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Defective Air Bags Trigger Largest Recall in History

ASCM CEO

Friday May 22, 2015


Air bags, key components in automobile safety systems, are at the root of the biggest consumer product recall in US history. According to the Washington Post, nearly 34 million cars and trucks nationwide were declared defective because of faulty air bags, which, when deployed, can eject sharp metal pieces. The air bags are made by auto-parts manufacturer Takata, and they are linked to six deaths and more than 100 injuries.

“The nationwide recall effort is expected to be a logistical nightmare for the auto industry, costing billions of dollars and potentially overwhelming automakers, parts suppliers, and dealerships already struggling to find enough safe replacement parts,” the Washington Post’s Drew Harwell writes.

The recall involves popular models from BMW, Ford, Honda, Toyota, and others. While owners wait for notifications about whether their own cars are affected, experts predict it could take years for all of the recalled cars to get needed repairs, according to the Washington Post.

The National Highway Traffic Safety Administration (NHTSA) announced Tuesday its intent to begin a formal process to organize and prioritize the replacement of defective Takata inflators under the agency’s legal authority.

US Transportation Secretary Anthony Foxx called the situation “probably the most complex consumer safety recall in US history.” Adding to the complexity, investigations by Takata, automakers, and independent researchers have failed to pinpoint a definitive cause for the air bag ruptures. Because of this, lawmakers are pressing Takata and the NHTSA to escalate their research efforts.

Starting in February, NHTSA began fining Takata $14,000 a day for failing to cooperate with the agency’s investigation. The fines, which had reached about $1.2 million, were suspended on Tuesday when Takata agreed to the national recall.

Although the recall affects cars sold in the United States, Takata’s materials are made in 56 plants located in 20 countries, the Washington Post reports. At best, Takata could make millions of new air bags a year, but not tens of millions.

The article quotes Karl Brauer, a senior analyst at Kelley Blue Book: “A recall of this scope illustrates the potential for massive automaker expense and consumer inconvenience when a common, mass-produced part is defective. Ironically, the use of common parts across markets and manufacturers is meant to save money, yet a recall of this size will cost the industry billions.”

Supplier risk and reward

Initially, this week, I intended to write about a recent study highlighting how much money weak supplier relationships cost car companies. An article on the study appeared in Monday’s Wall Street Journal. Instead, Tuesday’s announcements make it necessary for me to write about this substantial recall, which I will continue to highlight in Supply Chain Management Now as it evolves. Both news events focus on the risks and rewards inherent in supplier relationships. As professionals in this field, it’s essential for you to understand this critical balancing act.

APICS provides valuable resources that help supply chain and operations management professionals prevent, prepare for, and overcome major events such as automobile recall announced Tuesday. First, consider the APICS Risk Management Education Certificate, which prepares participants to develop a global risk mitigation strategy. In addition, this year, APICS will offer a risk and resiliency learning path at APICS 2015, October 5–7, 2015, in Las Vegas, Nevada. Visit apics.org for more information about these or any APICS resources.