Auto Recall System Under Fire For Leaving Dealers, Customers In The Dark

Recalls are aimed at protecting vehicle owners from potentially life-threatening defects, providing repairs at no additional cost. But some consumers are unwittingly driving off dealer lots with cars and trucks that may have been recalled and never know it, because the dealer was also in the dark.

Pinning the blame for that situation depends on who you speak with.

Mark Paul, founder and CEO of AutoAp Inc. puts much of the culpability with the U.S. National Highway Traffic Safety Administration (NHT
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His company, which sells an safety recall management software to dealers, sponsored a report published last month titled “Safety Recalls: State of the Retail Industry.” The report noted, “A review of NHTSA’s recall information showed a 30% error rate, which persists today. Errors, discrepancies and delays in the OEM’s (automakers) own information also became evident.”

“These errors are egregious,” Paul told Forbes.com in an interview.

A high-ranking officer at NHTSA takes issue with any charges the department is to blame for dispensing inaccurate information. In fact, said Stephen Ridella, Director of Defects Investigation at NHTSA, the agency is the wrong place to look.

“There’s a common misperception that NHTSA has recall data and we don’t,” Ridella said in reply to a Forbes.com question during a webinar on recalls sponsored by the Society of Automotive Analysts on Tuesday. “We don’t have VINs (vehicle identification numbers). Dealers are getting recall information from their companies, their respective companies. So NHTSA does not have that data.”

Last year automakers ran a record 400 light vehicle recall campaigns, not including the ongoing recall of Takata air bags. Those recalls accounted for 21.6 million vehicles, according research by Stout, a global investment bank and advisory firm that specializes in vehicle recalls and was involved in the Takata air bag case.

Ray Roth, Stout’s director of its automotive recall practice observes the system for informing dealers on recalls isn’t perfect but the situation isn’t nearly as dire, perhaps, as Mark Paul describes it.

“In some of our consulting work we have seen definite examples where there is a branded vehicle on a franchise dealer lot, used vehicle, that had an open recall that was listed for sale,” Roth said in an interview.

But he went on to note, “Things are going pretty well in the recall ecosystem when you look at the data. Most completion percentages are fairly high above 80%. Newer vehicles have higher completion percentages because dealers have good contact information and those vehicles are going back to the dealer regularly for service and warranty work. Most recalls happen in younger vehicles under three years old. We typically see completion 90% and above in that category. That’s where most recalls occur.”

The recall completion rate is much lower, however, for vehicles on the road for five years or more. That may be chalked up to the vehicle changing hands multiple times so ownership information is inaccurate, or, Roth said, the current owner simply can’t be bothered.

“Some people don’t want to hear it, take it in for a free recall then you hear your brakes are shot, tires are balding and you need $2,000 worth of work,” said Roth. “They feel they’re being upsold when from a dealer point of view it’s a safety issue. In good conscience they can’t let vehicle leave without pointing out the problems.”

But that’s exactly the opportunity dealers miss out on when they’re not aware of recalls due to lack of information charges Paul.

“70% of people who buy a new vehicle don’t take it back to the dealer,” he said. “Safety recalls is an excellent way bring back those lost customers.”

For customers who end up at small, independent used car lots looking for something affordable in this climate of sky high new car prices, they may be stuck with a vehicle under recall but not informed of that fact by the dealer.

“We’ve seen push back a little bit from the smaller used car dealers just for reasons of parts availability and so-and-so,” said Ridella. “It’s an unfortunate loophole in the used car area. They’re not required to fix those vehicles.”

AutoAp’s Mark Paul insists the notification system is broken to the point where some known recalls can’t be found on the NHTSA website saying when you search for them. He’s demanding action, asking in exasperation, “is this going to continue to be broken? Isn’t the government, aren’t the OEMs and their suppliers… goin to get their act together? Our view, we have seen no progress in them getting their act together.”

But while Stout’s Ray Roth agrees the recall system has room for improvement, it’s not completely broken, declaring, “We’ve identified some inconsistencies and changes at times but I would say overall it is more than directionally accurate. In terms of minor inconsistencies I’ve seen in the data. I would say they’ve been minor and not come to the level to where I would say the data is unreliable.”

What that leaves the consumer is the responsibility of attempting to do some independent research before buying, especially when considering a used vehicle that may be trouble hiding in plain sight.