Earlier this year, Hyundai announced that they would recall approximately 82,000 electric cars after reports came in about fires involving the automobiles. To replace the vehicles’ batteries will cost the company roughly $900 million – which was called an “astronomically” high number for a recall.
When a company has to issue a recall for one of its products, it is absolute hell for everyone involved. It doesn’t matter if you’re the consumer or part of the company or even an investor. When it comes to the consumer, they have to deal with the fallout of a faulty product that might be a danger to their health or safety.
The company, on the other hand, including the suppliers, manufacturers and investors, has to deal with an absolute PR nightmare that could wreak havoc on their prices and reputation. So, all in all, automotive recalls are not a pleasant experience for anyone.
Unfortunately, sometimes the company can make an error, and a recall is necessary to give consumers the product they paid good money for, while saving face for upcoming consequences. Unfortunately, recalls are also cripplingly expensive and can sometimes push a company into a money pit that could take them years to climb out.
Here are just some examples of those financially crippling recalls:
The Ford Pinto - $171 Million
Back in 1971, The Ford Motor Company released the Ford Pinto into their lineup. This automobile was supposed to be the company’s answer to the rising popularity of smaller Japanese imports like Toyota Corolla and Datsun 510. Unfortunately, trouble started to brew in 1978 when the complaints started rolling in.
The vehicle’s gas tank was positioned poorly between the rear axle and bumper, which meant that fires became more common when in contact with the shock absorber at the car’s back. This would also sometimes result in an explosion when involved in rear-end collisions. Did you think cars only blew up in the movies?
In the end, the cost of recalling the Ford Pinto cost approximately $121 million, whereas paying off the victims cost about $50 million. That would be $655.5 million today; no wonder they quickly discontinued the Pinto afterwards.
Toyota Accelerator Pedals - $2 Billion
Between 2009 – 2011, upwards of 14 million vehicles from different Toyota brands were forced to be recalled because of faulty accelerator pedals. People were complaining that the accelerator pedal could become stuck, preventing deceleration.
When you’re going at 100mph down the highway, the last thing you want is the accelerator pedal to get stuck. Toyota tried to downplay the seriousness of this issue in a statement:
“The condition is rare and does not occur suddenly. It can occur when the pedal mechanism becomes worn and, in certain conditions, the accelerator pedal may become harder to depress, slower to return or, in the worst case, stuck in a partially depressed position.”
As a result of this, it is possible that upwards of 40 people lost their lives, including an entire family in a Lexus back in 2009. It would take a while before Toyota bounced back from this one.
General Motors Ignition Switches - $3 Billion
Ever had your engine just cut out without warning? This was a problem GM faced back in 2014 when it was reported that a disturbingly high 124 fatalities resulted from faulty ignition switches. What made this worse was that airbags are powered by the engine, which meant that drivers had no protection if a collision was imminent.
The company was forced to recall 30 million vehicles, but that’s not all that came out of this tragedy. Several people filed lawsuits against the company by those claiming to have been injured due to the recalled vehicles’ faulty switches. It was eventually revealed that GM was well-aware that the switches were below standard for nearly a decade and did nothing to even alert customers of the potential hazard.
Long story short, the company was forced to pay out more than $3 billion in damages. Hope that silence paid off in the end.
Ford Firestone Tires – $5.6 Billion
In 2000, Firestone Tire and Rubber suffered a nearly fatal blow to their business when it was revealed that their defective tires on Ford SUVs and pickup trucks caused upwards of 271 deaths. And that was just in the United States.
The tires had a weird defect, causing the treads to peel off from the body. Experts believed it was due to “the interaction of steel and rubber tire elements.” Firestone had no choice but to recall 6.5 million of their tires and replace approximately 13 million. In total, the automotive recall cost over $5 billion, with Firestone pulling $2 billion from their pocket and Ford losing $3 billion.
After Ford faced another $600 million in lawsuits, the company severed their 100-year relationship with Firestone. Wouldn’t you too?
Volkswagen Diesel Engine – $18.3 Billion
Ever been caught cheating on a test? Volkswagen was back in 2015 when it was revealed that they cheated on their diesel-emissions tests, promoting it as “clean” and an alternative to hybrid and EVs. Apparently, the company installed emissions software on over 11 million cars worldwide, allowing them to sense the unique parameters of an emissions drive cycle set by the Environmental Protection Agency.
Unfortunately, the software would switch to a separate mode when driving, significantly changing the fuel pressure, exhaust-gas recirculation, and even the amount of urea fluid sprayed into the exhaust. Not only would this be toxic to our air, but the smog was also linked to lung cancer.
Volkswagen had no choice but to admit their fault and recall 11 million vehicles, paying out over 18 billion in recall cost, legal claims and other expenses. The company wouldn’t recover for another two years – and you thought cheating on that math test was bad.
Takata Air Bags – $24 Billion (So Far)
Not really the trophy they wanted, but Takata is taking the prize for the easily the most prominent automotive recall in history. This was so devastating to their business that they had no choice but to declare bankruptcy.
Back in January 2019, it was estimated that roughly 41 million vehicles had to be recalled, replacing 56 million Takata airbags. The problem wasn’t that the airbags didn’t deploy but would deploy too much. When the airbags needed to be deployed, they had a tendency to explode, hurling sharp shrapnel at the driver and passengers. This not only caused severe injuries but resulted in the death of 16 people.
After over a decade of lawsuits and fines, many car manufacturers still feel the loss of this recall. They even estimate that every vehicle with a Takata airbag won’t be fixed until 2023.
