Report: Automakers Seem to Delay Recalls – Opting Instead to Announce in “Clusters”

A recently released study indicates that automakers apparently do not tend to announce recalls as soon they are made aware of the need for recalls, but instead wait for other companies to issue recalls as well. reports that this is likely an attempt to “hide in the herd,” as automakers feel that the “clustering” of recalls may reduce the attention that consumers pay to any given recall. This is the conclusion of an academic study that suggests that as many as 73% of recalls are announced in clusters.

The intensive study concluded that in 3,117 auto industry recalls from 1966 to 2013 clusters lasted for an average of 34 days during which automakers announced an average of 7.6 recalls. Interestingly, whichever automaker was the first in the cluster to announce would usually suffer a 67% larger stock price drop than those automakers who announced later in the cluster.

The above facts seem to indicate that In addition to controlling consumers’ perceptions the clustering may be an attempt to help ameliorate any negative impact on automakers’ stock prices that may stem from the recalls and any negative publicity associated with the stock drops.

As a result of the findings, the researchers are urging the National Highway Traffic Safety Administration (NHTSA) to force automakers to issue recalls more quickly and to inform consumers of the date that they first became aware of the problems which led to the recalls.

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