Recalls As A Marketing Tactic

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While teaching in Shanghai, my students kept asking why, almost every other day, General Motors was recalling more cars. (it surpassed 20 Million cars while there.) For these students, it was an embarrassing situation for the iconic US automaker – but a good stimulus to stimulate learning.*

Over the July 4th weekend, Holman W. Jenkins, Jr. published an article in the Wall Street Journal that put a whole different spin on it.  In Your Car Recalled? Buy a New One!, he noted that 29 million cars now are on the recall list and proposes that GM’s real purpose in issuing as many recalls as possible, especially ones that really don’t involve life-threatening defects, is that it encourages owners to come to their dealers – and gives the company a chance to sell new models!

His thesis is that cars today are made better than ever: they are better made, better designed and consist of more reliable parts. Starting more than a decade ago, the industry began recalling on average more vehicles every year than it makes. GM is borrowing Toyota’s strategy during the sudden-acceleration furor of five years ago. Toyota ransacked its files for any “defect” it could fix to create an image of action in response to the frenzy that began with a single crash involving misplaced floormats and blossomed over a nonexistent electronic bug that allegedly caused runaway Toyota vehicles. It increased sales for Toyota.

Turns out GM’s strategy is working. Despite the furor, in the past six months, GM has enjoyed its best sales since the last days of the housing boom whose 2008 bust tripped the company into bankruptcy!

Sorry, I missed that rationale for recalls.  What do you think?   Share your thoughts!

(*At the same time, I was asked by a US writer who knew about my work with Evaluate To Win’s technology to improve cultural alignment and strategic performance ( for my perspective on how the culture of General Motors allowed for such defects and lack of transparency; and what large companies like GM could do to change the situation.)