If you’ve been in the auto industry long enough, you realize there are times when outside forces cause you to turn on a dime.
This past election season is a great example.
President Joe Biden’s election and the Georgia Senate election flipped control from Republican to Democrat. It’s almost certain this shift will result in legislation and regulation that impacts dealership operations, much like the Consumer Financial Protection Bureau did when it was created in response to the financial crisis a decade ago.
Today, vehicle safety recall repairs are likely legislative targets. It is illegal to sell a new vehicle with an open safety recall. Legislation for used-vehicle open recall repairs before sale was proposed in 2017 and 2019 but defeated in the Senate. Similar legislation would likely pass today’s Democrat-controlled Senate.
Why will recalls be in the crosshairs of federal legislators? An estimated 20 percent of vehicles on the road have an open unrepaired safety recall. These vehicles make their way through the auctions and into dealership hands, and then end up sold to customers, usually without anyone — auctions, dealers or customers — knowing about the open recall.
How does this happen? The vehicle recall ecosystem is broken. In 2014, AutoAp Inc. found a 30 percent error rate in NHTSA’s database — which continues to this day. These errors include recalls assigned to incorrect makes and models; recalls that are delayed from the time they are announced to when they are published; and some recalls that never get published at all. And SaferCar.gov routinely misses open recalls.
Manufacturers’ sites also contain unique challenges: They may incorrectly classify recalls as service campaigns or provide no information for dealers who receive off-brand vehicles in trades.
The political landscape is almost certain to shift to more regulations. The adoption of one guiding federal statute overseeing used-vehicle repairs is a likely outcome.
It is a looming challenge for dealers. First, federal legislation will likely increase their liability if they sell a used vehicle with an open recall to a customer who is subsequently injured. Second, if federal regulations tighten, many dealers will be caught without the right capabilities, solutions and processes in place to manage the potential onslaught of vehicle repairs.
Too many dealers are relying on government and manufacturer recall information — which is known to have data errors and publication-timing delays — to identify vehicles needing repair. To compound the problem, dealers’ daily operations often rely on manual processes.
How can dealers protect themselves? First, consider that being forced to behave a certain way — when the usual tools and services will fail them — is a recipe for problems. Second, recognize this legislation won’t strictly become a liability issue. Dealers can prepare and turn this problem into an opportunity for a significant source of income. Manufacturers cover recall repairs financially, so this could become a windfall for dealers.
Like anything else in business, putting the right process in place is the key to success. Dealers are better prepared if they have a written policy outlining their safety recall repair management strategy. Employees need to be trained on the policy, then sign off on it so they are clearly on board.
There also should be one person in the dealership charged with implementing and overseeing the recall repair process. Appointing a champion with authority and accountability will ensure recall repairs become a priority at the dealership. Even at large dealership groups, assigning one person to head this initiative will pay dividends.
Next, thoroughly understand any legislation adopted and how it impacts current operations. Dealers might be doing several things well already that help prepare for the coming legislation. Auditing current practices against pending legislation will help chart a path for needed changes.
Another critical factor in dealers’ success will be automating the recall-finding process. Manual processes are simply too costly and miss too many open recalls. This will leave the dealership open to potential liability and will leave potential profit on the table.
Finally, do not fear these changes. It is possible to both increase revenue and decrease liability by fully understanding the recall management process. In fact, they are two sides of the same coin.
Even if mandated by the federal government, recall policies can be turned into a competitive advantage. But only if dealers are prepared.