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Safety Recalls: Think You’re Covered?

How a Best-Practices Dealership Generated an 84 to 1 ROI

Antioch Auto Group in California has a long history of local community involvement in public safety, through owner Tom Nokes’ philanthropic efforts. This was part of their motivation to find efficient ways to manage safety recalls at their six store locations in Antioch, Pittsburg and Tracy, CA; to increase their customers’ safety and to reduce their safety recall liability.

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“Customers are our lifeblood and Antioch Auto Group goes out of its way to ensure they not only have a wonderful car-buying experience, but also know that we have their backs, because we care about each and every customer,” owner Brian Nokes said.

The Challenge

Antioch’s safety recall management goals were simple: Don’t sell any vehicles with open safety recalls. Easier said than done. It was left to the service departments to manually check for open recalls during the used vehicle recon process, or when directed by the OEM on in-brand vehicles. Additionally, it wasn’t possible to check for Stop Sale and Do Not Drive recalls on off-brands.

Antioch Auto Group decided to automate their safety recall processes. They considered creating their own but realized the major hurdles in trying to solve a broken recall ecosystem. They looked for a company that could help them with timely safety recall management information and services. They then combined this automated solution with their internal policies, processes and compliance requirements to increase customer safety, reduce potential recall liability and simplify safety recall compliance. Doing so ultimately increased revenue and improved profits, too.

Key elements of Antioch Auto Group’s Safety Recall Bests Practices include:
•  Documenting the recall status at sale with date and time-stamped consumer reports.
•  Identifying Federal Motor Vehicle Safety Standard recalls (FMVSS) for CA State Motor Vehicle Code compliance.
•  Identifying open recalls on loaner/rental VINs for compliance.
•  Daily distribution of identified safety recalls to each store.
•  Auditing sold vehicles for open safety recalls.
•  Obtaining Early Warning Alerts before official notification for better decision-making.
•  Accessing business intelligence to improve profits.
•  Visualization of liability and financial impacts of safety recalls. 

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The Results

Mike Baker, Antioch Auto Group’s digital marketing manager and safety recall “point person,” said, “Before we implemented this system, we were decidedly not covered — although we thought we were! We were using vehicle history reporting companies for alerts, which are not solutions, but ‘data.’ And, there are quality and timing issues with these and other sources.

“I can confidently say that we are now 100% effective on monitoring open safety recalls for all of our new and used inventory,” Baker continued. “With our approach, nothing falls through the cracks. Plus, it is the easiest and most cost-effective way to monitor safety recalls; it saves time and there are no excuses, and our customers benefit as a result. The additional revenue means we now catch recalls we were missing.”

If you are looking for additional profits and higher ROI, while reducing liability and saving time and money, then automation, with a multi-sourced solution, will help you get there. 


Case Study: How to Turn $1,600 into $130,000

In addition to selling safer vehicles due to automating recall management with a comprehensive solution (system, point person, policy, etc.), Antioch Auto Group has also profited significantly from doing the right thing. This is an example of just one small initiative they created to boost revenue. 

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The average warranty reimbursement for safety recalls is $344. Many vehicles have more than one open safety recall, so when Antioch decided to check customers’ vehicles, they applied the same type of solution they were using for their inventory monitoring.

Specifically, they processed nearly 1,600 customers’ vehicles to identify safety recalls, found 748 needing work, performed the necessary recall work and profited handsomely. 

Summary Results

By reviewing customers’ vehicles for safety recalls, Antioch benefitted by:
• Bringing back customers who had been going to independent shops
• Upselling parts and services for customer-pay
• Generating additional warranty revenue and profitability
• Increasing their CSI scores
• Obtaining an ROI of 84 to 1

Details of Case Study

Focusing on vehicles affected by just specific two recalls (2011–2014 Hyundai Sonata and 2013–2014 Hyundai Santa Fe) 1,556 vehicles were run through the service. There were two safety recalls they were looking for specifically; an engine inspection (recall #132 @ $130 each) and engine inspection/replacement (#162 @ $5,500 each).

From the 1,556 vehicles, 142 had #132 open and 606 had #162 open. The total of 748 needed to be inspected (@ $130 each) and about 10% of these (74) required an engine replacement.

$97,240 748 x $130
$407,000 74 x $5,500
_________
$504, 240 The total potential warranty reimbursement for just two recalls

Additionally, 1,133 other recalls found on these vehicles. At an average of $344, this amounted to $389,752.

Return on Investment

Processing these VINs cost $1 each, or $1,556. There were adders and subtractors. The adders included additional customer-pay services ($150/vehicle) and additional other recalls (1,133) found on these vehicles. The subtractors included costs to bring in — or go to — customers, and not all customers responded.

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$893,992 Potential Gross (including 1,133 additional recalls)
<$18,700> Cost to acquire @ $25* each x 748
__________
$875,292 Adjusted Gross
$525,175 Gross Margin @ 60% 
__________
$131,294 25% uptake
* Usually, it would be ~$5, but costs are higher due to COVID.

The “simple ROI” yielded $131,294 / $1,556 = 84 to 1!

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