In 2010, a dealership in Colorado provides direction to customers after Toyota recalled 8 million vehicles because of brake problems. Matthew Staver / Bloomberg News
In 2010, a dealership in Colorado provides direction to customers after Toyota recalled 8 million vehicles because of brake problems. Matthew Staver / Bloomberg News

Drive is on to reduce risks of costly car recalls



Almost every week somewhere in the world, it seems, a car maker recalls thousands of vehicles- just two days ago, Chrysler Group agreed to call back 2.7 million 4x4s.

It seems paradoxical - after all, modern cars are safer than they have ever been; anti-lock braking systems and electronic stability programmes that reduce the chance of skidding are now standard features even in mass-produced mid-range cars, not to mention airbags.

But, due partly to the growing technical complexity of vehicles, the number of car recalls has surged in recent years, the worst one affecting Toyota, which in 2010 issued a series of recalls covering more than 10 million vehicles in the United States alone because some of them would suddenly accelerate of their own accord while being driven.

"Recalls are increasing because the vehicles are packed with ever more electronics and all kinds of sensors, so there's more that can go wrong now," says Professor Stefan Bratzel, a car industry analyst at the FHDW University of Applied Sciences in Germany.

In the four years from 2009 until last year, manufacturers called back a total of 63 million cars in the US to fix safety-related problems, according to a study by Germany's Centre of Automotive Management, a vehicle consultancy.

The Japanese makers Toyota, Suzuki, Subaru and Honda have been the worst affected recently. But most car makers have had to recall vehicles, including the big German players Volkswagen, BMW and Daimler. It is a trend that is likely to continue growing, say analysts.

It is obviously bad news for drivers. And for the car makers, it entails enormous costs - Toyota's big recalls in 2010 alone cost it more than US $3 billion.

Another reason for the apparent rise in recalls is the radical shift in assembly techniques towards modular production, in which car makers are using the same components across a variety of vehicle types, similar in principle to a Lego set.

All the big companies are moving towards such common component platforms for their models but VW is at the forefront of the trend, investing more than €50bn (Dh245.62bn) over the next three years in new plants and technologies such as robots capable of assembling all the group's different models. Its new MQB car platform, used in the latest Golf 7 launched last year, will serve as the basis for more than 30 VW models ranging from the Golf to big 4x4s, with planned output reaching up to four million cars per year by 2019.

The modular system will make VW's plants far more flexible, allowing them to switch from assembling one model to another without costly retooling, and will save billions of euros on components. VW calculates it will be able to save between €1,500 and €1,800 in production costs per car. Based on the planned total output of 10 million cars by 2018, that would mean an annual saving of at least €15bn per year.

The strategy is part of the grand plan by the VW chief executive Martin Winterkorn to replace Toyota as the world's biggest car maker by volume by 2018.

But the risk of recalls looms over this new production method. A faulty component common in many models could cost VW hundreds of millions of euros.

"Winterkorn's really afraid of that - there's not much he's afraid of but the issue of quality is likely to be giving him sleepless nights," says Professor Ferdinand Dudenhöffer, the director of the Centre for Automotive Research at Germany's University of Duisburg-Essen.

Mounting competition is forcing companies to shorten their development cycles and roll out new models at shorter intervals, meaning car makers are more vulnerable to making mistakes. Also, companies are putting more pressure on components suppliers to reduce their prices at a time when the share of outsourced component production is rising dramatically. Parts made by suppliers such as Bosch, VDO and Magna already account for three quarters of every car built.

"The German and Japanese makers have contributed to major improvements in car quality over the years but now we need a new revolution in terms of quality control in which mistakes are spotted and corrected as quickly as possible," says Prof Dudenhöffer.

In key markets, car makers need to react particularly fast when problems arise to avoid damaging their business. But sometimes they do not: the latest Chrsyler recall concerned vehicles linked to 51 deaths in post-crash fires. The firm's ultimate capitulation to state pressure averted what could have been the biggest showdown with US regulators over a recall in decades.

The car maker reached an agreement with the US national highway traffic safety (NHTSA) administration for a "voluntary campaign" to repair Jeep Grand Cherokee and Jeep Liberty vehicles with fuel tanks mounted behind the rear axles. On June 4, the company had refused to issue a recall after the NHTSA had asked it to do so. The company, which is majority owned by Italy's Fiat, stuck by its defence of the vehicles' safety, saying on Tuesday they were not defective.

But the negative publicity that would have persisted through regulatory or court challenges may have pushed the Chrysler chief executive Sergio Marchionne to change his mind, Michelle Krebs, a senior analyst for the car researcher Edmunds.com, told Bloomberg news agency.

"Chrysler can't afford to have that vehicle's reputation damaged," Ms Krebs says. "It's the heart and soul of Jeep and a source of big profit to Chrysler."

In March, VW called back 384,181 vehicles to fix a long-standing gearbox defect only after the manufacturer was named and shamed in a programme on corporate malpractice on state-run China Central Television. The recall will cost VW hundreds of millions of euros. The TV show said the direct shift gearbox (DSG) transmission, a long-standing problem experienced by many Volkswagen drivers, was causing cars to speed up or slow down during driving due to an electronic malfunction. VW had also previously refused to recall vehicles and had opted just to extend the warranty of the gearboxes. But it responded quickly to the TV show and to warnings from the country's consumer watchdog, not least because China is a crucial market.

VW, which makes cars in China in partnership with Saic Motor Corp and Faw Group, sold more cars - 2.81 million cars - in the country than any other foreign firm last year and plans to boost its output capacity there to 4 million in the next five years.

"Auto safety is a sensitive issue in all countries, and in China you get the added factor that they're perhaps focusing a bit more on the western manufacturers that have high market shares and telling them, 'Don't sell poor quality and listen to us when we have demands on you,'" says Prof Bratzel.

In Australia, too, a suspected direct shift gearbox fault has prompted the recall of some 30,000 VW cars.

Growing technical complexity, competitive pressures, new assembly techniques and greater safety demands - it all points to recalls increasing in the near future.

"Manufacturers can't reverse the trend towards modular assembly because customers aren't prepared to pay more money for cars that aren't produced in such a way," says Prof Bratzel.

Unless they radically improve quality management, car makers will become increasingly vulnerable to recalls, not least because of the inexorable push towards greater automation, already evident in developments such as assisted parking systems. In the not-so-distant future, cars will probably be doing the driving themselves, ferrying passengers to their destinations at the push of a few buttons.

Car makers really cannot afford to make mistakes in that situation - imagine the havoc if they do: swarms of automatic vehicles going haywire on the streets and motorways of the world would not be a pleasant result.

MATCH INFO

Manchester United 6 (McTominay 2', 3'; Fernandes 20', 70' pen; Lindelof 37'; James 65')

Leeds United 2 (Cooper 41'; Dallas 73')

Man of the match: Scott McTominay (Manchester United)

Brief scores:

Manchester City 2

Gundogan 27', De Bruyne 85'

Crystal Palace 3

Schlupp 33', Townsend 35', Milivojevic 51' (pen)

Man of the Match: Andros Townsend (Crystal Palace)

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Our legal columnist

Name: Yousef Al Bahar

Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994

Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers