Nissan, GM, Toyota recall vehicles; have we become a 'recall nation'?

Nissan, General Motors and Toyota have recalled millions of vehicles for faulty parts. Have we become a recall nation that lives and dies by the supply chain?
Written by Andrew Nusca, Contributor

Yesterday, Nissan announced that it is recalling 539,864 trucks, minivans and sport-utility vehicles for problems with disengaging brake pedals and inaccurate fuel gauges.

On Tuesday, General Motors announced a recall of 1.3 million Chevrolet Cobalt and Pontiac G4, G5 and Pursuit models for loss of power steering assist.

And of course, Toyota in late January recalled 2.3 million vehicles for faulty gas and brake pedals. Now, the U.S. Department of Transportation is investigating problems with recalled vehicles that have already been repaired.

Have we become a "recall nation"?

Some say the recalls are the result of the increasing complexity of vehicles, particularly electronics. But all of these recalls appear to be mechanical in nature -- in fact, U.S. transportation secretary Ray LaHood recommended that Toyota use electronic "smart pedal" systems that override the brakes.

In all three of these scenarios, major automakers were let down by weak links in their supply chain.

Auto recalls, of course, happen all the time, but rarely as widely --and dangerously -- as these. And the recalls are changing consumers' perception of their vehicles, too: no longer are cars perceived as uniformly made by one company. Now, like computers, they're seen (rightly) as an assembly of many parts.

The difference: a faulty computer is a lot less likely to cause you bodily injury.

As I alluded to in a previous SmartPlanet post, Toyota's recall highlighted its over-reliance on suppliers and its own de-prioritization of quality control in the pursuit of international growth and increased profits.

But GM and Renault partner Nissan joining the club may indicate that there exists an industry-wide issue when it comes to quality control oversight on a global scale.

The Chicago Tribune reports that Toyota insiders believe the problems stem from its messy corporate structure in the U.S.:

But it lacks a U.S. headquarters. The tasks of gathering information about sudden-acceleration reports, analyzing the problems and engineering fixes, as well as reporting the issues to federal safety regulators, were handled by different Toyota subsidiaries, each managed separately in many cases from Japan, former Toyota managers and employees say.

And documents released by House investigators show that some of the disjointed subsidiaries of Toyota had an explicit strategy to minimize safety recalls, saving the company hundreds of millions of dollars even while reports of fatal crashes were increasing.

That structure emerged in the last few decades, as Toyota rapidly expanded in the U.S.

Similarly, in response to his company's recall, GM vice chairman Bob Lutz recently said its power steering motor supplier -- partially-owned by Toyota -- was to blame.

The BBC reports:

"This is a case where, yes, we would blame a partially Toyota-owned supplier."

Mr Lutz said the supplier had not met "all requirements for reliability and durability".

"So we will have to see who takes financial responsibility," he said. "But this is a risk you sometimes take when you buy a complete system from a supplier."

This is shocking. Lutz is effectively passing the blame to a supplier -- making sure to mention the now stigmatized Toyota name -- and absolving his company of guilt, even though it remains responsible for ensuring the safety of the vehicles it ships, regardless of where the parts come from.

Meanwhile, while Nissan's recall is comparatively small, it's still the company's largest to date. If the fuel sensors and brake pins turn out to be the result of a supplier, it only reinforces the notion that automakers live and die by the supply chain.

The company that stands to benefit from all this is Ford. But even that company had supply chain issues, as recently as 2006.

An MIT Sloan Management Review article from 2000 analyzed automakers' supply chains and came to the conclusion that a buyer's lean logistics practices and internal policies "can have a profound effect" on its suppliers' ability to optimize operations.

"Before pointing a finger accusingly at their suppliers," the authors write of automakers, "perhaps they should examine their own policies and procedures."

The article cites "just-in-time" delivery policies at the center of it all.

A few takeaways from that report:

  • Japanese automakers, when compared with their U.S. counterparts, tend to emphasize long-term business relationships.
  • U.S. suppliers perform at much higher levels when they are supplying Japanese automakers than when working with U.S. automakers.
  • Under pressures from the U.S. government, Japanese automakers set out to find local supply sources that could meet their stringent cost, quality and delivery standards. To ensure this, they decided to invest in teaching suppliers lean manufacturing techniques.
  • Japanese transplants to the U.S. typically develop close relationships with a small number of suppliers and integrate those suppliers with existing systems through "extensive information exchanges."

A similar report from MIT Sloan -- this time from 1997 -- shows the benefits and drawbacks of lean manufacturing:

The rapid flow of goods and information required by lean production is costly and difficult to achieve. Lead times are longer and inventory levels higher in international supply chains compared to domestic examples. Longer supply chains are also associated with poor sales-forecasting accuracy and significant delays in resolving technical problems. The study suggests that managers systematically underestimate these costs because they tend to plan for a relatively stable chain and do not fully appreciate the complex, dynamic way in which various disruptions affect a geographically dispersed supply chain.

Points from that article:

  • Some elements of lean production facilitate globalization.
  • The reduction of defects and fewer change orders help to stabilize the supply chain.
  • "Just-in-time" delivery is affected by geographic dispersion of the supply chain.
  • It is difficult, time-consuming, and sometimes impossible for distant, low-cost vendors to incorporate engineering or volume changes quickly. Why? Rapid, broad-based communication about specifications is difficult to achieve.

Suddenly, Toyota's problems have become apparent: by insisting on running the entire global ship from Toyota City -- yet still insisting on just-in-time delivery -- it couldn't react quickly when significant problems were discovered at the bottom of the corporate food chain.

That may also be Nissan's problem: the No. 3 automaker in Japan, it first knew about the problems stipulated in the recall in 2006.

The exception here is General Motors -- only in the last six months did the National Highway Traffic Safety Administration receive enough complaints to open an investigation.

When the global economy tanked in 2008, many were astonished to find that banks deemed "too big to fail" did.

Are automakers too big to succeed?

Image: "Typical laptop computer"/Sourcemap.org

This post was originally published on Smartplanet.com

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