Drive safe. Forget about recalls

Update: I just had a brief conversation with Dr. Pawan Goenka, president of the automotive and farm equipment sector at Mahindra & Mahindra on the voluntary recall code. Dr. Goenka believes that the process should be given a chance to work and if it does not serve the purpose then by all means the government should step in. "However if a need is felt to do it right away, we are not against it. The policy is a good beginning in any case," he said.  He further added that even today many manufacturers correct any safety related faults but unlike the developed nations, there is a stigma in India against calling such repairs 'recalls'.

Society of Indian Automobile manufacturers (SIAM), the body which represents most if not all automobile companies in India today announced a voluntary code on vehicle recall (initiative) which will be in effect from 1st July, 2012. The policy will be applicable for cars, two wheelers, three wheelers and commercial vehicles. In a spirited speech, S Sandilya, President, SIAM & Chairman of Eicher motors said that this policy will significantly help in improving customer safety and satisfaction and is a measure towards “growth with responsibility” mantra of the automobile industry in the country.

I don’t think so. Here’s why.

First point. What does ‘voluntary’ mean? SIAM believes that the guys who run car companies are very nice people. So in this nice little automobile market like India, if they discover that any of their products has something which can affect the safety of customers, they would recall the product and fix it free of charge. And they would notify the government, call up each customer to explain what’s wrong and increase their business in the country. In fact, Mr. Sandilya added that there is no point in ‘questioning the ethics and values of automobile companies’ because they would do everything possible to save their brand if a recall situation arises.

I don’t think this argument holds true in the real world. In most markets of the world, automobile recalls happen because a separate independent body (most likely government body and not an automobile industry body) exists whose job 24/7 is to set safety standards and ensure that they are followed. Right from setting safety standards to taking customer complaints to conducting independent investigations or enforcing the whole recall process and penalizing automobile companies which are found at fault. For instance there’s the National Highway Traffic Safety Administration (NHSTA) in the USA or the Vehicle and Operator Services Agency (VOSA) in the UK or the Korean Transport Safety Authority (KOTSA) in South Korea.

The problem with India is there is no such body. So right now there is not a single organization which lays down safety regulations and ensures that it is followed by automobile companies. If you are thinking Automotive Research Association of India (ARAI), don’t, because ARAI is just an agency that tests vehicles and ensures they are road worthy. It is not a regulatory body. I checked with Rajesh Mukhija, Associate VP of field services and parts at Hero if SIAM ever considered suggesting an independent body to look into the ‘investigation of a recall part’ and he said no. In fact his answer kind of stumped me. This is what he had to say, “We think that it is the manufacturer who best knows his product. So he is in the best position to say whether the product can have safety implications.”

That’s a clear conflict of interest. Here, it is important to ask the question, how does a recall take place? There are two ways it can start. One is when a manufacturer finds a defect in its product and orders a recall. Second is when quite a few customer complaints on a particular product pile up with the independent body which then decides to investigate the matter.Unfortunately SIAM's code does not create a mechanism for customers to initiate a recall.

How many complaints does a manufacturer need to have to decide if the products merit a recall? There are no clear answers on this right now.

SIAM also has to develop a system to monitor recalls. How many recalls do you know of in India? You could count them on your finger tips. There’s the example of Maruti A-Star and Toyota Etios. You want to know how many recalls happen in a developed market like the USA. Just check the vehicle recalls section of this link. I could count about 10 recalls in just the last 6 months.

The Indian automotive market has a lot of shades of grey. For every Toyota Etios recall (40, 000 units to solve fuel filler hose problem), we have a Tata Nano where 1, 40, 000 cars were called back to the dealers very discreetly (for a starter replacement) and this was during the time that several Nanos caught fire.

And SIAM cannot do anything if an auto company knows that there is a safety problem in its product and decides not to do a recall. “If the company does not follow the code, we are not a regulatory body to give punishment. But let me emphasize it that if any company does this then, they will do it at their own peril,” said Mr. Sandilya. Sandilya didn’t clarify the government’s stand on this issue. All he said is that the policy was made in consensus with the concerned ministries.

There is something of value in the recall code though. It is good in the way the automobile industry now has a set procedure for recall. So earlier you could do anything in the name of a recall and get away with it. So if let’s say you have discovered that 50, 000 cars you have sold have a ‘potential’ safety threat and you got down to recalling only 10, 000 and closed the matter without informing anybody about it, that’s not going to work anymore. SIAM says that in the event of a recall, the manufacturer will now have a guideline in terms of informing the government and concerned customers. That’s a good thing. Except that if a manufacturer still cuts corners and behaves like the good old days before 1st July 2012, SIAM can’t do anything about it. Remember, it is not a regulatory body.

Lastly, I want to put out some interesting facts from the presentation.

1. The recall will be valid for 7 years from the date of manufacture. If you are the second owner within this time frame, the automobile company is not liable to contact you. Because they have details of first owners only. Sorry! 2. What the automobile manufacturer does with the component supplier (whose component is found to be defective which led to the recall) will entirely be between the manufacturer and the component guy. He could be fined or even asked to pay the complete amount for the recall.
3. SIAM is not against a mandatory vehicle recall code if the government wants to implement one.

Which situations do not make a recall? (Upon investigation by manufacturer, the vehicle would be inappropriate for recall action for these reported safety defects)

1. Overloading
2. Poor maintenance/unauthorized repair (unauthorized has not been defined clearly here)
3. Any unauthorized fitment or alteration carried out by owner.
4. Any other external reason. (Okay. That’s a pretty large, ambiguous area)
5. Use of vehicle for purpose other than what it was designed for.
6. Parts or accessories which are not approved by the manufacturer and or fitted outside the manufacturers’ network.

It would be interesting too see if the government of India realizes the importance of product recall in the automotive sector and puts in mechanisms to enforce SIAM's recall code.

The thoughts and opinions shared here are of the author.