giving them a little special courtesy when they arrive.

In its first four months of operation, the effort gave the store a $77,000 uplift in service revenues, Bellando says -- on top of more than $300,000 worth of factory warranty work to fix the recall bugs.

In addition, 81 of Sullivan's recall customers decided to buy new vehicles when they came in.

"This is for real," Bellando told Automotive News. "It's working well for us."

The golden goose in this bonanza is the National Highway Traffic Safety Administration, which is doubling down on its scrutiny of vehicle safety hazards.

Last year alone, there were more than 51 million vehicles recalled in nearly 900 campaigns in the U.S., NHTSA said. A large number of them involved actions over airbag inflators manufactured by Japan's Takata Corp.

But last year's recalls are only one piece of the potential floor traffic that industry vendors are now eyeing.

"There are millions and millions of other, older recalls that are out there from years gone by that remain open," Thimmig says. "We have no doubt that vast numbers of old recall notice letters were never opened or possibly never even delivered to the correct owner."

Last month, industry market research giant J.D. Power and Associates announced that it is getting into the recall field, launching a venture it calls J.D. Power SafetyIQ. SafetyIQ, which integrates NHTSA data with J.D. Power data, is a searchable database, updated daily.

There are specific details of every recall by manufacturer, by vehicle segment, by vehicle identification number, by component and by the nature of the problem. Into that mix, Power has added its own Initial Quality Study data, so that a subscriber can track specific consumer complaints about a model, giving automakers, parts suppliers and dealers the ability to monitor trends as they emerge.

"It's a new business," explains John Tews, J.D. Power spokesman. "There are a lot of people who need this information. Imagine a retailer being able to know better which used cars not to buy at auction next week."

As a secondary service, SafetyIQ will attempt to help automakers locate and notify owners of older vehicles that have open recalls. In many cases, open recalls concern older vehicles that are no longer under warranty, that are no longer being brought into franchised new-car dealerships for service needs or that have been sold to a second or third owner for whom the manufacturer has no records or address.

Recall Masters Inc. of San Francisco also is looking for those overlooked owners, says company president Chris Miller. The company uses 40 search sources to find the owners of vehicles with open recalls, even combing through credit databases to find VINs.

The company is marketing its "Recall Masters Academy" training sessions to dealers to guide them on how to set up recall centers in their stores and how to handle recall customers delicately.

Miller describes it as a business development center phone bank that specializes in reaching out to owners of vehicles with open recalls.

The dealer personnel use Recall Masters' customized marketing lists and prepared scripts that steer them through what to say and what not to say. Instead of describing an airbag as "faulty," for example, callers are trained to say "there is a known issue with the airbag."

"The first thing you have to do is apologize," Miller says. "We get the dealership to own the problem. The first message is, "We're sorry that this is happening. And we want to fix it.'"

The caller then precisely and briefly explains what will be required for the recall work. Some dealer business development centers have been struggling with recall conversations, Miller says, simply because the topic can trigger a longer-than-desired conversation with a customer. Because the centers are compensated by the number of customers they bring in, phone explanations that go on for 10 minutes eat into productivity.

Recall Masters' scripts are written to cut through the conversation in two minutes.

But it is the third part of the customer call that generates added business for the dealership, Miller says. The caller asks whether there is "anything else" the customer believes might be wrong with the vehicle.

"We're finding that dealers can get a 33 percent lift in customer-pay business from that question," Miller claims.

"Since you're contacting people who probably aren't even aware that there is a recall issue with their car, you realize a lot of them are going to be new customers to the dealership."

Thimmig's California investment company, Conservaco, now partially owns SpeedTrack, a big-data company that has been working in the medical field to help hospitals crunch and interpret information about patient illnesses and results. SpeedTrack is now providing the technology behind J.D. Power's SafetyIQ venture.

But as the recall industry moves forward, new business needs are emerging.

"Once you've located a car with the recall, how do you communicate with the owner?" Thimmig asks. "Do they speak English? Do they even read their mail? Because the official factory recall letter obviously didn't work. Are they a millennial who only communicates by text? Do they prefer to be contacted on Facebook?

"Somebody is going to have to provide these services."