Automotive Recall Decision Making

Automobile manufacturers have a responsibility to their consumers to remedy product defects through recalls. This research studies consumer product recall decision making in the automotive industry. The recall decisions considered include: defect identification and investigation, voluntary recalls, proactive recalls and recall timing. More specifically, this research investigates: (1) If the government should investigate a potential defect based on consumer product defect complaints and historical recall and defect investigation data. This research uses historical information, more specifically the textual complaint data, to analyze topical content, understand temporal topical trends and predict which product defects identified by consumers should be investigated. (2) How an automaker should recall. Using data on consumer product defect complaints, historical recall and defect investigation data, sales and market share and brand value data, this research explores the impact of “responsible” recall decisions, proactive and voluntary, on consumer market share. The analysis shows, surprisingly, that the consumer market penalizes automakers more for responsible decisions. (3) When automakers should initiate a recall. This research investigates the impact of timing on sales and recall effectiveness. The analysis finds that longer time-to-recall leads to decreased recall effectiveness, as measured by repair rate. After first defining the relationship between recall timing and effectiveness through regression, this research then derives the optimal recall timing to minimize total recall cost, which includes direct, opportunity and liability costs, using input from the empirical analysis. This research finds that automakers have financial incentives to act responsibly and can reduce their expected liability costs, and thus total costs, by improving the effectiveness and timeliness of their recalls.

Many thanks to Chelsey’s dissertation committee: • Committee Chair – Hande Benson – Associate Professor – Drexel University • Committee Co-Chair: Chaojiang Wu - Assistant Professor – Drexel University • Committee Member: Murugan Anandarajan - Professor- Drexel University • Committee Member: Eleanor McDonnell Feit - Assistant Professor – Drexel University • Committee Member: Matthew Schneider - Assistant Professor – Drexel University