Benefits of a recall to an Automobile Manufacturer
Back when I worked in the business, I thought about the whole voluntary recall business…of course, in the customer service world, if you handle a customer with problems the right way, they can be a customer for life. So I guess telling a customer there’s a problem with their vehicle that they didn’t know about and fixing it for free certainly seems like good business.
There’s another benefit to this - and if you think about how it overlabs the introduction of new models, it will certainly make more sense. Case in point, this recall covered 1.3 million vehicles, comprising the entire large truck line for GM.
The probe involves 1999-2002 Chevrolet Silverado and GMC Sierra pickups and SUVs that share the same basic underpinnings, including the Chevrolet Suburban, Tahoe and Avalanche; the GMC Yukon, Yukon Denali and Yukon XL; and the Cadillac Escalade and Escalade EXT.
Now, those very same vehicles are all due for redesigns in the very near future, with the large SUVs (Suburban/Escalade, Escalade EXT/Avalanche, Tahoe/Yukon) will be transitioning to a whole new platform, internally known as GMT900, very shortly. Now, as a manufacturer, sometimes you never see these vehicles again until the show up at a dealership for some warranty required maintenance. If the vehicle went into a company or rental fleet, it could never see a dealers service bay (and never get an NVH, or National Vehicle History, performed) and subsequently be sold and resold, making the “owner of record” in the manufacturer’s database innacurate.
Smart dealers take advantage of a recall to touch base with their owners, find out if they will be replacing them in the future, and updating the NVH and their own CRM (Customer Relations Management) databases with the correct contact info. Although GM doesn’t typically state the cost of recalls, they range from as little as $5 per vehicle to as much as $200 per vehicle. This expense is usualy included in warranty cost. Now also keep in mind that while the volume of GM’s recalls has increased, the amount spent on
warranty costs per vehicle has dropped considerably:Andersson told the suppliers they must continue to play an important role in reducing GM’s warranty costs, which have dropped from $35.56 per vehicle after six months in service, to $24.90 in 2004. GM’s target for 2005 is $22.05 per vehicle.
So, given that not every vehicle will need the repair, and not every vehicle will make it in to fix the recall, the cost of a recall campaign may compare nicely to that of a marketing campaign.
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