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A new study from Auburn University’s Harbert College of Business revealed that the news media plays an influential role in automakers’ decisions to voluntarily recall their vehicles to correct safety-related defects. This study is the first to examine both long-term National Highway Traffic Safety Administration (NHTSA) recall data and the tone and content of news reports.
“There are many potential negative consequences to a recall,” said Yen-Yao Wang, assistant professor in the Department of Systems and Technology. “For example, [customers] may question the company’s quality control, and this could ultimately lead to a loss in the company’s market share.”
Yen-Yao Wang, assistant professor, Department of Systems and Technology
According to NHTSA statistics, automotive recalls are becoming increasingly common, as the number has nearly doubled from 656 in 2011 to nearly 1,100 in 2021. Last year alone, more than 34 million vehicles were impacted by the recalls.
“Our findings alert product managers to how their own voluntary recall decisions might be influenced by the volume and negativity of the news concerning the safety of [their] products and prior media’s rating of the manufacturer’s products,” said Wang.
Wang conducted the study with Vivek Astvansh, assistant professor of marketing in the Kelley School of Business at Indiana University, and Wei Shi, professor of management in the Miami Herbert Business School at the University of Miami. Their paper, “The effects of the news media on a firm’s voluntary product recalls,” was recently published online in Production and Operations Management, one of the leading journals in the supply chain field.
Using NHTSA data files, the team examined 2,500 recalls initiated by 22 automotive manufacturers* between June 2009 and December 2020. The recalled vehicles had defects that, if left unremedied, could harm consumers.
For example, the study included tens of millions of vehicles with Takata air bags, which could explode upon deployment after long-term exposure to high heat and humidity. These defective air bags caused injuries and deaths.
The team also searched 28,333 media reports from the Factiva business news archive that included any of the 22 automaker names and key words like safety, defect, or faulty. They then leveraged a machine learning algorithm to evaluate what percent of corresponding media mentions were positive or negative.
“[Our] results show that the volume of news reports about safety in a manufacturer’s products increases voluntary recalls by managers,” Wang said. But interestingly, Wang explained that it matters how the media describes the recall. For example, reporters can present the recall as a socially responsible, positive action or they can describe it as a negative event.
“Our findings suggest that even if the news media talks positively, this positive tone doesn’t matter about the overall effect the media has on the product recall,” he said.
However, the researchers found that negative news reports about the safety of a manufacturer’s vehicle could strengthen the effect of news media on the product manager’s decision to initiate a recall.
“Managers pay greater attention to the negativity in the news than to the positivity,” noted Wang.
Another factor Wang and his colleagues considered was the effect that vehicle ratings from U.S. News & World Report have on a manager’s recall decisions. They determined that higher ratings buffer the automakers from the effect of news volume. In other words, when a firm’s products are rated highly by the news media, those ratings shield the firm from the pressure exerted by the volume of safety-related news, which could influence a recall.
According to Wang, their research findings are valuable to product managers, who may not realize that their voluntary recall decisions are influenced by the quantity and tone of news media reports about their vehicles.
“Also, we inform product managers about the value of such ratings,” Wang said.
Wang and his colleagues are expanding their research to explore the impact that social media has on manager’s decisions to initiate voluntary automotive recalls.
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*The 22 carmakers in this study are Acura, Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler, Dodge, Fiat, Ford, Honda, Hyundai, Infiniti, Jeep, Kia, Lexus, Mazda, Nissan, Porsche, Subaru, Toyota, and Volkswagen.