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Are cars really that unsafe? Behind the recall frenzy

Are the cars on our highways getting more dangerous?

That might be a logical assumption considering the rapid rise in recalls over the past five years. Last year, 22 million vehicles were involved in recalls in the United States, up about 20 percent from the previous year, according to federal data. And the pace is only accelerating.

"Everybody that has anything to recall is getting it out now. This is a reporting frenzy," said David Cole, chairman emeritus of the Center for Automotive Research, in Ann Arbor, Mich. "There's so much attention to the issue of recalls in the wake of the GM situation, that if you have a problem you deal with it now."

Toyota mechanics push a car next to a Prius hybrid model in the service area of a Toyota dealership in Santa Monica, Calif.
Mark Ralston | AFP | Getty Images
Toyota mechanics push a car next to a Prius hybrid model in the service area of a Toyota dealership in Santa Monica, Calif.

There's little doubt that today's cars are more complicated than ever, and there have been service actions for technologies that didn't even exist a decade or so back, when recalls last hit their peak. But for those worried that automotive quality is somehow on the decline, that is clearly not the case.

With minor exceptions, studies from such expert sources as J.D. Power and Associates and Consumer Reports magazine show today's vehicles are generally better than ever—both in terms of initial defects and long-term reliability.

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So, why the recall surge? For one thing, credit the auto industry's growing focus on "economies of scale," noted Joe Phillippi, chief analyst with AutoTrends Consulting. The more copies of a water pump, windshield wiper motor or airbag module you produce, the lower the piece cost. The flip side is that, "if there's a defect, you're going to have one huge problem affecting a lot of models."

In 2013, for example, several million vehicles sold by manufacturers including Toyota, GM and BMW were covered by service actions due to their shared use of the same defective airbag system.

But there's another factor at work. And that's the increased scrutiny the auto industry is facing—as are regulators at the National Highway Traffic Safety Administration, which some critics contend have been too soft on the industry.

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The clamp-down began with the Ford Explorer/Firestone crisis that resulted in hundreds of deaths due to rollover accidents at the beginning of the new millennium. Congress responded in November 2000 with the TREAD Act, which beefed up scrutiny of vehicle problems and increased penalties on manufacturers who skirted the rules.

In late 2009 and early 2010, Toyota was hammered by a series of problems related to so-called unintended acceleration, recalling over 10 million vehicles in the process. The maker was hauled before Congress and targeted in a criminal investigation by the Justice Department that ended only last month with a settlement that will cost the Japanese maker $1.2 billion—and put it on probation for three years.

A key adviser to GM CEO Mary Barra confirmed that the maker is closely studying the Toyota case and expects to be under the microscope for at least several more years. But it isn't alone. A veteran Detroit auto industry official, speaking without official authorization, summed it up by noting that the recall "system is working. It's providing the pressure and people know what will happen if they don't respond."

In many cases, it means that relatively minor issues that might have been ignored—or been the subject of less aggressive "service bulletins"—in the past are now triggering full-fledged recalls.

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"Hiding a defect will eventually come back to haunt you," observed Don Tanner, a reputation specialist with Detroit-based consulting firm TannerFriedman.

In years past, manufacturers often worried about how a recall might be perceived by the public. Various marketing experts agree that the damage is much less today because consumers see such service actions as a normal process that, if anything, is designed to keep them safe. But the GM ignition switch fiasco shows there are exceptions.

"Recalls become a problem when the ethical issue becomes part of the story," said Anthony Johndrow, a managing partner with New York's Reputation Institute. And that's become the problem for GM, which, it appears, delayed the recall for a decade, opting against an early callback because it would have cost more than the maker deemed justifiable.

A company will get in trouble if it relies on "Machiavellian decision making," warned Johndrow, that "relies on a cost-benefit analysis against the cost of a human life."

Curiously, many motorists seem to make similar decisions when delivered a recall notice. According to NHTSA, an average of only 70 percent of vehicle owners typically take a car in for repairs, a figure that can fall to as little as 20 percent to 30 percent for minor issues.

Toyota aggressively pushed to boost the recall response rate for its 2009 and 2010 recalls, and GM is expected to do the same for the ignition switch issue, but despite the potential dangers, few expect it to get close to a 100 percent response rate.

—By CNBC Contributor Paul A. Eisenstein

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