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Motor vehicle recalls: Trends, patterns and emerging issues

Author

Listed:
  • Bates, Hilary
  • Holweg, Matthias
  • Lewis, Michael
  • Oliver, Nick

Abstract

This paper examines patterns and trends in motor vehicle safety recalls using a dataset based on 23.1 million vehicles registered in the UK between 1992 and 2002. A safety recall occurs when vehicle manufacturers call vehicles that have been sold and are in use back to their dealerships for safety-related remedial work. Safety recalls can be a strategic concern for car makers, having the potential to damage brand value, reduce stock price as well as resulting in significant direct costs. The data from this study show that the incidence of vehicle recalls is increasing--between 1998 and 2002 there was an average of over 120 recall incidents per annum in the UK, compared to less than 50 per annum between 1992 and 1994. Total numbers of vehicles recalled show no clear trend over time, but the absolute level of recalls year on year is very high: in the UK, 10.8 million vehicles were recalled during 1992-2002, representing 47% of all vehicle UK registrations in the period. Moreover, there are substantial differences in recall rates between different car manufacturers, suggesting that recall rates may be a useful indicator of process performance in the automotive design-and-production value chain. European and American producers have recall rates that are nearly three times greater than their East Asian counterparts. This paper concludes with some ideas that may explain these patterns and suggests an agenda for further research.

Suggested Citation

  • Bates, Hilary & Holweg, Matthias & Lewis, Michael & Oliver, Nick, 2007. "Motor vehicle recalls: Trends, patterns and emerging issues," Omega, Elsevier, vol. 35(2), pages 202-210, April.
  • Handle: RePEc:eee:jomega:v:35:y:2007:i:2:p:202-210
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    References listed on IDEAS

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    1. Crafton, Steven M & Hoffer, George E & Reilly, Robert J, 1981. "Testing the Impact of Recalls on the Demand for Automobiles," Economic Inquiry, Western Economic Association International, vol. 19(4), pages 694-703, October.
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    3. Hoffer, George E & Pruitt, Stephen W & Reilly, Robert J, 1988. "The Impact of Product Recalls on the Wealth of Sellers: A Reexamination," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 663-670, June.
    4. Jarrell, Gregg & Peltzman, Sam, 1985. "The Impact of Product Recalls on the Wealth of Sellers," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 512-536, June.
    5. Hoffer, George E & Pruitt, Stephen W & Reilly, Robert J, 1987. "Automotive Recalls and Informational Efficiency," The Financial Review, Eastern Finance Association, vol. 22(4), pages 433-442, November.
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    7. Barber, Brad M & Darrough, Masako N, 1996. "Product Reliability and Firm Value: The Experience of American and Japanese Automakers, 1973-1992," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1084-1099, October.
    8. Nicholas G. Rupp, "undated". "Newspaper Coverage of Automotive Safety Recalls," Working Papers 0113, East Carolina University, Department of Economics.
    9. Richard J. Tobin, 1982. "Safety-Related Defects In Motor Vehicles And The Evaluation Of Self-Regulation ," Review of Policy Research, Policy Studies Organization, vol. 1(3), pages 532-539, February.
    10. Rupp, Nicholas G & Taylor, Curtis R, 2002. "Who Initiates Recalls and Who Cares? Evidence from the Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 123-149, June.
    11. Hartman, Raymond S, 1987. "Product Quality and Market Efficiency: The Effect of Product Recalls on Resale Prices and Firm Valuation," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 367-372, May.
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    Cited by:

    1. Lockström, Martin & Lei, Liu, 2013. "Antecedents to supplier integration in China: A partial least squares analysis," International Journal of Production Economics, Elsevier, vol. 141(1), pages 295-306.
    2. Sood, A. & Stremersch, S., 2010. "Deviation Among Technology Reviews: An Informative Enrichment of Technology Evolution Theory for Marketing," ERIM Report Series Research in Management ERS-2010-005-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

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