6th Annual State of Automotive Recalls Summit 2018 Recap Number of - - PowerPoint PPT Presentation

6th Annual State of Automotive Recalls Summit

2018 Recap

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• Number of vehicles recalled in the U.S. has stabilized since elevated activity during 2014 - 2016
• Number of individual campaigns greater than years of exceptional activity
• Number of vehicles affected by recalls is consistent with prior year, and vehicles involved in

campaigns other than Takata inflator recalls is consistent with activity since 2015.

• Approximately 24 million vehicles recalled exclusive of Takata inflators
• Six non-Takata campaigns in 2018 affected more than 1 million vehicles (46% of non-Takata recalls):
• FCA electrical system: a short circuit in the vehicle’s wiring may prevent cruise control from

disengaging (4.8 million vehicles)

• Ford seatbelts: sparks from the deployment of the front seatbelt pretensioner may ignite materials

within the B-pillar area (1.6 million vehicles)

• Ford steering wheel: steering wheel may detach while driving (1.3 million vehicles)
• Ford fuel system: cannister purge valve may malfunction and cause an engine to stall while driving

without the ability to restart the vehicle (1.3 million vehicles)

• FCA latches: tailgate latch actuator limiter tab may fracture and cause tailgate to unlatch while driving

(1.1 million vehicles)

• GM steering: electric power steering assist may be lost momentarily (1 million vehicles)

2018 Recap

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• Largest recall of 2018:
• Issued by FCA related to 2014 – 2018 Dodge, RAM, Jeep and Chrysler vehicles may

experience electrical short preventing cruise control from disengaging

• 4,846,885 vehicles affected
• Smallest recalls of 2018
• 2 vehicles recalled by Bugatti and Mercedes-Benz

2018 Recall Sizes

2018 Recap

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Sources: Traffic Volume Trends November 2018, Federal Highway Administration1 Number of motor vehicles registered in the United States from 1990 to 2017, statista2

2018 Recap

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Source: Average Age of Automobiles and Trucks in Operation in the United States, Bureau of Transportation Statistics3

2018 Recap

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Source: Carfax Vehicle Recall Check4

2018 Recap

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• All remaining vehicles were scheduled to be recalled by 12/31/2018 (all unrepaired non-desiccated PSAN) 5
• All like-for-like replacements scheduled to be recalled by 12/31/2019 5
• On December 21, 2018, the Independent Monitor of the Takata Recalls issued a second report about the state of the

Takata recalls

• As of October 2018, approximately 17 million vehicles still had unrepaired defective Takata airbag inflators
• The Report discusses initiatives implemented by manufacturers resulting in unprecedented increases in recall

completion percentages, especially for the older and more dangerous vehicles affected:

• Improving data quality
• Segmented analysis
• Communications
• Overcoming owner inconveniences
• Dealer engagement
• Third party engagement
• Canvassing 6

Takata Update

2018 Recap

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Takata Update

• As of January 18, 2019, the overall recall completion percentage for Takata recalls was 65% 5
• The completion percentages for Priority Groups 1 – 9 are available at NHTSA.gov :

Data Analysis and Review: Recall and Defect Overview

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Recall and Defect Overview

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Recall Data Analysis: Process and Background

• Information downloaded from NHTSA website (www.nhtsa.gov) for historical recalls dating back to 1966
• NHTSA data provided detail regarding NHTSA campaign number, manufacturer, model and model year,

component, total units affected, and certain additional fields

• Stout analyzed recall trends for OEMs across various component groupings and timeframes

Recall and Defect Overview

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Year in Review: Stabilization in the Industry

• Takata inflator recalls have abated, providing insight into industry recall activity
• Units affected by recalls in 2018 nearly identical to 2017
• Non-Takata inflator activity is consistent over past four years
• Approximately 24 million vehicles recalled for non-Takata inflator defects in 2018
• Despite stabilization in number of vehicles recalled, number of campaigns has increased
• Average recall size declining
• Airbag recalls not associated with defective Takata inflators still represent the greatest number of recalls,

however electrical recalls affected more vehicles in 2018 (significantly influenced by FCA cruise control recall)

Recall and Defect Overview

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Analysis by Size of Recall

• Large recalls may be the most newsworthy, but historically have not been the most prevalent
• 65% (on a unique campaign basis) involve fewer than 10,000 units in 2018, many with significantly

less

• However, recalls of greater than 100,000 units consistent involve more than 85% of vehicles affected

by recall in any year.

• There has been a steady increase in the number of recalls involving fewer than 100,000 units since 2014
• Recalls over 100,000 units represented less than 20% of all unique recalls each year since 2014.
• We observe certain differences for large recalls as compared to small recalls, such as
• Differences in completion percentages
• Differences in age of vehicles involved
• Differences in frequency of suppliers being named in DIRs

Supplier Identification: 573 Letter Review

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Supplier Identification

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Part 573 Letter Review

• For each recall initiated, OEMs are required to submit a Part 573 Report that serves as notification to

the U.S. Department of Transportation, National Highway Traffic Safety Administration that a defect related to motor vehicle safety or noncompliance with Federal Motor Vehicle Safety Standards exists

• Required sections of report include:
• Manufacturer, Designated Agent and other Chain of Distribution Information
• Identification of the Recall Population and its Size
• Description of the Defect or Noncompliance and Chronology of Events
• The Remedy Program and its Schedule
• Manufacturer of Defective Component

Analysis of Part 537 Letters

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Supplier Identification: Observations and Conclusions

• Review of 573 Reports indicates continued trend of more frequent supplier identification, particularly

for certain components

• Both in terms of number of campaigns and as a proportion of total campaigns
• Airbags, electronic stability control, and hybrid propulsion represent components where supplier is

most likely to be identified

• Proportion of suppliers identified in recalls involving design related defects is declining, however

suppliers named in manufacturing related defects at levels not seen since 2008

Recall Completion Percentage Overview

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Recall Completion Percentage Overview

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Recall Completion Percentage Review

• NHTSA requires that beginning the quarter after the start of a recall, the manufacturer must submit a Quarterly

Progress Report for six consecutive calendar quarters. The deadline for the report is the 30th day of the month following the quarter’s end.

• In analyzing this data, Stout linked Quarterly Progress Reports to NHTSA’s larger recall database using campaign

numbers in order to analyze trends in completion rates across different subsets of recall data.

• Required Data to be disclosed includes:
• NHTSA-assigned recall identification number
• Manufacturer-assigned recall identification number, if applicable
• Various dates of notification for dealers and purchasers
• Number of items involved in the recall
• Number of items at respective quarter’s end that have been remedied
• Number of items as respective quarter’s end that have been inspected and determined to not need a remedy
• Number of items unreachable for inspection
• Number of items returned and/or repaired by dealers, retailers and distributors

Recall Completion Percentage Overview

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Recall Completion Percentage - Highlights

• Three recent campaigns achieved 100% completion:
• Model Year 2016 Honda Clarity –
• Fuel cell control unit may cause loss of power
• 471 vehicles affected
• Model Year 2019 Subaru Ascent –
• Missing spot welds in B-pillar area
• 293 vehicles affected
• Model Year 2018 Rolls-Royce Ghost –
• Head airbags may not fully inflate
• 3 vehicles affected

Recall Completion Percentage Overview

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Recall Completion Percentage - Highlights

• Older and larger campaigns that have achieved notable completion percentages:
• Model Year 2001 - 2002 Dodge Dakota, Durango, Ram van and Ram pick-up trucks vehicles –
• The ignition / park shift interlock system may become inoperative, allowing the shifter to be moved out of

the “Park” position with the ignition key removed; this can also allow the ignition key to be removed when the shifter has not been placed in the “Park” position.

• 576,418 vehicles affected
• 6 - 8 years old at time of recall
• 80.8% completion
• Model Year 1999 - 2000 Chrysler Cirrus, Dodge Stratus and Plymouth Breeze vehicles–
• Power steering fluid leakage in the presence of an ignition source may result in an under hood fire.
• 216,299 vehicles affected
• 6 - 8 years old at time of recall
• 87.0% completion

Recall Completion Percentage Overview

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• In addition to specific differences observed for certain OEMs or component groups, certain factors appear to have a

universal impact on the ultimate completion percentages for recalls:

• Vehicle Age: Completion percentages for recalls involving older vehicles are generally lower, sometimes
• significantly. This impact becomes more pronounced as vehicles get older.
• Recall Size: Completion percentages for larger recalls (>100,000 units) are often approximately 5-10% lower

than for smaller-sized recalls.

• Vehicle Type: Completion percentages for trucks and minivans appear to perform differently than for sedans and

full-size vehicles.

• Owner Ability to Self-Diagnosis: If the vehicle owner can easily self-diagnosis whether the vehicle suffers from

the defect, completion percentages may suffer.

• Outreach Efforts: New ways of engaging with vehicle owners is demonstrating success – email, television

advertising, print advertising, mobile apps, etc.

Recall Completion Percentage – Influential Factors

Recall Completion Overview

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• On December 21, 2018, the Independent Monitor of the Takata Recalls issued a second report about the state of the

Takata recalls.6 The Report discusses initiatives implemented by manufacturers resulting in unprecedented increases in recall completion percentages, especially for the older and more dangerous vehicles affected:

• Improving data quality: frequently refresh and supplement vehicle owner registration records
• Segmented analysis: Categorize affected vehicle owner populations by available attributes and develop targeted

communications

• Communications: send outreach that is: frequent, personalized, bilingual, conveyed through multiple channels, conveys

urgency and importance, contains a call to action, uses eye catching graphics, conveys repair is free, clearly identifies services offered

• Overcoming owner inconveniences: Offer free services that minimize repair inconvenience
• Dealer engagement: Proactively engage and motivate dealers to conduct recall outreach
• Third party engagement: Use DMVs, IRFs, insurers, auction houses and used car dealers to increase awareness and

facilitate repairs

• Canvassing: Engage in door to door canvassing of owners older unrepaired vehicles where repeated prior outreach has

been ineffective

Recall Completion Percentage – Keys to Further Recall Success

Recall Completion Percentage Overview

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• Completion percentage benchmarking can be utilized by OEMs and suppliers to:
• Monitor the pace of completion in active campaigns
• Ensure compliance with regulatory and enforcement actions
• Plan replacement part inventories and dealer service capacity
• Estimate potential financial exposure in cost recovery actions
• Identify appropriate risk mitigation and insurance strategies

Implementing Recall Completion Benchmarking

Electronic Component Defects

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Electronic Recalls and Software Recalls

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Electronic Components: Industry Highlights

• U.S. DOT released the policy document Automated Vehicles 3.0: Preparing for the Future of

Transportation in September 2018,7 containing principles to guide future policy:

• Multimodal safety guidance
• Clarification of policy and roles
• How to work with DOT as technology evolves
• Integration of DOT administrations
• In October 2018, Pennsylvania’s Governor signed an act which allows for “platooning” of two or three

buses, military vehicles, or motor carriers, using a combination of V2V communications systems and vehicle automation to control acceleration and braking to travel in close proximity.8

• Reduces aerodynamic drag, resulting in fuel savings and reduced emissions
• Reduces excessive braking, lessening impacts on infrastructure and decreasing congestion

Electronic Recalls and Software Recalls

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Electronic Components: Industry Highlights

• In January 2018, GM submitted a petition to NHTSA to put zero-emissions driverless

cars on public roads beginning in 2019.

• Vehicles would be built on the Chevy Bolt EV platform.
• Seeking permission to meet 16 safety requirements “in a different way.” 9
• Now open to public comment on the proposed exemptions for the next 60 days.

Electronic Recalls and Software Recalls

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• Our analysis of automotive electronics highlights the role of software in the failure or remedy of

electronic defects.

• Stout’s analysis has focused on the following categories of defects:
• Integrated Electrical Components (“IECs”) – Failure of electrical components due to physical defect.

Includes defects related to water intrusion, wiring failure, etc.

• Software Defect – Failure of components related to defect in operating software
• Software Integration – Failure results from software interfacing with other components or systems in

the vehicle

• Software Remedy – Software flash or replacement is identified as the appropriate defect remedy

Electronic Components: Analysis

Electronic Recalls and Software Recalls

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Electronic Components: Observations

• Recalls of electronic components have declined in 2018, however the number of campaigns involving

software based defects continues to increase

• IEC recalls have steadily declined over the past three years, while software based recalls have remained

stable

• One recall resulted in a significant increase in software integration activity in 2018:
• FCA electrical system (4.8 million vehicles): A short circuit in the vehicle’s wiring may cause the

system to stop communicating while the cruise control is active. The fault handling strategy in the ECM software does not remove positive torque requests in the event of the electrical short.

• FCA performed a software flash on the ECM to improve the fault handling strategy so any torque

requests will be cancelled in the event of a short circuit during a positive torque request

Electronic Recalls and Software Recalls

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Electronic Components: Defect Emergence and Tail Risk

• Electronic content in vehicles has been expanding in terms of amount of this content, and the

applications in which it is utilized.

• In an evolving technological landscape, manufacturers and suppliers may struggle to predict patterns of

failure and understand the duration of their potential exposure to failure of new components and technologies.

• While reviewing the individual defect descriptions associated with electronic recalls, Stout observed that

software-based defects (software defects and software integration) often appeared early in vehicle life and infrequently after the first two years.

• Electronic defects which involve the physical component (software remedy and IEC) were observed to be

less frequently concentrated around the early years of vehicle life.

• Stout has plotted the frequency of software-based and non-software-based electronic defects on heat

maps to visualize the emergence of these defects by model year.

• Red indicates the greatest number of campaigns by recall year and model year; green indicates the

lowest.

Electronic Recalls and Software Recalls

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Emergence of Software-Based Recalls

MAX MY 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 4 2010 1 1 1 2011 n/a 1 3 1 2 1 2012 n/a n/a 1 4 1 2013 n/a n/a n/a 2 3 1 1 2014 n/a n/a n/a n/a 4 11 3 2 2 2015 n/a n/a n/a n/a 1 5 20 1 2016 n/a n/a n/a n/a n/a n/a 2 9 1 2017 n/a n/a n/a n/a n/a n/a n/a 5 11 4 2018 n/a n/a n/a n/a n/a n/a n/a n/a 5 13 2019 n/a n/a n/a n/a n/a n/a n/a n/a n/a 7 Recall Year

Electronic Recalls and Software Recalls

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Emergence of Non-Software-Based Recalls

MAX MY 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 47 12 7 8 4 3 4 8 5 4 2010 31 72 15 6 8 6 8 10 5 5 2011 n/a 37 51 9 12 18 10 21 6 6 2012 n/a n/a 35 71 22 10 10 10 22 13 2013 n/a n/a n/a 33 76 27 15 11 4 18 2014 n/a n/a n/a n/a 36 102 28 19 15 6 2015 n/a n/a n/a n/a n/a 81 120 30 14 8 2016 n/a n/a n/a n/a n/a n/a 53 133 37 14 2017 n/a n/a n/a n/a n/a n/a n/a 66 136 21 2018 n/a n/a n/a n/a n/a n/a n/a 1 44 140 2019 n/a n/a n/a n/a n/a n/a n/a n/a n/a 66 Recall Year

Electronic Recalls and Software Recalls

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Electronic Components: Defect Emergence and Tail Risk - Observations

• Both software-based and non-software-based recalls exhibit their greatest emergence between years 1

and 2 of vehicle life.

• The software-based recalls show little emergence after year 2 (limited tail risk), while the non-software-

based recalls present a moderate level of recall emergence throughout all years in the analysis (continued tail risk through all 10 years presented)

• Software-based recalls are therefore more likely to:
• Be more predictable (limited tail risk)
• Involve smaller populations (less production history)
• Achieve higher recall remedy completion (newer and smaller vehicle population)
• Conversely, non-software-based recalls may:
• Be less predictable (longer tail)
• Involve larger population (more production history)
• Achieve lower recall remedy completion (potentially older and larger vehicle population)

Electronic Recalls and Software Recalls

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• Electronic components offer unique opportunities for vehicle safety, improved fuel economy and

performance, and driver convenience.

• While the nature and scope of potential consequences of electronic component defects is still developing,

we have insight into types of remedies available.

• In addition to studying the nature of the defects associated with electronic components, Stout has

reviewed and analyzed the remedy descriptions for each of these campaigns.

• Our analysis considers:
• Remedy procedures
• Remedy time
• Delivery methods
• Completion percentages

Remedies for Electronic Component Defects

Electronic Recalls and Software Recalls

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• Our analysis considers electronic defects involving IEC devices and those that relate to the software

controlling or interfacing with those devices.

• By the nature of our analysis, remedies of IEC devices involve inspection, repair, or replacement of the
• IECs. OEMs’ and suppliers’ exposures in these remedies are influenced by the cost of remedy

components, service labor times, and the number of vehicles that are repaired.

• Repairs to these components are not completed with software remedies.
• These nature of these exposures are not substantially different from those faced by defects found in

traditional components.

• Remedies of software-based defects may be remedied with a combination of replacement of the defective

component and/or an update to the software affecting the defective component. The past 10 years of remedies for software-based defects indicate:

• 90% involve software-only remedies
• 7% involve a combination of software remedy and component repair or replacement
• 3% involve only the repair or replacement of an affected component

Remedy Procedures

Electronic Recalls and Software Recalls

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• Remedy times for the inspection, repair, or replacement of defective components may be difficult to

estimate or predict without specific remedy instructions:

• Type of component
• Location of component
• Nature of defect
• Nature of repair
• Remedy times for software-based defects are more standard across a variety of defects.
• Stout gathered Technical Service Bulletins and reviewed remedy instructions for all software remedy

based recalls in 2018. We observed:

• Range of software remedy times: 0.2 – 2.0 hours
• Average software remedy time: 0.6 hours
• Remedy times typically provide for driving vehicle in / out of service bay, stabilizing the vehicle power

supply, connecting the service tool to the vehicle’s USB or data port, and performing the update.

Remedy Time

Electronic Recalls and Software Recalls

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• Most electronic defects, including those involving software remedies are performed by a service

technician at a dealership, requiring owners to make a service appointment and go to dealerships.

• Software remedies do provide opportunities for repairs to be performed without vehicles being taken to

the dealership:

• USB flash drive
• Over-the-air (OTA)
• To date there are only limited examples of USB flash drive or OTA delivery of software remedies for

defects resulting in recall:

• USB flash drive: FCA radio software vulnerability (15V461 and 15V508)
• OTA: Tesla overheating vehicle charger (14V006)
• GM and Ford plan to have most vehicles able to accept OTA remedies by 2020.10

Remedy Delivery Method

Electronic Recalls and Software Recalls

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• Delivery of software remedies outside of a dealership are more commonly found among service

campaigns other than recalls (TSBs).

• Most of these updates involve non-critical updates (e.g., infotainment, navigation map updates, and

sound system changes).

• Between 2017 and 2018, Stout identified 8 TSBs involving OTA updates:
• Two appear to describe a notification to dealers of a primary remedy issued over-the-air to vehicle
• wners, including one pilot program tested by GM.
• However, several service bulletins describe diagnosing and repairing failed OTA update attempts:
• One FCA OTA caused vehicle radios to become inoperative
• Three Honda / Acura service bulletins related to displaying error codes after attempted OTA updates.

Remedy Delivery Method

Electronic Recalls and Software Recalls

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• Remedy completion percentages for electronic defects are higher than those of all other recalls during

the period 2008 - 2017:

• Industry average= 76%
• Electronic defects average = 79%
• This is influenced in large part by the younger age of vehicles affected by electronic components and the

relatively convenience of the remedies available.

• Among electronic defects, we observed a wider disparity between those recalls involving IEC defects and

software related defects over the period 2008 - 2017:

• IEC = 76% (consistent with industry average)
• Software integration = 81%
• Software defect = 84%
• Software remedy = 86%

Remedy Completion Percentages

Electronic Recalls and Software Recalls

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• Software remedy completion percentages are further enhanced by the convenience associated with

remedies delivered directly to owners (USB flash drive and OTA)

• While limited recall data exists for these campaigns, we can look at three such campaigns that have been

executed to date:

• 14V006: Tesla charger (21k vehicles affected)– 99.7% completion
• 15V461: FCA radio software vulnerability (1.4M vehicles affected) – 99.0% completion
• 15V508: FCA radio software vulnerability (7.8k vehicles affected) – 98.8% completion
• Each of these campaigns involved vehicles that were 3 years old or less at time of recall and reflect a

wide range of campaign sizes.

• The nature of the remedy in these campaigns minimized owner inconvenience which provided for high

remedy completion percentages.

Remedy Completion Percentages

Electronic Recalls and Software Recalls

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• Recalls involving software-based defects, including the number of vehicles affected, at record levels in

2018, a trend that we expect to continue.

• These defects demonstrate more consistent emergence patterns and shorter tail.
• Software-based defects also provide more opportunities for software remedies:
• Most often do not involve component repair or replacement
• Limited service labor times
• Opportunities for alternative remedy delivery.
• Electronic defects exhibit higher recall completion percentages than industry averages, especially for

software-based defects.

Observations and Conclusions

Tire Recalls

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Tire Recalls

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• Each year about 33,000 tire-related passenger vehicle crashes occur, resulting in 19,000 injuries.11
• In 2017, 738 people died in tire-related motor vehicle traffic fatalities.12
• In 2014, the National Transportation Safety Board identified the following concerns related to tire

safety:

• Problems with the tire registration and safety recall system;
• Failure to establish the current level of crash risk posed by tire aging and lack of consumer guidance
• n the issue;
• Poor tire maintenance practices by consumers;
• Barriers to technological innovation that could prevent or mitigate tire-related crashes. 11
• Tires are susceptible to age and climate-related deterioration:
• “Tires are primarily degrading from the inside-out, due [to] permeation and reaction of the

pressurized oxygen within the tire structure, with rates proportional to temperature.” 13

• Large body of scientific evidence indicates that tires expire after six years.14

Nature of Tire Failures

Tire Recalls

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• Tire manufacturers are subject to the reporting and notification requirements of Parts 573 and 577 of the

Federal Motor Vehicle Safety Standards.

• Tire manufacturers are also subject to the tire identification and recordkeeping requirements of Part 574
• The tire labeling requirement applies to all new, retreated tires and non-pneumatic tires and tire

assemblies, and requires that manufacturers identify:

• Plant code identifying the manufacturer or retreader;
• Manufacturer’s code containing significant characteristics of the tire;
• Date code
• Retreaded tire mark (as applicable)
• Tire manufacturers are required to remedy defective or nonconforming tires within the first 180 days

after the later of 1) an owner’s receipt of a notification letter, or 2) the owner’s receipt of notification that a replacement is available.

Tire Recalls - Background

Tire Recalls

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• Tire recalls initiated by tire manufacturers differ from vehicle recalls involving tires. Tire recalls initiated

by tire manufacturers typically involve an issue of safety or noncompliance related to the manufacture, materials, or labeling of the tire itself.

• Vehicle recalls involving tires often include:
• Tires damaged during vehicle assembly
• Tire pressure monitoring systems
• Installation of incorrect tires
• In addition to the vehicle recalls involving the tire defects described above, Stout has reviewed the recalls

initiated by tire manufacturers.

• We have excluded certain unique conditions related to trailer tires, motorcycles, labeling, etc., in order

to focus on conditions that made lead to failures or safety defects involving light vehicles.

Tire Recalls - Background

Tire Recalls

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Tire Recalls

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Tire Recalls

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Tire Recalls

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Tire Recalls

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• Moderate level of tire recalls each year
• Typically about 9 recalls per year
• Average of 460k units affected per year
• Most tire recalls affect 10,000 or fewer units
• Average tire recall affects 54,000 units
• Majority of campaigns over past 10 years (55%) relate to tread / belt defects:
• Insufficient tread base
• Chunking / cracking
• Tread separation

Tire Recalls - Observations

Tire Recalls

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Tire Recalls

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Tire Recalls

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Tire Recalls

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Tire Recalls

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• Overall completion percentages for tire recalls involving passenger vehicles is approximately 30%.
• This is significantly below the industry average for vehicle recalls
• Tire recall completion percentages are significantly impacted by age
• Average completion percentage for tires older than five years is less than 5%
• There are several characteristics of tire recalls that impact completion percentages:
• Difficulty locating registered owners
• Limited requirements of independent dealer / distributors to collect registration information
• Limitation on manufacturer’s requirement to remedy
• Periodic replacement of tires by vehicles owners

Tire Recalls – Completion Percentages

Tire Recalls

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• Tire recalls are generally small and infrequent
• Tire equipment recalls are unique, and face different barriers to successful remedy completion
• Importance of engaging other stakeholders and understanding where risks remain
• Enhanced and creative outreach
• Data sharing with retailers, dealers, etc.
• Raising awareness
• Understanding risk profiles

Tire Recalls – Observations and Conclusions

Other Indicators of Defect

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Other Indicators of Defect

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• NHTSA recalls represent a focal point in the study of automotive component defects:
• Robust data set
• Specific vehicle model and production population data
• Detailed defect, consequence, and remedy verbatim descriptions
• While robust, this data is limited to safety defects that rise to the level of recalls.
• Stout has identified, collected, and analyzed additional sources of defect data to study

the emergence and patterns of other component defects that may not result in safety recalls. Beyond U.S. Recall Data

Other Indicators of Defect

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• Stout’s analysis includes these other sources of component defect information:
• Earning Warning Reporting (“EWR”) – Pursuant to the TREAD Act, NHTSA requires manufacturers
• f motor vehicles to report certain specified information about each incident involving deaths and

injuries.

• NHTSA Defect Investigations – NHTSA also provides a database of all defect investigations

conducted by the agency from 1972 through the present. Investigations may result in safety recalls, or may be designed to assess the scope or effectiveness of current recalls.

• Motor Vehicle Defect Petitions (“MVDP”) – MVDPs represent consumer submitted petitions to

NHTSA requesting the investigation of a potential issue. These petitions are reviewed by NHTSA, and if accepted can result in the launch of an investigation.

• Petitions for Inconsequential Noncompliance – Vehicle and component manufacturers are permitted

to request from NHTSA an exemption from the notification and remedy requirements of the safety act, due to the inconsequential impact of a known defect on vehicle safety.

• Technical Service Bulletins (“TSBs”) – Service procedures issued by OEMs to service technicians for

the diagnosis and repair of known defects. Defects identified in TSBs may subsequently result in recalls.

Beyond U.S. Recall Data

Other Indicators of Defect

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• International Recall Data – In addition to U.S. recall and component defect data, Stout has collected and

analyzed recall data from the following non-U.S. jurisdictions:

• Australia
• Brazil
• Canada
• Germany
• Japan
• United Kingdom

Beyond U.S. Recall Data

Other Indicators of Defect

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• Analysis of many data sets can provide a more comprehensive understanding of the risk of component

defect.

• U.S. recall data is robust and instructive, but analysis of other data sets provides additional perspectives:
• Nascent field incidents
• Defect and component failure patterns or other potential safety concerns identified by NHTSA
• Concerns of the public
• Insights into NHTSA’s approach to risk assessment
• OEM communications to technicians
• Incidence of automotive component defects abroad
• Understanding of component defect is enhanced by insightful analysis of multiple data sets.

Conclusions

State of Automotive Recalls Summit: Conclusions

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• Record number of U.S. light vehicle recalls identified in 2018
• Light vehicle recall activity appears to be stabilizing: 25M – 30M vehicles affected per year
• Average recall size continues to decline – a sign that the industry is proactively identifying and

responding to defects

• Recall completion percentages continue to improve. Early results indicate that recalls initiated in 2018

are on track to exceed recent remedy completion experience.

• Regulatory focus
• Industry reaction to recent recall activity
• Software-based defects increased significantly in 2018, but provide more opportunities mitigating

exposure to remedy costs while enhancing remedy completion

• Engaging stakeholders and information sharing provides a path to recall remedy improvements
• An informed understanding of recall risk is enhanced by industry expertise and comprehensive analysis
• f multiple sources of automotive component defect data

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Contact Information

For further information regarding this presentation please contact a Stout representative:

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Robert Levine Senior Manager +1.248.432.1294 rlevine@stout.com Neil Steinkamp Managing Director +1.646.807.4229 nsteinkamp@stout.com Raymond Roth Director +1.248.432.1337 rlevine@stoutadvisory.com

Footnotes

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1 – https://www.fhwa.dot.gov/policyinformation/travel_monitoring/18novtvt/18novtvt.pdf 2 – https://www.statista.com/statistics/183505/number-of-vehicles-in-the-united-states-since-1990/ 3 – https://www.bts.gov/content/average-age-automobiles-and-trucks-operation-united-states 4 – https://www.carfax.com/recall/ https://www.nhtsa.gov/equipment/takata-recall-spotlight 5 – https://www.nhtsa.gov/recall-spotlight/takata-air-bags 6 – https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/update_on_the_state_of_the_takata_airbag_recalls-tag_0.pdf 7 – https://www.transportation.gov/sites/dot.gov/files/docs/policy-initiatives/automated-vehicles/320711/preparing-future- transportation-automated-vehicle-30.pdf 8 – Pennsylvania Department of Transportation Request for Information for Vehicle Platooning, RFI Number 3518RF101 9 – https://www.detroitnews.com/story/business/autos/general-motors/2018/01/12/gm-driverless-car-fleet-cruise-av/109381232/ 10 – https://www.consumerreports.org/automotive-technology/automakers-embrace-over-the-air-updates-can-we-trust-digital-car- repair/ 11 – https://www.ntsb.gov/safety/safety-studies/documents/SIR1502.pdf 12 – https://www.nhtsa.gov/equipment/tires 13 – https://www.nhtsa.gov/DOT/NHTSA/NVS/Public%20Meetings/SAE/2010/MacIsaac_SAE2010.pdf 14 – http://www.tiresafetygroup.com/tires-expire-in-six-years/