Even with top quality control measures, the most attentive employees, and the highest standards, there’s always the possibility for mistakes. Fortunately, each crisis is an opportunity, though it usually doesn’t feel like it at the time.
Many of the biggest automotive flops have had to do with recalls, but a recall in itself doesn’t have to amount to complete failure. On the list of the “10 Biggest Losers,” manufacturers compounded their troubles with missteps in the recall process, amplifying the effect of negative public opinion and creating problems that otherwise may have been avoided.
Here’s what we can learn about handling recalls by looking at how not to react:
Lesson 1: Respond immediately.
Remember the Firestone tire fiasco? Ford Explorers were too top heavy, and Firestone tires had weaknesses that could cause blowouts. This combination resulted in flipped SUVs, lawsuits, and a national scandal.
As the two large companies navigated their internal processes, communicated about responsibility and appropriate action, and tried to decide how best to proceed, the public began to feel like this was a coverup attempt. The end result was a delayed response, and the extra time caused greater challenges and compounded negative press.
Firestone took the bulk of the blame and has not yet fully recovered its reputation. On consumer websites, Firestone tires regularly suffer from woefully low ratings from consumers complaining that their tires may be defective, and studies like one in the John Marshall Law Review estimate that the initial drop in Firestone’s market share was a staggering 50%.
By not having an immediate solution to the problem, the damage to both companies became more dramatic, and much more longterm. An immediate response is vital for preventing further damage from public opinion, especially in the information age.
Lesson 2: Honesty is the best policy.
Perhaps a contributing factor to the scandal mentioned above, Ford’s reputation had been damaged long before the Explorer recall ever made the news.
The Ford Pinto sparked a public outrage in 1977, when a design flaw was discovered that had literal explosive potential. Ford had discovered the flaw during testing, and knew that the Pinto did not meet safety standards, but chose to proceed with the design anyway due to their cost-benefit analysis. Technically, the company was not breaking any laws at the time, but many contended that the ethical implications outweighed legal concerns.
When the news media reported on the possible design weakness, though, Ford released a statement that the Pinto met all safety standards, which was untrue. The statement led to investigations and lawsuits, and Ford’s internal documents were audited. Eventually, Ford’s CEO was terminated, and the company was indicted and prosecuted for criminal homicide.
Though Ford’s decision to proceed with the Pinto’s production followed the letter of the law, their single misleading statement when questioned about the issue eventually led to murder charges. Honesty and transparency, it can then be concluded, are necessary ingredients for a smooth recall.
Lesson 3: Strive to fix the problem quickly.
When Toyota discovered that there was a problem with gas pedals sticking in many of their vehicles, they released a statement quickly and were fairly open about the flaw. The real problem occurred when it was determined that 7.5 million cars were affected by the fatal glitch, a staggering number that would take a huge effort to rectify.
A massive recall is not an ideal situation, and though Toyota acted in good faith, being slow to coordinate recall actions, notify owners, and fix the problem resulted in a massive human cost. This destroyed Toyota’s once spotless reputation, and even after their market share stabilized post recall, their sales numbers remained steadily 10% below what they once were.
Lesson 4: If you have production problems, increase quality standards before releasing more shoddy products.
GM XCars were plagued by recalls, government investigations, and lawsuits. Eventually, the brand was known as a “death trap” to the public, and the damage was permanent. During the X-Car era, GM lost more than $700 million, sales dropped 26%, and the X Car line was eventually abandoned.
During 1980 and 1981, GM announced more recalls than at any time in their history. In fact, for those two years, they actually recalled more cars than they produced. Instead of fixing the problem in their manufacturing process, GM continued to produce vehicles with major design flaws that necessitated corrective action, and it eventually resulted in the dissolution of two entire product categories: the XCar and the JCar lines are now known as some of the most spectacular failures in automotive history.
Can a recall actually be handled well? Any time a product recall is announced, it always feels like a disaster. A story about “life threatening dangers to ordinary citizens like you” is ever popular in the media, and it’s difficult to recover trust once lost. So, is it really possible to use a recall to strengthen your brand?
Saturn did just that. Shortly after the release of its first cars, Saturn discovered a design flaw. They immediately announced the recall before there were many cars on the streets, made sure to notify all Saturn owners, and appropriately addressed the problem. When a customer purchased a car and shipped it to Alaska, Saturn flew a representative to Alaska to fix it. They then incorporated that act into their marketing campaign with great success. As a new company, the issue could have stuck Saturn with a reputation for shoddy vehicles right from the start, but instead, they earned a reputation for outstanding customer service.
Of course, not all of the 10 biggest automotive losers earned their place on the list because of a recall.
What’s the greatest lesson to take from some of the worst cars ever made?
Attention to quality and transparent communication with your customer is absolutely vital.