Imagine feeling ill enough to visit the local hospital. Most of us identify the hospital as the one place that has the combination of diagnostic technology, patient history, the knowledge and the skilled clinicians in one location. In order for physicians to accurately diagnose your ailment, they take blood samples and conduct a multitude of tests. As a patient, it would be reasonable to expect to be diagnosed and receive the prescribed treatment. In fact, many would believe that, if this barrage of tests yielded abnormalities in addition to the ailment, the physician would bring them to your attention so that a corrective action could be taken. 

I would think the above scenario wouldn’t seem to be unreasonable to most of you. However, think about the reasonable expectation a customer has when they bring their vehicle into your dealership to get serviced, regardless of whether they know something is wrong with the health of their vehicle or not. They expect that it will be efficiently diagnosed and fixed. Yet, every day vehicles with open recalls pass through service drives without being checked, repaired or notifying the customer.

Many consumers visit dealerships because of their expertise, knowledge and the thorough inspections conducted on their vehicles. They have a reasonable expectation that necessary repairs will be made and, at the very minimum, be reported to them. And, in most cases, they are. However, there is one glaring area where a huge gap exists - recalls.  Some of these recalls can pose a threat to safety or can cause great damage to the vehicle if not attended to.  Failure to alert the vehicle owner of an open recall can be almost negligent in the eyes of the consumer.

Checking a vehicle for recalls can occur in a number of dealership departments - prior to the purchase, at trade in, during vehicle service, or by combing through customer data in your CRM.  These customers have a reasonable expectation that your dealership will have some recall solutions in place to notify, schedule and repair the problem.

Without some sort of recall platform in use and enforced as part of a diligent process, it is impossible to effectively manage the volume of open recalls at your dealership. As a result, customer expectations go unattended to, eroding trust and the customer’s belief that you are the right “doctor” for their vehicle.

You would be wise to have an integrated recall strategy in place across your entire dealership – all departments communicating with each other to identify any open recalls. This has nothing to do with adding another process just to be difficult, it’s a matter of meeting your customer’s reasonable expectations that the vehicle they purchase, or service at your dealership, is safe. They expect that your dealership has done its due diligence to identify any known and unknown issues – and fixed them.

No matter what recall solution your dealership chooses to use, it should be efficient, thorough and timely in delivering the information that customers and your staff require. Is that an unreasonable expectation to ask?

With the massive onslaught of vehicle recalls it is pretty much guaranteed that all parties involved are paying attention. Today that ranges from consumers to OEMs to dealers to insurance companies; and tomorrow that will soon include rideshare companies like Uber and Lyft.

One of the biggest, and perhaps most well-known recalls, is unrepaired Takata airbags which could explode upon vehicle impact. As you can imagine, an exploding airbag is of grave concern to consumers. It is also a major financial liability to the automotive and insurance industries. Due to its massive scale, this recall is exacerbated by lack of parts availability and, while the media feeds consumers stories of death and destruction because of failure to repair these airbags, consumers are faced with long delays and heightened anxiety.

No matter how hard you work to disclose an open recall to your customers, there may come a time when customers start factoring recalls into their buying decisions, based on the barrage of problems, delays and parts availability.

Tools to check a vehicle’s VIN for an open recall are accessible to consumers, who are likely to consult them while perusing your used car inventory. Because of this, regardless of whether it’s legal to sell a used vehicle with an open recall, that vehicle may still end up sitting there on your lot simply because nobody wants to buy it.

Let’s take a look at how open recalls will affect a future buyer’s decision-making process:

1. Conquest – Oh, you better believe that manufacturers with vehicles that aren’t affected – or less affected – by recalls will ramp up advertising to let consumers know just how safe their vehicles are. That loyal brand customer may start rethinking their loyalty should an attractive conquest offer appear. And those messages will be a ruthless assault on unsafe vehicles with deceptive sales practices labeling your dealership as a hungry wolf feasting on unsuspecting consumers.
    
2. Peace of mind – Consumers are bombarded by recall messages daily -- horror stories about the danger of leaving their vehicle unrepaired. Combined with the long wait times to secure the recall repair, whether they’ve been personally affected, or someone they know has, this certainly affects their state of mind. Most consumers don’t have the time, patience or willingness to wait indefinitely for a repair, or to buy and drive a vehicle that could potentially injure, or even kill them. And that makes perfect sense.
    
3. Cost to own – It’s easy to see a future where insurers start factoring recalls into their complicated algorithms for calculating policy holder premiums. Checking insurance costs with your insurance agency is one of the first steps in choosing a vehicle and establishing if it is within budget.
   
   While it does not currently happen, imagine the day when insurance agencies increase premiums on vehicles that are unsafe and could potentially cause an accident – especially those defective vehicles that have dangerous and life-threatening recalls. This could certainly impact whether a consumer buys a vehicle, or starts their search for an alternative.
    
4. Worry-free Inventory – Dealerships love the advantage of offering a “certified pre-owned” vehicle.  Those vehicles typically yield better margins and create a loyal customer who will return for their next purchase. If that’s the case, how would you describe inventory that does not fall into that category? Diminishing margins force dealerships to carefully examine the kinds of vehicles they bring into their inventory.  Imagine if your dealership had the tools to evaluate resale value, prior to acquisition. 

 During trade in evaluation, or at auction, wouldn’t your inventory manager benefit from knowing what that vehicle’s recall status is? Those tools are available and your dealership needs to take an active role in presenting your prospective customers with a better selection of used vehicles.

More than likely, the biggest roadblock in NOT selling used cars with open recalls has been the financial impact dealers face in terms of tied up capital, space to store vehicles while awaiting a recall repair, and lost sales from sitting on those vehicles waiting for parts and repairs.

Large auto retailers such as AutoNation initially took strong positions on recall management.  However, the group changed its position and decided to allow the sale of used cars with recalls when they realized the burden these recalls levied on their dealerships.

Still, the fact of the matter is that consumers only care about one thing: the vehicle they are buying right now. They’ll take action and vote with their dollars before any massive industry change or government intervention.

I’ve mentioned in my past blogs on several occasions how pending legislation which prevents dealers from selling used cars with open recalls is on the horizon. At some point, the issue is unavoidable.

You have a unique opportunity to proactively address a matter that is important to consumers.  In an era where dealerships search for market differentiation, the stage is set for savvy leadership to outpace slow competitors who would rather adopt policies when they reach a critical state, or are mandated from some higher authority. 

Which kind of dealership is yours?

Consumers have plenty of choices when it comes time to buy a used car – private sellers, independent used car lots and, of course, franchise dealerships. Each have their pros and cons, ranging from price, to quality, to reliability and safety. The one edge franchise dealerships may have over all other options is that consumers, in general, believe that a used vehicle at a franchise dealership has been inspected, is of good quality and will be safe.

In some cases, that customer may have been able to purchase that exact vehicle at a lower price from a private seller, or independent dealership. However, they chose to pay a little more for the peace of mind and the backing of a franchise dealer.

What happens when their perception of safety is eroded by the fact that the vehicle was sold to them with an open recall?

Recalls have long been top-of-mind for consumers. News sources, including TV, radio, newspapers and the Internet, regularly blast out messages of doom and gloom to consumers with each new recall – even those that only apply to a single vehicle, as manufacturers are now playing the “better safe than sorry” game.

Franchise dealers, who are also impacted by these recalls, make hard choices on how, when and if to sell used vehicles with open recalls to consumers. Often, it’s not financially feasible for a franchise dealership to simply sit on trade-ins, or other in-stock used vehicles with open recalls without risking the financial health of the dealership. So, even with the best intentions and full disclosure, many franchise dealers continue to sell these vehicles. The problem is that consumers come to the dealership with the assumption that purchasing a used vehicle comes with peace of mind and confidence that the vehicle is a safe and good quality vehicle. They then discover problems. What happens to that customer to erode their confidence in the buying experience with that franchise dealership?

The customer discovers that parts are unavailable and that they have to wait months to get their newly purchased vehicle repaired – and it is not even safe to drive – in the customer’s mind, they brought a dud from your dealership!

You can imagine the frustration they must feel, especially if they found out that you knowingly sold them the vehicle and may not have overtly disclosed the existence of an open recall. However, disclosing that a vehicle has an open recall also presents difficulties for the dealership. If you had taken the time to explain how the airbag is a recalled item that could in fact cause serious injury, and that a replacement airbag will not be available for months, the customer may have thought twice about completing that purchase. Still, when the customer learns about it after the fact, this just irritates them and they distrust your dealership -- even if you gave full disclosure.

There are many things that can go wrong with a used vehicle purchase. I’m certain that you can create a pretty long list. Most of those problems can be rectified. But recall repairs with no parts availability is the problem for which there is really no good solution, as yet. And the only person who will bear the brunt of that frustration is the dealership.

What’s a franchise dealership to do – a bit of a catch 22 dilemma, right? Once that vehicle is in your inventory, you’ve already limited your best options. The smartest decision is to proactively assess vehicles for open recalls at the time of valuation, either at trade-in or at auction prior to placing a bid. Doesn’t an open recall and its proper disclosure affect the consumer’s perception of safety and, subsequently, the sales price? Of course it does! If your franchise dealership is authorized to repair those open recalls you might elect to acquire a trade-in of a particular make versus a make where you have to secure a remedy from another dealership.

The bottom line is that your dealership should be running the VIN prior to purchase (or making an offer) so that you know what you are dealing with. You can get that info right from NHTSA.

Proposed legislation to prevent the sale of any used vehicles with an open recall is starting to take shape on both State and Federal levels. I think the industry would be wise to prepare for some new legislation coming down the pipeline in the not too distant future.                                   

Recalls are such a pressing issue and there is enough confusion out there already with all the media reports and hype. Many consumers are already in a state of electrification. Personally, I believe that a vehicle with an open recall should not be sold until it has been properly repaired, I realize the huge challenge this presents, but there are longer term goals at stake and there are tools to assist. At the very least, your dealership should ensure that recalls are fully disclosed and make a strong attempt to ensure the consumer knows this before leaving your lot.

At the end of the day, effective management of recalls is not only the right thing to do, but the smartest.

In my last blog, I shared some reasons why dealers need to prepare for a constant flow of recall repair work for a long time to come. In this second part, I’d like to lend some further insight as to why savvy and responsible auto dealerships need to develop a strategy for recall repairs. I could not fit them into the first blog without it becoming a bit of a book. So here you go!

(Numbers 1 -4 can be found in Part 1 of this blog)

5. OEMs are building better quality cars, which is great for consumers. However, this also extends the service intervals. In some cases, intervals have increased from 3,000 miles to as much as 15,000 miles. As these increases are fairly recent, there’s no predicting what problems could come up, or perhaps be exacerbated by the vehicle no longer being available to inspect and repair quite as frequently. It’s certainly good for consumers to avoid frequent servicing, but only time will tell what the impact on safety will be when consumers bypass regular vehicle inspection.

6. Due to the huge amount of recent recalls, consumer backlash and the resulting bad press, OEMs are now more proactive about revealing safety issues to the public and faster to issue recall orders. Even the smallest of defects now prompt recalls, as OEMs seek to project a better image to consumers and protect themselves from any liability that might arise from non-disclosure.

7. These days, manufacturers aren’t just under the watchful eyes of the United States government. Overseas actions, changes and legislation could force the hand of one of the domestic OEMS. The changes, recalls or other activities initiated in another country could have an overall effect on the brand worldwide.

8. Due to the volume of negative publicity all of these recent recalls have spawned, consumers are voicing displeasure with the OEM response to issues and the manufacturer’s willingness to correct them. Market share is incredibly important to manufacturers and a slight misstep, or action that doesn’t meet with the general public’s approval, could be disastrous for a brand - as was seen with Toyota. Manufacturers acknowledge this and, in the future, may well be faster to take action to rectify problems and avoid consumer wrath or defection to another brand.

9. Personal injury attorneys are getting a little more aggressive and savvier in their approaches to litigation. Rightfully or not, they now name all potential defendants including OEMs, dealerships, dealership management and even, in some cases, the salesperson involved in the transaction. This makes any vehicle with an open recall that drives off your lot a potential ticking time bomb in terms of liability.

Take note of these points and make preparations in your dealership to accommodate your customers – and safeguard your business – by creating an action plan and being prepared for recall repair work.

It starts with creating a Recall Department and providing the necessary training to address the very unique issues associated with a recall. This is not limited to the vehicles, as a very frustrated and scared consumer also requires special attention. However, if approached properly and treated with care and concern, these consumers evolve into the most loyal of customers.

In an era where dealerships are wrestling with competition to win over the long-term loyalty of consumers, recalls represent a tremendous opportunity for dealers who are willing to step up when the consumer is at the height of vulnerability. Studies in human psychology prove that the foundations of loyalty are best forged during times of crisis.

You don’t need to be an expert in human relations to know the doing the right thing by consumers during a recall episode might also be the smartest for your dealership.

Recalls have reached epidemic levels and stretch the resources of everyone involved – dealers, manufacturers and parts suppliers – as well as the patience of consumers faced with a recall, or who contemplate the purchase of a new or pre-owned vehicle. While it may be tempting to imagine a world where recalls aren’t such a burden to dealers and customers, the fact is, recalls are here to stay.

Consider these facts:

1. The reason it takes so long to get an airbag to replace those recalled Takata units is that suppliers simply do not have enough capacity to deliver. Takata was (and still is) the primary supplier and manufacturer of airbags in the United States. One main reason for slow parts fulfillment is that Takata continues to manufacture airbags as replacements for recall repairs and still provides airbags to manufacturers in order to build new vehicles. True, these faulty airbags are still being put into brand new vehicles. The logic being that the process provides the industry a couple of years to handle the congested situation because these airbags are reportedly “safe,” for at least 2-3 years.
   
   As a result, approximately three years from now, almost every new vehicle currently being sold will need airbag replacement. At this time, dealers will very likely still be in the process of repairing the airbags from the current Takata recall and will be hit with a whole new wave of 3+ year old vehicles needing airbags. Airbag recall repair will be part of our lives for many years – perhaps a decade – to come.
    
2. The rising popularity of electric vehicles, combined with state and Federal environmental initiatives, has manufacturers racing to produce more of these types of vehicles. As electric vehicles were such a small market segment in the past, many of these EVs have not yet seen production on a mass scale. However, as production ramps up in the near future, the scale of mass production is likely to cause errors. As this new technology pours off assembly lines and into consumer driveways, it’s very possible that problems will appear that nobody anticipated. This could easily lead to recalls requiring technicians with expertise that they do not have, further adding to the problems of overloaded service departments.
    
3. Self-driving cars. Is it even possible to predict what problems these vehicles may have once they hit the roads in volume? Consider the combination of human drivers and self-driving vehicles! Technology is fickle and there are so many integrated technologies in a self-driving vehicle that recalls are pretty much inevitable. The earliest versions of these vehicles are due to hit the consumer within the next two years, with sales expected to soar in markets where commercial application is anticipated. Given the enormous savings the commercial market is expected to realize with self-driving vehicles, analysts predict brisk sales early in the release of these vehicles.
    
4. Due to various factors, including the recent explosion of leased certified pre-owned (CPO) vehicles and increased used car sales, more vehicles are on the road later in their lives than ever before.
   
   It is currently legal to sell used cars with open recalls, which will inevitably add future recall workload. Some of these leased CPO vehicles are for very low-mileage vehicles, such as former service loaners, demos, etc. While these vehicles may have had open recalls when new, preventing dealers from selling them without first fixing the recall, taking the vehicle in as a demo or loaner and putting a few thousand miles on it makes it a used car which can be sold or leased with an open recall. Which of course means future recall work.

These are just some examples of why there will always be recalls. I’m not referring to the continued existence of recalls in general. I’m simply stating that recalls will continue to be a large problem in the coming years. For this reason it is important to understand that this HUGE amount of work, along with the frustrating process of getting parts in stock and dealing with a constant flow of irritated and upset consumers, is not going to decrease any time soon.

If your dealership has not already reengineered itself to manage recalls, then the observations I’ve outlined above should provide a strong case for why life with recalls is going to be the norm, rather than the exception. For many, this isn’t good news. For some, the conditions represent a unique opportunity to win in the marketplace. We’ll discuss how to use the recall crisis to your dealership’s benefit in future blogs.

There are many more facts that would have made this blog too long. So, in Part 2 of this blog, I’ll outline more reasons why recalls are here to stay.

As we make our New Year’s resolutions and reflect on 2016, which was a less than perfect year for our industry, filled with recalls and declining consumer confidence due to lack of parts availability to quickly fix these recalls, I thought it may be a good time to look ahead to 2017. In that spirit, I’d like to offer some simple tips that can help improve the service experience and ease any fears in dealing with recall customers.

Simply stated, compelling data suggests that there are plenty of residual benefits for those dealerships that handle recalls efficiently and with an exceptional level of service throughout the process.

Automotive recalls present an opportunity to maintain and improve dealer and brand integrity while winning back lost customers and attracting new customers that typically do not service at a factory-certified dealer. Historically, however, recalled vehicle owners have been viewed as a nuisance by dealership personnel. These consumers can, at times, be frustrated and emotionally volatile; too demanding and suspicious of the dealership’s intent. The perception in most dealerships is that these customers are unwilling to spend money on additional repairs identified through a multi-point inspection and that they’ll leave negative responses on CSI surveys, even when they were treated well by the dealership. There’s no mistaking – these consumer are, perhaps, annoyed by the inconvenience of the recall in the first place, but it would be a huge mistake to avoid these customers altogether or to move them through their store as quickly as possible without disrupting normal operations or where they may taint the perception of, otherwise, happy customers.

Before your dealership decides to give up on recalls, be informed of what is at stake.  Many of these customers desperately need their vehicle to be in good working order. These vehicles are often their lifelines -- they get them to work, shuttle their kids to school and run all of the various errands necessary to provide for their families. When unexpectedly confronted with a major disruption in their lives, such as an inoperable, or perhaps dangerously unsafe vehicle, it can easily trigger unwanted emotions that can then be taken out on you, the dealer.

However, while these customers may begin a relationship with you in a controversial and emotional manner, if handled properly, they can very easily become some of most loyal and profitable customers. You see, they are looking for help because they desperately need their vehicle repaired.  And, if they don’t get help from you, they’ll get help from your competitor.  That single interaction with a competitor could forever cost you that customer.  The dealerships who step up to better manage these weary customers, not only win more new customers, but also win back lost customers and gain a legion of loyal followers who will serve as brand advocates to a larger population of consumers who seek a referral to a reputable dealer.  There’s a lot at stake here.  It’s more than recalls and the key to winning their trust and, ultimately, their business, lies in handling them properly.

Here are a few tips:

Training: Recall customers can be a little more emotional than your average customer. Many have been inconvenienced, are irritated, upset and even scared. So, naturally, they need a little more hand holding. And that usually requires a little training. But it is well worth educating service personnel, BDC reps, salespeople, and even the receptionist on how to properly handle any recall customer communications – be they by phone, email or in person. It is the very first step in transforming the customer experience of a recall customer. I understand parts availability presents a problem and prevents many dealers from being able to service these customers quickly. However, the bottom line is that these consumers don’t care to hear about all the reasons WHY you can’t help. They’re frustrated and want their vehicles fixed now. Training your staff in how to be empathetic when handling these customers is an important part in helping to calm the customer and ease their concerns. It’s not enough to simply tell the customer that the parts aren’t available. Staff should be apologetic to customers and, if the dealership has the resources, do everything they can to assist the customer based on the danger presented by the recall. All it takes is one negatively perceived interaction to potentially lose a customer.

Consistency: Make a commitment to consistently check all vehicles – whether inventory or service vehicles – for open recalls. Service advisors should check every vehicle that comes into the service drive for open recalls and have real-time updated information so they can do a thorough job. This simple process can increase repair orders but, more importantly, safeguard your customers from unknowingly driving around in an unsafe vehicle.

Efficiency – Analyze service drive processes and shop capacity and you would be surprised at how simple it can be to spot ways to increase efficiency through small process changes that enable you to service more vehicles with existing resources. Efficient scheduling is like a game of Tetris. Find just the right spot for the next block headed towards your dealership so that they all fit together perfectly. The ability to project anticipated repairs through strategic scheduling can result in a higher volume of vehicles fixed more efficiently and, by default, increase service revenue.

The proper handling of recalls will save your CSI by providing exemplary service and recall consultation. It will also quickly pay dividends through increased customer pay revenue from repair upsells and vehicle sales from service. Recall customers are a wonderful source of additional service revenue AND vehicle sales – if handled correctly.

Rolling out the red carpet for these consumers can greatly increase your penetration in your local market and win valuable customers for life.

In a past blog, I discussed how AutoNation instituted a policy to not wholesale or retail any vehicles with open recalls until they were repaired. Sadly, as recently reported by Automotive News, AutoNation’s efforts have met with tough consequences, including 6,000 grounded vehicles with “no parts in sight,” according to AutoNation CEO Mike Jackson. Jackson feels future legislation making it illegal to sell a used car with an open recall, as already exists for new vehicles, will be unlikely due to an incoming pro-business administration.

AutoNation’s decision to sell pre-owned vehicles with open recalls could not have been made easily. I certainly empathize with AutoNation being in a position where their dealers are unable to compete with the marketplace. AutoNation continues to maintain a position of full disclosure whether the vehicle is retailed or wholesaled. Jackson’s position is that, when AutoNation sells the vehicle, the consumer will be made aware that the recall exists.

Regardless of your position on this issue, it is also important to be aware that, just because it’s legal, selling pre-owned vehicles with open recalls doesn’t mean that your dealership is safe from a lawsuit stemming from product liability. Consider legislation enacted where bartenders can be held liable for serving alcohol to an intoxicated patron if that patron then leaves and hurts themselves, such as in a car accident. Many states already have such legislation and, one could argue, it could easily be applied to a situation where a dealership sells a used car with knowledge of an open recall and the customer is injured or dies after purchasing it. There are multiple examples where legally selling a defective product can also lead to a party being held liable for subsequent damages to an unsuspecting consumer. The challenge revolved around whether a jury would interpret the action as negligent. Given the ability for a dealership to easily and quickly determine whether a pre-owned vehicle had an open recall or not, it’s no secret that consumer agencies and personal injury attorneys are licking their chops.

As covered in a recent Automotive News article, Rosemary Shahan, president of Consumers for Automobile Safety and Reliability, feels strongly that dealers could still face liability regardless of a federal ban. She stated that, “Dealers forget there’s a whole body of state law, and it is illegal for a dealer to sell an unsafe product, period, whether it’s under recall or not.”

The legality of selling pre-owned vehicles with open recalls is currently being debated amongst federal and state legislators. If history serves as a roadmap to future legislation, my belief is that the industry would be wise to prepare. It’s only going to be a matter of time. If the Trump Administration doesn’t move swiftly on expanding the law, certainly foreign governments will.  More importantly, insurance companies that underwrite dealership policies will act decisively to mandate a more restrictive stance. Laws that protect the consumer usually win out in time, as evident in the Safe Car Rental Act that was enacted earlier this year, requiring rental car agencies to remove from their fleets any vehicle with an open recall or face severe penalties.  The wheels are already in motion and the momentum seemingly impossible to stop.

Whatever the future holds for legislation, it would be wise to take a new look at the policies you have in place when it comes to selling vehicles with open recalls. Even if your dealership has no concern for customer safety (which we would certainly hope is not the case), the mitigation of risk for your dealership should be top of mind.

Consumer and public safety will always take precedence over profit in the eyes of a sympathetic jury. Any state-level liability concerns, of course, varies by state. But as a minimum, consider the fact that federal law doesn’t prohibit dealerships from selling pre-owned vehicles with open recalls doesn’t mean you are in the clear.

Recalls are such a pressing issue and there is enough confusion out there already with all the media reports and hype. Many consumers are already in a state of electrification. While personally I believe that no vehicle should be sold with open recalls, I realize the huge challenge this presents. At the very least your dealership should ensure that recalls are fully disclosed and make a strong attempt to ensure the consumer knows this before leaving your lot.

While not in a position to offer legal advice, I would suggest that every dealership pursue the necessary recall management protocol in order to mitigate these types of legal liabilities.  We are in a litigious society and it’s imperative that your dealership take all measures necessary to reduce risk.  At the end of the day, dealerships will likely be held accountable as “experts” in a vehicle sales transaction by a judge or jury.  Again, effective management of recalls is not only the right thing to do, but the smartest.

While it is still legal to sell pre-owned vehicles with open recalls, the National Highway & Transportation Safety Administration has advocated that these vehicles not be sold -- Similar to how it is illegal for auto dealers to sell new cars, or for any rental car agency to rent vehicles with open recalls. The issue is still being debated, yet, at the moment, pre-owned cars with open recalls still remain eligible for sale.

Even the government has internal problems handling recalls. According to a letter written by three members of the House of Representatives to General Services Administration (GSA) Administrator, Denise Turner Roth, despite the fact that the GSA has a system which notifies them of open recalls for government vehicles in use, the agency continues to sell these vehicles at auction.

Instead of revealing any open recalls to a potential buyer, apparently, the GSA absolves itself of liability through a general disclaimer. While the GSA will pull these vehicles out of service when notified of an open recall and not allow their employees to drive them, they still dispose of them through auctions -- in essence implying that while the vehicle is unsafe for government employee use, they willing to pass the risk on to any subsequent buyer or owner.

Most consumers would probably assume that government agencies would refuse to sell these vehicles without first fixing all recalls – so as to maintain a consistent front with the NHTSA stance that these vehicles are dangerous and should not be sold.

My best guess is that the GSA is simply doing the job it is tasked with – namely disposing of government property that is no longer in use so as to recover some of its investment. The internal policies that cause this practice to continue could easily be rectified – without the need to pass any legislation. While the NHTSA is pushing for this standard to become law, the government agencies themselves could choose to implement their own policies internally and refuse to sell these vehicles, effectively protecting the American consumer from dangerous vehicles owned by its government.

American consumers generally hold the Federal government to a higher standard. They expect that the government would look out for the safety of its constituents by ensuring a cessation of sales of any dangerous vehicles. Available technology makes it easy to check recall information and it is no longer an arduous chore.

Recalls are such a pressing issue and there is enough confusion out there already with all the media reports and hype. Many consumers are already in a state of electrification. I feel it is important that government agencies offer a united front to consumers and should be on the same page. I sincerely hope the GSA takes heed of the NHTSA’s advice and discontinues this practice. It is important to put consumer’s minds at rest and to ensure that no lives are at risk due to vehicles purchased from the government with any open recall.

One dealer in Florida is taking a stand to ensure that pre-owned vehicles with open recalls never hit the streets. When the Takata airbag crisis first reared its ugly head, Earl Stewart of Earl Stewart Toyota, started informing customers of in-stock vehicles with open recalls by clearly marking them with signs, while still continuing to sell them.

In June of this year, Stewart did an interview with CBS News and it really hit a nerve when, in questioning him about defective airbags, the reporter asked, “How are you going to feel if one does explode in a car that someone bought from you here, even with disclosure, and they are severely injured or killed?” Stewart’s response was “How would I feel? I would feel absolutely terrible.” According to the story, Stewart decided to stop selling all vehicles with open recalls.

But he didn’t stop there.

According to Automotive News, Stewart wrote a letter to Florida Governor Rick Scott, the state’s House of Representatives and Senate. In addition, he started a petition on change.org in an attempt to make selling pre-owned cars with open recalls illegal. Stewart now uses his “consumer-first” stance as a competitive advantage and aggressively markets his dealership’s policy of not selling any vehicles with open recalls. He has a special page on his website informing customers of this policy and solicits consumers to sign his petition.

“All I care about is to stop the practice of selling these cars. Put them in the same category that you do with new cars. There’s no logical rationale whatsoever that you should not be able to sell a new car with a defective airbag, but you can sell that same car used. It’s even illegal to rent a car with a defective airbag,” said Stewart.

According to Stewart, his passion for this cause has been costly. He still needs to sell cars and still accepts vehicles with Takata airbag recalls as trades. His decision not to sell them has cost him more than $110,000 in storage and depreciation. At the same time that Stewart sides with consumer safety, his competitors continue to sell pre-owned vehicles with open recalls and, in his mind, have placed his dealership at a competitive disadvantage.

Figuratively painted into a corner, Stewart decided to sue his competitor.

With an unsaid fellowship amongst automotive dealers, many question Stewart’s motivation.  His position is that competitors are misleading consumers, disguising the fact that an open recall exists or the ease with which it can be fixed. Because Stewart felt so strongly that the competing dealership and/or its employees were intentionally withholding important information and, in some cases, egregiously misrepresenting the vehicles, Stewart sued his competitor under Florida’s Deceptive and Unfair Trade Practices Act.

It’s pretty rare to see dealers sue each other – especially when the recipient of the suit isn’t doing anything illegal and is, in fact, mirroring policies most other dealerships in the country exercise. It’s no secret – dealerships continue to sell pre-owned vehicles with open recalls. While a growing number of dealers are adopting similar policies against the sale of pre-owned vehicles with open recalls, Stewart’s decision to sue a fellow dealer clearly pins one camp against another. Whatever your position, one item remains true – selling pre-owned vehicles with open recalls is not in the best interest of the consumer. Internally, dealers must debate whether the benefits consumer safety and social justice marketing outweigh the costs of moving vehicle inventory. 

I sure as heck am not going to challenge or validate Stewart’s decision to sue another dealer, as that is not the point of this blog. What I love about this dealer is his commitment to consumer safety and to leveraging it as a market differentiator – smart guy. I certainly feel it gives him a unique selling proposition and competitive advantage in a market where consumers have valid questions about vehicle safety…. And then this happened …

Just as I was wrapping up this blog, an update on this situation appeared in Automotive News. Apparently, the dealer that was sued had a change of heart soon after the lawsuit was filed and adopted a policy not to sell the vehicles anymore. According to the article, his decision had nothing to do with the lawsuit. The motivating factor was that same question that CBS News asked Stewart during a segment in June -- how he would feel if someone was killed in a car he sold. The dealer considered the same question before ceasing the sale of used inventory subject to the Takata recall.

The legality of selling pre-owned vehicles with open recalls is currently being debated amongst federal and state legislators. If history serves as a roadmap to future legislation, my belief is that the industry would be wise to prepare. Laws that protect the consumer usually win out in time, as evident in the Safe Car Rental Act that was enacted earlier this year, requiring rental car agencies to remove from their fleets any vehicle with an open recall or face severe penalties.  The wheels are already in motion and the momentum seemingly impossible to stop.

Whatever the future holds for legislation, I sincerely hope consumers reward these two dealerships for their good deeds. Sometimes, doing the right thing, while challenging at first, pays off in the long run.

Think about the value propositions most dealerships present to consumers. Free car washes, fast transactions, oil changes, low prices, etc. They’re all so similar that, in reality, they cease to differentiate one dealer from another. The simple fact that they aren’t unique just about negates the offer for consumers when they consider who to buy from.

Nobody cares which Wal-Mart to shop at because they all have the same value proposition, low prices. So what kind of value proposition could a dealership come up with that would help dominate the market over their competition?

The answer may surprise you.  With today’s recall crisis being top-of-mind with consumers, how about guaranteeing that every car you sell is recall free? AutoNation recently implemented just such a policy and has been met with both media and consumer applause.

The reality is that nearly 1 in 5 vehicles on the road today has an open recall. And it gets worse – most drivers aren’t even aware that their vehicle has an open recall, and in many cases, if they are aware, the dealership doesn’t have the parts to fix it.

However, I can guarantee you that any customer going into a dealership – whether it’s a franchised dealer or an independent – is expecting to get a vehicle that’s been inspected, runs well and has no recalls. Therefore, the lack of any recall is just as compelling a selling feature as a vehicle warranty, for example.

Customers want peace of mind when buying a new or pre-owned vehicle. If you sell a vehicle with an open recall which the customer then immediately has to take into an authorized dealer service center to get fixed, the customer can feel as if they have been sold a defective product. This will increase the likelihood that they are unhappy with their purchase.

Some dealerships have chosen to ensure that customers are aware of any open recalls at the time of purchase -- but is that adequate? If you go to the grocery store and buy a dozen eggs. Then find at the checkout counter that two are broken and the cashier tells you that you need to come back next week to replace the two broken ones, chances are good that you won’t purchase the eggs or, at the very least, that you won’t be happy with your experience and will defect to a competing store for your future purchases. Sounds a little ridiculous in this example, right? But think about it. The customer EXPERIENCE is not that different at that grocery store to what happens when you sell a vehicle with an open recall at your dealership. The customer perception of that experience and desire to do business with you in the future would be the same.  You might even argue that, due to the amount of the consumer’s financial investment, the quality standards for a vehicle are substantially higher than that of a dozen eggs.

The “No Recall Guarantee” isn’t an easy guarantee to offer. It involves paying attention to each vehicle on a regular basis while in inventory, not just when you dealership first acquires it. The vehicle could have no open recalls when you first acquire it, but perhaps one is issued while in your inventory.

There are many times when you should check for recalls. For instance, in my last blog, I talked about the importance of checking for recalls at auction so as not to purchase any vehicles with open recalls, which helps decrease the number of units in inventory with open recalls.

It takes some work and a steadfast commitment to a reliable and accurate solution. However, the most valuable unique selling proposition any dealership can offer its customers is full confidence that any vehicle they purchase and drive away in is safe. To do that, you have to ensure that none of the vehicles in your inventory have open recalls.

Consumers are bombarded daily with news about new recalls. This is top-of-mind for them and a matter of huge concern. Consider implementing a no recall policy and telling your customers of this policy through all your marketing and by physically labeling your vehicles as such. You should find that this helps instill trust and confidence in your dealership while also increasing the value of the vehicle in the minds of your customers. This product confidence not only leads to increased profits, but also builds loyal and happier customers.

Embrace this policy and you could very easily find that your value proposition controls your market… and makes all of your competitors inferior when it comes to consumer choice.