Vehicle Recall on Consumer Perception

¶ … Vehicle Recall on Consumer Perception

Product recall

The effect of vehicle effect on consumer behavior

Vehicle recall and marketing

Effects of recall motor Vehicle Industry

In this research, we evaluate the effects of motor vehicle recalls on consumers' perception of brand and safety. The perceptions of the consumer are evaluated as well as the brands that are susceptible to recalls. Our focus however, is on Ford Motors. The effects of vehicle recalls on consumer safety and brand loyalty are evaluated also investigated. A recommendation of the best vehicle recall framework is presented.

Every year, millions of vehicles costing billions of dollars get recalled to their manufacturers due to safety related defects. This presents a significant amount of concern to the companies that are concerned, their stakeholders as well as customers. In this paper, we explore the various perceptions that customers form of companies that recall vehicles. The effect of vehicle recall on the customer's perception is therefore investigated.

Product recall

Product recall can be described as a request or process of returning either a batch or entire product to the producer due to discovery of defections and safety issues. Recall happens in cases where a product has been detected to have significant substandard quality and is found out to be violating on consumer product safety regulation standard hence dangerous for consumption (Pruitt and Peterson 122). The process of recall begins with a detection of defect by either, the federal agency, producers, distributer, a retailer or a customer. If the defect has been detected by the manufacturer, then they can recall the goods immediately, but if detected by others as stated, it then implies that communication must be done to the company hence needs time to act. It is clear that recall can either be initiated by the affected company or under the directions of a federal agency.Recalls always presents major challenges to manufacturing companies including; serious damage to the brand integrity, reputation of the manufacturing company and hence reduced sales volume (Cheah 428). On the other hand, it can portray a positive image of the company depending why the recall was undertaken. Recalls can be categorized into three depending on the percentage of the product involved in the recall process thus; Major recall where more than 20% of the products are recalled; Medium recall occurs when the manufacturing company recalls products ranging from 10% to 20%; and finally minor recall happens when the manufacturing company recalls products less than 10% (Hartman 368).

Before undertaking the recall process, the company is supposed to set budget aside for the process, this is because the manufacturing company shall be required to meet all the costs including; notification to the customers on the products to be recalled, cost of correcting the defects; transport cost from the customer to the manufacturing company and back. It is also clear that the manufacturing company shall meet indirect cost like damage to the brand quality, bad reputation to the company both leading to reduced profits (Pruitt and Peterson 122).Every year, millions of motor vehicles valued at millions of dollars get recalled by their manufactures due to safety-related defects. Consumers are heavily affected by these recalls since they feel a sense of danger as their lives. This subsequently affects their purchase decision and loyalty. The National Highway Traffic Safety Administration (NHTSA 1) reported about 37,261 road carnage fatalities. It has been observed that most road accidents are caused by the misbehavior and mistakes of the drivers (Bae & Beni'tez-Silva 2). It is however, worthwhile to note that vehicular defects play an important role in the cause of road carnage. Bae & Beni'tez-Silva (1) pointed out that more than 16 million cars were recalled in 2009 alone. Bae & Beni'tez-Silva (2) define safety defect to a problem that a certain vehicle has or that equipment in the vehicle has and that poses a risk to the safety of the vehicle. In order to get rid of the defective vehicles from the road, the NHTSA demands that all vehicle manufacturers recall the defective vehicles and then fix the defects at no cost to the motor vehicle owners. The last couple of decades have seen an exponential increase in the number of motor vehicle recalls. The National Traffic and Motor Vehicle Safety Act mandate the NHTSA to require that motor vehicle manufacturers recall all vehicles that have defects that are safety-related and that could cause the loss of vehicular control. Such defects could affect the steering and braking system and lead to the stalling of the motor vehicle. There are laid down motor vehicle safety standards that must be adhered to by the manufacturers. According to Bae & Beni'tez-Silva (2), the recalls can either be voluntary or involuntary. The voluntary recalls should be communicated by the manufacturers according to the government directives. Failure to comply with the government recall decisions may lead to a legal resolution of the ensuing dispute. The negotiation that occurs between the government and the auto manufacturers is discussed by Tobin (534). The NHTSA also provides the motor vehicle owners with information on how to launch complaints.

The recall process

Since the late 1960s auto mobile manufacturers have been required to give notice to the owners of their vehicles which they feel relates to their safety. Recently motor vehicle manufacturers have been faced with a new source of embarrassment and concern which is known as the auto mobile recall. After products have entered the market place and some sold then defects are apparent. The same are usually safety related. In cases where defects are detected then the manufacturers of the said products may issue a recall of those products that already in market. Recall is a procedure that is taken by a manufacturer to remove a certain product from the market. The process of recall affords manufacturers the opportunity to repair or replace the products that are defective. These procedures are often costly to the manufacturers but cannot be compared to the cost of several law suits that may be file against them or the loss goodwill among the consumers.

The process of issuing recalls varies with the kind of product in relation to the effect that may be caused to the consumer. Manufacturers are required to emend and/or repair at no charge only the defects that do exist at the time and period of the recall. The recall laws do not apply to owners of motor vehicle who had experienced certain problems before a manufacturer announces recall even if they had repairs made at their own expenses. Moreover, the manufacturers will not be liable for any damages caused by the defects. For example, if motor vehicle owners have a defective tire and it blows out which leading to damage to the brake, then the manufacturers are not required to pay for the brake damage.

This therefore means that the consumers that are affected by the recall are wise to have the recall work done as soon as the recall notice is issued. There are however a few exception to the rule of recall. In instances where consumers are able to provide sound and reasonable documentation of damage suffered as a result of a defect, manufacturers of the product have agreed to pay and cover the cost of the damage incurred voluntarily. By doing this the manufacture will be able to repair damage image.

There is however restriction on the consumers' rights to take advantage of the recall process. For example, issues regarding the age of the motor vehicle. There is always a limitation regarding the herein referred issue. In order for one to be eligible for repairs, replacement or refund the motor vehicle must be less than eight-year-old on the date of the defect. It is usually based on the date sold to the first purchaser. In the event that there is a recall of motor vehicle a customer is liable to replacement, repair or refund of the defective part without any charge and that the same should occur within a reasonable time. There are procedures that ought to be followed by the manufacture so as to remedy the consumer after a defect is discovered and then a recall ordered. The manufacturer is therefore given time to develop procedures so as to remedy the defect, to instruct and inform the distributors or dealers of the said product on how to repair the product, to provide the parts that are necessary for replacement or repair and also to communicate to the consumers about how the recall process will be conducted.

Since the recall process involves time consuming steps the manufacturers are therefore given a reasonable time to correct and remedy the defect. The time is usually 60 days which is summed from the time that the parts are available. The manufacturer is therefore required to specify that information in its recall letter.The consumers are highly affected by the recall process of motor vehicle as the process is time consuming and the consumer may be forced to abandon his/her schedules so that he can be able to get replacements, repairs and/or compensation for the damage caused. They may be forced to follow the technical procedures that are related to the recall that may seem time consuming on their part.

In cases where the defect has caused the life of someone then monetary compensation may not suffice as life is deemed precious than the monetary compensation that may be awarded. Recall usually causes a lot of disruption to consumers hence creating a major confusion to the personnel using the product. Disruption will lead to consumers change their plans so as to meet the demands and meet the deadlines set by the manufacturers. States have laws known as lemon laws which are meant to curb and protect consumers who buy new autos against ones that are defective. The defective vehicles are usually referred to as lemons. These laws entitle the aggrieved consumers to a replacements vehicle, or refund as long as the motor vehicle meets certain standards that are set by the law. The National Highway Traffic Safety Administration ( NHTSA) gives the power that require manufacturers to recall all the motor vehicles with safety-related problems that may cause loss of motor vehicle control such as fire, braking, repeated stalling or steering. The NHTSA regulates motor vehicles and motor vehicle equipment.

A report is to be taken to NHTSA within five working days where a manufacturer determines that a safety-related defect or noncompliance with a NHTSA regulation exists in its product. The manufacturer's proposed remedial program is to be included with the report. This remedy will always include a recall of the affected products from the customers' control if the product has made it into the market. Because on-road motor vehicles must be registered with some governmental entity, it is generally easier to find the current owner s and communicate with them than is the case with most consumer products. A manufacturer must also report to NHTSA when a foreign government requires a recall of an identical or substantially similar vehicle or equipment. There is a standard required by manufacturers to maintain known as Federal Motor Vehicle Safety Standard to regulate vehicles in order to sell their vehicles in the market. Even if they comply with the standard, if serious accidents occur or are expected because of potential defects, then a recall is required. The recent massive recalls by Toyota, which have included full product lines and over 6 million vehicles (in the U.S. alone), have brought the issue to the front pages around the globe, and have prompted some to suggest the need for the government to better regulate the vehicles that manufacturers put on the road.

Types of recalls

There are 2 types of recalls

i. Mandatory and ii. Voluntary The manufacturers are given the opportunity by the state to announce recall on a voluntary basis. If manufacturers disagrees with the State's decision to recall its products the dispute can be resolved in courts.

When the owners think that their vehicles have any safety-related problem, then the NHTSA releases information on how to complain. When they are injured in accidents, and think that their injuries are due to those problems, they are asked to file a defect report directly to the NHTSA. Alternatively, they may report the problems to the manufacturers.

The legal process is usually long, For example, a Firestone tire recall that affected some

Ford vehicles took more than 7 years from the first report until they reached a decision that is final. There are several steps that may be followed before a final decision is made to recall the defective vehicles. The manufacturer can start the process of recalling once the defects are found to be unsafe even where no complaints have been reported and recorded by their consumers. The first step is taken by the regulatory agency, is known as "screening." Once all the information from the reports is entered into a database, technical staff at the Office of Defects Investigation (ODI) of the NHTSA looks at the complaints and check if there is any trend in accidents. If the trend shows an increasing risk of accidents, then the NHTSA starts an investigation. The next step is called "petition analysis." However, this does not always follow screening because any person can submit a petition to the NHTSA. For example, an owner who had a serious injury from an accident can write a petition to the NHTSA, when he or she believes that there may have been some defects in the vehicle that may have played a role in causing the accident. The role of the NHTSA is then to decide whether the petition is accepted or denied. Once it is accepted, more detailed investigation is conducted. In the final stage before recall issuance, the ODI sends a notice to manufacturers to give them an opportunity to argue against it or provide new evidence. Manufacturers can issue a recall at any of the stages, which makes the recall voluntary. If the manufacturers do not recall, then the NHTSA investigates further. If the government experts find the safety standard has been violated, the government agency contacts the manufacturer who starts the recall process. In rare occasions the manufacturers fight the decision of the government and bring the issue to court. Once recalls are announced, notice letters are sent to their customers by the manufacturers and also the recall is announced through the media so that the vehicles can be brought in and the defects fixed.

Any manufacturer selling goods needs to assume a minimum post-sale duty to warn. More than half of the states have adopted some version of this duty, either through the courts or the legislatures.If the manufacturer's product was defective at the time of sale, the common law provides generally that a highly effective recall will not cut off liability for the manufacturer. A post-sale duty to warn is based on negligence. So, while a manufacturer may successfully defend this cause of action, the existence of the recall or other remedial program may be considered an admission that the product is defective. The manufacturer could still be held liable for selling a defective product where that product injured someone.

The common law basis for post-sale duty to warn is negligence. Judge Learned Hand's formula for negligence is used for determining whether this duty has been met is the reasonableness of the manufacturer's conduct after balancing the risk of harm against the burden on the manufacturer to reduce the harm. The question becomes, "What action would a reasonable manufacturer undertake if faced with these circumstances?" And the answer is that the greater the risk to consumers and other product users, the more the manufacturer must do to minimize that risk. Or in other words, the higher the risk, the more the manufacturer needs to do to minimize the risk to consumers and other product users. An effective recall is based on many considerations. The general factors that affect the outcome include the perceived risk to consumers and the difficulty for the manufacturer of reducing or eliminating risk. Considerations that affect the latter factor include product cost, the product's distribution in the marketplace and difficulty in conveying notice to those at risk. The level of risk is reduced if people discontinue use of the product. Actually retrieving the product may not be necessary. Given notice, a consumer may destroy the product or stop using it or change her behavior when using it.

At some point, most manufacturers will have to undertake a post-sale remedial program in connection with one of its product. The programs could include consumer warning, retrofit, recall or safety upgrade. These programs may be instituted as a result of a series of accidents, law suits, consumer complaints, and a change in standards, a safety improvement, a governmental order or even a request. Manufacturers need to be prepared to recall their product even if they have not done so before. Once a product has issues with regard to its safety then the manufacturer may find it hard to develop plans as soon as possible before a lot of damage is caused. Earlier preparation for a recall before it happens can significantly increase its effectiveness and more so lessen disruption and cost.

Manufacturers also need to develop and employ a pro-active and before sale product liability prevention techniques so that a recall will not be necessary in the first place. Manufacturers should also not assume that their effectiveness rates are static and cannot be changed or improved. With the technological advancement today this therefore means that they could increase their ability to communicate with the distribution chain and even the consumers about the recall. They should also look for other ways to improve the success of their recall procedures and other post-sale remedial programs as the will help minimize risks and potential accidents which would in turn reduce the consequences and effects that may be caused to the consumers as a result of the recall process

Literature review

Extant literature has been dedicated to the study motor vehicle recalls. Crafton, Hoffer,

and Reilly (700) studied the effects of motor vehicle on the consumer demand. Rhee and Haunschild (101) however examined the effects of vehicle recall on the reputation of the manufactures. Jarrell and Peltzman (512) on the other hand evaluated the response of the stock markets to product defects. Rupp (265) also examined the effects of vehicle recalls on motor vehicle sales. Rupp and Taylor (124) on the other hand study the vehicle recall initiation process. They indicated that government usually initiates the less hazardous vehicle recalls that have an effect in several cars while the inexpensive vehicle recalls are initiated by the manufacturers. Huble and Arndt (33) used a GM truck and their crash data to support various points in a vehicle safety dispute. A study by Wynne and Hoffer (157) indicated that the vehicle recalls had no impact on the sales volume of the affected company. Crafton et al. (612) shown that the vehicle recalls for safety-related reasons produced a short-term effect on the product sales. A study by Jarrell and Peltzman (513) indicated that vehicle recalls may produce an effect on the stock price of the affected company. Other authors evaluated the effect of recall on various vehicle brands shown that recalls affected both sales and the affected company's market share. The intensity of the recall however was shown to vary with the level of media campaign against the manufactures of the defective vehicles. Numerous studies have been conducted regarding the various effects of vehicle recalls on the consumers. A number of the studies have been based on the kinds of regulation on vehicle recalls (Tobin 532). Similarly, Rupp and Taylor (124) conducted a study on the indirect costs and also the external costs that are linked with the consumers, the capital market and the reactions of the media to vehicle recalls. A huge number of studies on vehicle recalls are considering share price and market share to be dependent variables though the outcomes of these researches are contradictory. Early researches concerning the reaction of the market to recalls established that a number of recalls are having very little control on the demand for new vehicles by the consumers.Conversely, some studies on the effects of vehicle recalls established that vehicle recalls are having a considerable negative effect on the outstanding values of the recall-prone vehicle models (Hartman 368). A considerable number of literatures that is connected with vehicle recalls looked at topics like the impacts of vehicle recall on the demand of the consumers for the motor vehicles (Crafton, Hoffer, and Reilly 700) and the resale prices and the wealth of many manufacturers (Jarrell and Peltzman, 513). Nichols and Foumier (1999) conducted a research on the effects of vehicle recalls on manufacturer's reputation. Jarrell and Peltzman (516) critically analyzed equity reactions to vehicle recalls. The two estimated the losses that occur to the manufacturers because of vehicle recalls. The results of Jarrell and Peltzman (513) are showing that shareholders are bearing very huge losses which are so large that they are capable of dominating the direct costs of vehicle recalls. Hoffer, Pruitt, and Reilly's study (96) is showing that the recalls of new models that are having numerous safety defects are generating the biggest corrective rates.Rupp and Taylor (124) have also investigated the origin of vehicle recalls (the people originating recalls).They studies are finding out that several governments originates large, but less dangerous recalls. They are also finding out that the manufacturers originate recalls that are not expensive. While several studies have comprehensively noted the equity reactions to vehicle recalls and consequent losses of the shareholders, very minimal attention in the studies has been granted to investigating the destructive vehicle recall attributes. By the use of automotive safety vehicle recall information from the year 1973 to the year 1998, some studies have identified the types of vehicle recalls that care capable of causing considerable losses to the shareholders. Vehicle recalls have comprehensively been scrutinized in several studies with researchers establishing that they typically cause damages to shareholder value despite the fact that the response of equity to vehicle recalls has greatly attracted significant attention, the vehicle recall attributes that results into these important losses to shareholder has got very little attention.There had been previous examining the reaction of the market over long periods of time and whether this response is different between auto motive companies.Rupp (265) is comparing the equity reactions of automotive recalls initiated by the government and those that are initiated by the automotive firms.

Effect of vehicle recall on consumer perception

Vehicle recall gives the affected motor vehicle company a bad image. Ahluwalia et al. (204) pointed out that negative publicity can have a detrimental effect on the perception of consumers. Product recalls are made by companies at their own volition or with the demand from the government. Both forms of product recall have been indicated to be carried out as a result of the potential risk as that they pose serious safety risk to the consumers as pointed out by (Mowen et al.,1981). The numbers of recalled vehicles as pointed out earlier are continuously increasing. The 2004 Consumer Reports pointed out that in 2002 alone, about 19 million motor vehicles were recalled.De Matos and Rossi (113) pointed out that despite the increase in the number of vehicle recalls as well as the potential negative effect on the consumer brand perception, very few research studies have been dedicated to the empirical investigation of the consumer processing of the negative information as well as the factors that affects the process of developing negative perception. Siomkos and Kurzbard (283) pointed out that most of the marketing literature regarding product recall has a sharp inclination on the managerial aspects as well as business case study.

Product recall

A large number of marketing studies regarding product recall are from the domain of public relations. These literatures have a focus on the managerial techniques of implementing product recalls Smith et al. (1996) as well as on risk assessment and management regarding product recall (Siomkos and Kurzbard, 283). Yet again, not much empirical studies have been dedicated to the examination of how the consumers do perceive as well as react to the needs of product recalls. Mowen (405) pointed out that few studies have been dedicated to the study of the variables that influence the process of perceiving the influence of product recall on a given product. Mowen (405), employed the experimental approach in the manipulation of variables like the consumer knowledge of a given company that is recalling its products. The outcome was that consumers perceived companies that are well-known (familiar ones) to be less responsible for the product defects as compared to the unfamiliar companies. Studies indicated that companies that sprang into action prior to the intervention were perceived by consumers as less responsible.

Mowen et al.(405) in a non-experimental study surveyed 200 consumers with the aim of investigating the perception that they had for four firms that had performed product recalls. Ford was one of the firms that were surveyed. The other three were Corning Glass Works, Forestone and Conair. Their study indicated that the reactions of the consumers were heavily influenced by the fact that the recall knowledge had been imparted on them and the knowledge made them to perceive danger of the product that is defective. The perceived level of the companies for the defects was also a factor. Their work also pointed out the fact that the number of product recalls would increase with time due to the increasing level of consumer activism that emerged in the early 1960s, the involvement by government agencies on product activism. Such organization include Consumer Product Safety Commission as well as the Food and Drug Administration. The increasing complexity of product was also mentioned as a factor.

Product recalls are a source of negative publicity and can result in a severe damage to corporate image. In an effort to decrease the level of negative publicity that can be created by product recalls on the overall computer behavior, the forms initiating product recalls should adequately emphasize that they are making the move for the sake of corporate social responsibility as pointed out by Mowen et al.(405). The other factors that can effectively influence the manner in which consumers perceive the product recall information are the source of the information as well as how the information is relayed by the media. Another study indicated that the product recall information was perceived by the consumers to be more objective if it was channeled/sourced from the government and not by the firm itself. The print media was also perceived as being trustworthy and more objective.

Most of the existing literature on the recall of products puts a lot of emphasis on the part of management issues (Souiden and Pons, 106). Most of these available studies have particularly analyzed on the managerial issues such as; best ways to implement the product recall campaign how to manage the product crises once they happens (Siomkos and Kurzbard, 274); while others have majored on how to minimize the impact of product recall crisis on the capital market shares All the mentioned studies provide emphasis on the importance of a manufacturing company's preparedness to deal with product recall once it occurs. It is therefore important that every manufacturing company should have a clear plan on how to manage product recall crisis, the plan should be very clearly understood by all on what to do once a crisis is detected and who to report to if you detect a crisis on their products.

On developing such plans, the manufacturing company should put into consideration the fact that the process should collaborate all sectors including marketing, legal, distribution, safety all involved in sale experiences. The plan should also consider on how consumers can get positive information during product crisis, this is because most of the times consumers often receive negative information about the products and the concerned company, this helps in shaping their attitude towards the company once a product crisis is detected (Siomkos and Kurzbard 274).

The management of manufacturing company should take note that there are several factors which influences the success of a product crisis including; Corporate reputation where companies which has had good reputation before may have limited reputational damage due to product crisis; secondly; the impact of information relayed by the media as concerning the crisis can shape the opinions negatively or positively; and thirdly; how the company responds to the crisis depending on whether the recall was initiated with the company or the recalling company has decided to recall the products under the directions of a federal agency (Siomkos 28), there is high likelihood that in cases of voluntary recall the customers will trust the company that when the company has decided to work on a recall under a direction of a federal agency concerned (Siomkosand Kurzbard 274)

Even though there are several number of researches and studies which elaborates on product recall from the management of view, a few experimental studies which investigates the customers reactions to the product recall process have also been undertaken including; analysis of factors which influences customers judgment on motor vehicle recall in Brazil (Vargas Rossi and De Matos 113) where the researchers concluded that several factors can attribute to the customers reactions to product recall process including social corporate responsibility, reasons for recalls and what customers perceived to the dangers involved in the defects.

It is very clear that even this stream of available research wok has not been able to consider the perception of the customer towards the way crisis and communication has been managed by the companies. In practical, the company which is undertaking recall process should portray clearly to their customers that they are working on a socially responsible manner (Mowen et al. 1981). Managers should learn to know that customers may have a contrary view to the company's action even though the company might be acting responsibly by dealing with the product crisis. Hence the company should be able to have a strategy of dealing with the negative perceptions of the customers which might spread even after the crisis.

The way in which the manufacturing company shall handle the perceptions of the customers matters a lot and can be justified in different ways including; the attitude of the customers toward a company after the crisis depends on how the same customers perceived the company to have dealt with the recall crisis, if the customers feels that the company responded responsible to the crisis, then the customers will have positive perception towards the company the reverse is also true; In some cases, the customers may see that the company is managing the product recall in an opportunistic way, this is likely to create a negative perception of the customers towards the company.

In the marketing world, it is very clear that reputation which is accorded to a particular brand of a company's product distinguishes the company with her competitors hence providing the company with benefits over others including; enabling the company to have easy access of finance, the brand also offers protection to the company against introduction of others in the market; provides the company with an opportunity to request for prices increases (Podolny 1993)

Contradictory role of company's reputation in relation to the effects of a product recall campaign has been highlighted by the previous literature. The reputation of a particular brand is capable of creating customers expectations in the mind of the customers about the quality of the products of a company . Once a company have a good reputation, the good reputation mitigates automatically mitigates the consequences of product recall process.

From the above reasoning, different point can be raised on how reputation of a brand can lead to moderating impact of effective product recall crisis management, the reasoning includes; first, there is high likelihood that in a case where customers have perceived that the company is managing the product recall process in a responsible way, the customers attitude towards the company will always improve sustainably provided that they had high brand reputation before. Secondly, on the other hand, in a case where customers perceived that the company is managing the product recall process in an opportunistic way, the attitudes of the customers is likely to deteriorate significantly provided that they perceived the brand to be of high quality before the crisis.

The effect of vehicle effect on consumer behavior

According to the work of Siomkos and Kurzbard (274) who presented three factors that directly influenced the intensity of the product recall impact on the behavior of consumers, the level of crisis management, reputation of the company as well as other external factors such as the media and government agencies form the main factors. This is because they may have negative or positive impact on the consumer behavior. Siomkos (27) pointed out that should the affected company be having a good reputation as well as a good communication strategy, then the effect is positive. This results in diminishing the negative impact of motor vehicle recall.

On the contrary, if a company having a reputation that is average recalls its products involuntarily due to pressure from the government agencies, then the consumer purchase intention can be affected negatively. This therefore indicates that the reputation of the company plays an integral moderating role on the impact of product recall. These outcomes to concur with the ones found by Jolly and Mowen (473). They found that the level of delay in the period of product repair by the manufacturer, type of product recall and the number of product recall by the competitor firms are the main factors.

In an effort to understand this scenario, Siomkos and Kurzbard (274) made the same conclusion as well as proposed a though analysis of the available options that can be assumed by firms that were faced with an impending product recall. Weinberger et al. (23) on the other hand explored the negative impacts of product recall of certain approaches that are adopted by vehicle manufacturers. He found out that vehicle manufactures who failed to acknowledge as well as deny the cases of product defect created poor consumer perception of their company and the brand image. Studies like these indicated the importance of adopting an effective recall techniques as well as crisis management by the manufacturers. These studies however never allowed for the measurement of the attitude of the consumers in relation to the procedures of recall.

Vehicle recall and marketing

Voluntary recalls have been seen to offer a perfect marketing opportunity since the affected company can use it to display their ethical behavior.The opportunity can also be used by the affected company to reduce both the profitability and image losses. Several authors have pointed out those different strategies of product recall produces different effects .Others found out that the product recalls that were government initiated offered very low signal and ended up damaging the brand image from the perspective of the shareholders as opposed to the ones that were initiated by the automobile manufacturers. On the other hand, Haunschild and Rhee (101) discovered that firms that initiated voluntary product recalls usually obtain higher learning effect and generally experienced a decline in their future rates of recall. Other authors pointed out the existence of passive as well as proactive product recall strategies. The proactive recall strategies were shown to result in greater negative losses of share as compared to the passive ones. This was attributed to the fact that the proactive product recall strategies signal greater financial losses by the company as opposed to indicating corporate social responsibility. Several researchers have dedicated their work on the effects of product recalls on consumer safety (Ashenfelter & Greenstone 226). There is however no quantitative study of the same. Hoffer (96) and Crafton, Hoffer, and Reilly (700) focused on the effect of product recalls on the customer demand for the automobiles while Rhee and Haunschild (101) studied the impact that it has on the reputation of the manufacturers.

Motor vehicle market has been in the boom for the past few years, this has mainly been due many factors including, competition from the motor vehicle manufacturing companies, reduced cost of production including man power and materials, Increased technological advancement and increased demands for the motor vehicles. The total sale of sports cars, normal, premium luxury and entry luxury salons are of the order of over millions of motor vehicle per year. Motor vehicles have ready market in the whole world with leading consumers being the developed countries including; United States of America, Germany, United Kingdom and Japan.

Major motor vehicle manufacturing industries have been putting emphasis on the product quality for the consumer's money over the past few years. Many quality slogans including "Putting quality on the road" by the General motors' (GM) manufactures to "quality is job" by the Ford Automobile company combined with a myriad of J.D. Power consumer satisfaction index rankings have been used increasingly to market new vehicles to the United States of America consumers. It is therefore very important to note that the National Highway traffic safety Administration in United States of America has been providing information on the product quality for the American citizen over the last four decades. This follows the passage of National Traffic and Motor vehicle safety Act in 1966, through this act, manufactures have been forced to recall over 200 million motor vehicles which are suspected to have safety

News of auto recall has been prevalent in the international news headlines in the past year. Toyota Company was forced to recall millions of vehicles in the year 2009 due to safety concerns. This created confusion to the customers who had already purchased Toyota products because they did not know which models of Toyota was affected; this in fact affected the Toyota brand. The first Toyota recall was due to assistance of the United States National Highway Traffic Safety Administration (NHTSA). This followed a report that several Toyota vehicles were experiencing unintended acceleration problems. The first recall was meant to correct possible incursion of an incorrect or out of place front driver's side floor mat into the foot pedal which was projected that it could cause pedal entrapment. After the recall which was made by Toyota in the year 2009, it was very apparent that the consumers trust in the world's leading motor vehicle Company Toyota was depreciating. In the year 2010, American drivers felt that Ford had made a very significant improvement in their car safety and quality since the first cars recall by Toyota in 2009, the same divers perceived that Toyota had made a dramatic drop in the safety of their motor vehicles (Consumer Reports National Research Centre, 2010)

Generally, product recalls have been in the increase over the last decades particularly in the automobile industry reporting the highest recalls worldwide. In the United States of America which is the leading consumers of motor vehicle, the number of vehicles recalled in 2004 reached over 29 million. This figure was slightly above the highest reported in 2000 which was 24.6 million motor vehicles leading to massive loss by the motor vehicle manufacturing companies due to the cost of transporting the vehicles from the customers for repairs and back. It also impact indirect cost of the companies' reputation in the markets.

Even though the recall of motor vehicles by the automobile companies is not a new occurrence in the history of motor vehicle industry, what makes consumer worried most is the ever changing reasons for car recalls and the fact that motor vehicles can lead to accidents. The first automobile recall in the world can be traced as back as in the 1966 which was reported in United States of America. Since this first recall, the American National Highway Traffic Safety Administration (NHTSA) which is charged by the responsibility of checking the safety of the motor vehicles has been. The number of academic researches on the investors and consumers behavior concerning this recalls have been very minimal. It is only in the last decade that some research studies were conducted to determine the impact of motor vehicle recalls on the product and capital markets. In their research, Crafton, Hoffer and Really (700) found out that several safeties related recall campaigns adversely affects the sales of new cars of the recalled model. In the other research, methodology studies have been used to investigate the impact of automobile recalls on capital markets (Jarrell and Peltzman, 513) where Jellellel and Peltzman (532) concluded that capital markets do penalize firms whose products had been recalled for more than the direct cost of the recall campaign, while Pruitt, Reilly and Hoffer also supported the same idea.

In the recent past in the year 2000 and beyond, there has been optimum quantity of modeled recalls. The major challenge has been that there is very little research work which focuses on the success of recall campaigns in terms of achieving the immediate goal of entirely correcting the safety related defects in the current automotive stock. Three reasons have been provided in support to the raised concern raised as follows. First, it is very clear that the manufacturing companies have not been publicly announcing some of the campaigns, it is therefore very important to ascertain consumer's responses to such campaigns for recalls that were never publicly announced. Secondly; that the knowledge about the variable which forms the basis for the recalls and determines the response rate including motor vehicle problem severity have sometimes lead to changes in the notification process which enhances the overall return rate hence increased vehicle safety. Finally, the motor vehicle companies are likely to find this information more useful toll in projecting the level of support necessary to accommodate the repairs under a particular recall campaign

Legal and environmental perspective

Since the recall of first motor vehicles in 1966 in the United States of America, the congress passes a n act to safeguard the road safety "The National Traffic and Motor vehicle safety Act of 196." This act has been under the administration of National Highway and Traffic Safety Administration (NHTSA) which is a department of Transport. The main aim of this legislation was to reduce by large margins traffic accidents and consequent economic and social costs which were experience in United States of America, this public body was to do this through encouraging motor vehicle manufacturers to produce safer vehicles which meets federally determined standards and rules. They were then charged by punishing the motor vehicle companies which fails to produce vehicles and equipments which does not meet the set standards in the United States of America.