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Massive number of U.S. auto recalls only dent sales slightly

  • Buried inside an economic report from the Richmond Federal Reserve this week is an interesting tidbit on the auto industry.
  • As part of its scan of the economic horizon for the Beige Book, the bank noted the massive wave of automobile industry recalls has only had a "slight adverse" impact on sales. Customer traffic was still up and new car sales strong on solid pricing.
  • The read from Richmond is consistent with recent U.S. sales reports from major automakers, although with a slight disconnect existing between a "sale" and a "delivery" in the industry the confirmation is noteworthy.
  • Chaos theory: Some industry analysts think recalls can actually spur sales as safety is teed up as a consumer issue and older cars replaced.
  • Related auto stocks: GM, F, TM, OTCPK:FIATY, HMC, OTCPK:NSANY, TSLA, OTCQX:VLKAY, OTCPK:DDAIF, OTC:HYMLF, OTCPK:BAMXY, TTM, TSLA, AN, KMX, SONC.
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Comments (18)
  • Seekinggreatwealth
    , contributor
    Comments (49) | Send Message
     
    I find it interesting that the article i rec'd highlights F and TSLA.making it seem they are leading the pack on recalls, i realize i follow those two issues and that is why i rec'd this but to be fair it would seem to me that the lead should be with the auto maker with the largest number of recalls to the one with the least.
    18 Jul, 02:57 PM Reply Like
  • Esekla
    , contributor
    Comments (3125) | Send Message
     
    Nitpicking, but the second to last bullet point is (micro-?) economics, not chaos theory. Chaos theory may sound cooler, but it has to do with how dynamic feedback systems perform in the face of changing inputs.
    18 Jul, 02:57 PM Reply Like
  • hughesrd
    , contributor
    Comments (157) | Send Message
     
    Have you read Prigogine?
    18 Jul, 04:51 PM Reply Like
  • David at Imperial Beach
    , contributor
    Comments (4267) | Send Message
     
    Besides, any spur in sales most likely comes about because salesmen snag the customer by the arm while they are waiting for warranty work to be done and show them all the shiny new models. From the dealer's point of view, anything that gets customers into the dealership is a good thing. The customer is unlikely to think that his bucket of bolts with two air bags is unacceptably unsafe compared to the sleek new sedans with six. But he is likely to think "Shiny!"
    18 Jul, 05:38 PM Reply Like
  • Cassina Tarsia
    , contributor
    Comments (647) | Send Message
     
    I think that people are overwhelmed - or underwhelmed - kind of like the "ignorance is bliss" attitude ... and then they just keep going on with their life figuring that they can't do anything about it anyway. The problem with GMOs and the herbicide Roundup that is used with it, for many people, is along the same lines, as far I see it ... can't be bothered, you know.
    18 Jul, 03:01 PM Reply Like
  • bwmaki
    , contributor
    Comments (420) | Send Message
     
    I think you are correct Cassina. Plus I'm old enough to remember cars of just a few decades ago- auto manufacturers have done an excellent job of improving reliability and safety while reducing the ownership costs of their products. I have no complaint.

     

    Plus regarding safety issues its a little hard to get wound up by something like GMs ignition switch which is apparently responsible for 13 deaths and 31 accidents in 10 years. Sure they acted poorly but its the guy behind the wheel most people worry about because thats where you are likely to get injured or killed- drunk, distracted, tired, speeding, etc. The freak chance that the key may fall out causing the air bag to not deploy in the case of a head on probably is not on the top of the list of worries and that's about the worst recall out there presently.
    18 Jul, 05:11 PM Reply Like
  • Cassina Tarsia
    , contributor
    Comments (647) | Send Message
     
    Thanks for your complement, bwmaki. Actually, GM's ignition switch problem, though, was a little more dangerous than you describe here - when the keys fall out it locks the steering wheel while the care is moving, and this "little" problem can be lethal if you happen to be going around a corner and can't change the direction of the car ... like, for instance, forcing you to run into a tree at whatever speed that you might be going. And that is precisely what killed those 13 people and caused all or most of the other accidents. But still, you are right that people kind of blank out and think that it could never happen to them since there is such a "freak" chance of it happening.
    19 Jul, 12:39 PM Reply Like
  • Juan Carlos Zuleta
    , contributor
    Comments (478) | Send Message
     
    If we agree that safety is not the only factor consumers take into account when they decide to buy a car, we are forced to suggest the implausibility of the so-called "chaos theory". Unless we concede that consumers all of the sudden became irrational, there should be no doubt that recalls affect the reputation of car makers, tending to lower their future sales. Hence more work needs to be done as to the different determinants of the demand for cars before we jump to any definitive conclusions in this regard.
    18 Jul, 03:03 PM Reply Like
  • surferbroadband
    , contributor
    Comments (1868) | Send Message
     
    People are buying poorly made vehicles from Ford, GM and Toyota.

     

    Those companies despite the "massive recalls" are still making money.

     

    And where is the recalls for Tesla Motors? None actually. So who is going to have the "massive profit"?

     

    All that this article points out is, how good a (con) job the Salespeople are doing at the dealerships.
    18 Jul, 05:01 PM Reply Like
  • alukro
    , contributor
    Comments (76) | Send Message
     
    Unfortunately your statement about Tesla recalls is incorrect, unless of course you buy in to Musk's dispute over the term 'recall':
    http://ti.me/1mZphqP

     

    At the end of the day though a Tesla car caught fire and thousands more had the defect that would also those to catch on fire as well. Despite the term you'd like to use, Tesla also has safety concerns it needs to address.
    18 Jul, 11:21 PM Reply Like
  • rwbrown.bvf@gmail.com
    , contributor
    Comments (80) | Send Message
     
    Since new cars, in general, tend to be safer than older cars, all consumers need is

     

    a little push (like a recall from any maker, especially a major one like GM) to get

     

    them into a showroom. Since GM has been giving huge incentives along with all

     

    those recalls, guess where most of these people first encounter the first salesman

     

    ready to solve all their problems?

     

    In 2012, I had been thinking of updating my wife's car, which was then a

     

    1997 Taurus SHO V8, with 167,000 miles on it. Perfectly fine car, past autocross

     

    class champion, fabulous V8 sound. However, when I saw the results of the

     

    small overlap frontal crash test, where the Honda Accord blew away all the

     

    competition- I started testing new cars, including the Fusion, Accord and Nissan

     

    Altima. The base Accord, with alloy wheels, backup camera, dual-zone climate

     

    control plus that fantastic crash test was far and away the best buy. Plus, in

     

    15,000 miles it has AVERAGED 33.4 mpg, in mostly short trips. There are

     

    probably many people in similar situations, where just a little extra push is

     

    all that's needed to make the sale. And interest rates will never be lower.
    18 Jul, 05:12 PM Reply Like
  • geekinasuit
    , contributor
    Comments (1189) | Send Message
     
    Recalls are a fact of business. It's a safety / lawsuit issue, it will always happen from here to no end. No big deal. It's best if the company under fire comes out clean first rather than later.
    19 Jul, 12:24 AM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (1420) | Send Message
     
    A family member of mine finally got a recall notice about a 2007 vehicle that is defective, sadly in the recall letter they mention that the parts are not available?

     

    WTF really? pathetic GM, they've waited 7 years and finally as a result of increase scrutiny, are going to do something, except that they allegedly don't have any parts to do it?
    19 Jul, 01:41 AM Reply Like
  • Budavar
    , contributor
    Comments (1387) | Send Message
     
    Just a few serious accidents among the millions of drivers driving millions of recalls +
    GM = toast!

     

    Why?

     

    Earlier this year GM successfully defended a demand to strand ALL recalled cars =
    that "victory" now leaves GM entirely defenseless if further accidents happen in the next 18 months, + beyond.
    19 Jul, 01:42 AM Reply Like
  • Tdot
    , contributor
    Comments (4045) | Send Message
     
    There may be something to this hypothesis that the massive recall is spurring new sales, especially in a market with so-called "pent up demand". It will take months, if not years, for GM to produce and install the replacement parts in some 30-million vehicles, and for many of them that are past their prime (and paid off), perhaps this is the catalyst to get folks to retire the old beater. It could be bigger than the old Cash for Clunkers program.

     

    It would be very interesting to see if the dealerships have been reporting back to GM Headquarters that all these new customers were coming in droves with cars that were (or not) subject to recall, and being frustrated with the confusion and waiting period, or just being tired of hearing and dealing with it all day, day after day, gave up and traded in the old beast for something shiny and new.

     

    And if so, did GM leadership see an opportunity and an incentive to use those fears and concerns to expand the recall to infinity, selling more new cars to hapless and confused customers, taking advantage of an unforeseen opportunity?

     

    Perhaps the other automakers need to jump on the bandwagon and recall absolutely everything they built from, say, 1994 to 2009, over an "undersized screw" in the steering or brake system, or something scary like that. Then when frightened folks come in, tell them yes their vehicle needs that screw replaced, but they will have to wait for 9 months to get it, but meanwhile "just look over all these pretty new cars in the showroom that I can get you in today for nothing down, just the trade in, plus $2000 bonus cash and no payments for 3 months...", while suggesting that the screw is "probably just the first of many crazy recalls in this old girl...". Worth a try.
    19 Jul, 05:57 AM Reply Like
  • rwbrown.bvf@gmail.com
    , contributor
    Comments (80) | Send Message
     
    Maybe Mary Barra is a genius after all!
    19 Jul, 12:38 PM Reply Like
  • Capt Jack Daniels
    , contributor
    Comments (1420) | Send Message
     
    Only a fool would link the recall to scared customers trading older gm cars for fresh shiny new defective gm cars.

     

    Genius she is not, she looks and looked stupid during her entire short stint as the CEO and her VP days are nothing more than a token fill.

     

    Mary was in charge of quality control and the hens are coming home to roost.

     

    Sadly, Gm probably could have gotten competent CEO management outside of some 33 year career lifer who was part of the problem with Gm back then and is still a problem today.

     

    Outside of the cash attributable to the shares of stock, this stock isn't worth more than 5 dollars on it's own.
    20 Jul, 11:29 PM Reply Like
  • rwbrown.bvf@gmail.com
    , contributor
    Comments (80) | Send Message
     
    Capt., that remark about MB being a genius was totally facetious....
    21 Jul, 01:18 PM Reply Like
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