Recall the Recall: How to Fix Nhtsa's Recall Program

Abstract:     
In his 1965 bestseller, Unsafe at Any Speed, Ralph Nader wrote: The regulation of the automobile must go through three stages - the stage of public awareness and demand for action, the stage of legislation, and the stage of continuing administration. Forty years later, the regulation of the automobile has traveled many times through each of these three stages.

The result of this travel is a recall system that has run amok. If secret recalls were part of the concern expressed in 1966 when Congress created what would later become the National Highway Traffic Safety Administration (NHTSA) to oversee the auto industry, by 2006 the pendulum has swung the other direction to over-recalling. The legal standard requiring automakers and others to conduct a recall in cases where a defect presents an unreasonable risk to motor vehicle safety is now essentially meaningless because the agency, backed by the courts, has stripped out the unreasonable element.

As a result, automakers routinely have more annual recalls than annual sales. In 2004, for example, automakers conducted nearly 600 recalls covering more than 30 million vehicles, an increase of 57% from 2003. Compared to the 17 million vehicles sold, that equates to nearly 1.75 recalled vehicles for every new vehicle sold.

The volume of recalls is not improving motor vehicle safety. In fact, when one considers the risks of crash posed by otherwise unnecessary trips to car dealerships to repair safety defects, NHTSA's recall program is probably exposing motorists to more hazards than it is correcting. The problematic effect of recalls on vehicle safety is highlighted by NHTSA's consistent refusal to study the issue. Thirty years ago NHTSA's own Advisory Council concluded that: The question naturally arises - do the safety benefits of the [recall] program justify its cost? Curiously, no one knows. Indeed, the scarcity of hard facts and the abundance of unknown factors make any definitive evaluation of the defect-recall program very difficult. Driven by dogma, NHTSA has nonetheless charged forward each year with its recall program. Driven by fear, reluctant auto companies have continually acquiesced. And so the vicious circle is complete: vehicles must constantly be recalled to fix the most inane safety risks. And consumers, shareholders, employees, and the motoring public all pay the price.

Number of Pages in PDF File: 41

Keywords: automobile safety, vehicle safety, traffic safety, recalls, regulation, crash causation

JEL Classification: K23, K32, K13

Accepted Paper Series