Automakers delay recalls to minimize stock penalties, avoid being the first safety issue in news cycle, study shows

NEWSWISE

Whether consciously or unconsciously, automotive firms time their product recalls to minimize stock price penalties, resulting in unnecessary delays and clusters of subsequent recalls by other companies, according to new research from the University of Notre Dame.

An initial recall by one firm prompts clusters of additional recalls in close proximity by competitor firms, according to “Hiding in the Herd: The Product Recall Clustering Phenomenon,” forthcoming in Manufacturing and Service Operations Management from Kaitlin Wowak, assistant professor of IT, analytics, and operations at Notre Dame’s Mendoza College of Business.

According to the study, “Automobile recalls seem to be announced after inexplicable delays. Toyota’s unintended acceleration recall and General Motors’ (GM) ignition switch recall are two noteworthy examples, which were associated with 37 and 124 deaths, respectively. In both cases, consumers’ lives were put at risk while firms hesitated to announce a recall, even after they were aware of the serious product defects. This study offers one potential explanation for recall delays: recall clustering.” read more »