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Safety Recalls: Think You’re Covered?

Navigating a Complex, Broken Process

Recalls have become a cancer in the automotive industry, presenting potentially grave risk to consumers and all players in the supply chain, with automotive dealers being on the front line.  

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Dealers are closest to the vehicle owner and have unprecedented exposure when something goes terribly wrong.  

With vehicles becoming more complex, especially with the introduction of semi-autonomous and autonomous features, much of the new technologies being deployed is directly connected to the safe operation of vehicles. 

Although those in the industry are quite familiar with air bag and failed ignition recalls, there are many more safety recalls that have nothing to do with these components and impact other aspects of the safe operation of vehicles.

Additionally, the OEMs’ and regulatory agencies’ inability to maintain and monitor the status of each and every vehicle, have made it very difficult to systematically manage these risks for both independent and franchised dealers. 

The current situation is far from ideal in finding and fixing these vehicles. There are strict laws and regulations that punish dealers who sell new vehicles with open safety recalls, with the FTC leading the charge in fining dealers who do not disclose open safety recalls upon sale of used vehicles as well. Some states are now prohibiting the sale of vehicles with specific types of open recalls and without proper disclosure.   

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Additional financial risk for the dealer is acquiring vehicles that can’t be resold, thus encumbering capital. Even worse, the dealer is the first stop in the litigation path when an accident occurs and there are injuries or deaths when a vehicle was sold with an open recall.  

Further dealer liability occurs when the vehicle was sold with an open recall, and no disclaimer was made to the consumer as to the status of the vehicle. 

Not only is the recall eco-system clearly complex, but — as discussed in previous AutoSuccess articles on safety recalls — the system appears to be “broken,” with incomplete, erroneous and delayed safety recall information. 

Even with best-efforts and through no fault of their own, dealers can be out of compliance and sell vehicles with open safety recalls and not even know it — which makes consumer disclosure problematic at best. 

In order to navigate this mess, dealers should to develop an automated, systematic and accountable process — along with the appropriate policies and point-person assigned — that will not only mitigate front-line liability but provide additional profit opportunities and, most importantly, peace of mind.

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