Businessweek Archives

Getting Mileage From A Recall


Top of the News

GETTING MILEAGE FROM A RECALL

When Alex F. Cardone of Jersey City, N. J., drove his Volkswagen Jetta to a Saturn dealer a few weeks back, he was a doubter. Previously the owner of a Honda and an Alfa Romeo, he "was a little hesitant about buying an American car but decided maybe now's the time." Then, the day after his odometer hit 1,111, it seemed his worst suspicions had been realized: Saturn Corp. recalled his car.

In the letter Saturn sent him, Cardone read that the car's radiator had been filled with faulty coolant. Another customer inconvenienced by a carmaker's goof, right? Maybe not, for Saturn is offering to replace Cardone's car with a new one--at no cost to him. "It sets the odometer back to 4," he says. He noticed something else in the letter: Saturn fingered Texaco Refining & Marketing Inc. as the supplier of the bad coolant.

Saturn's offer to replace 1,836 cars, rather than just repair them, is almost unheard of in an industry rife with recalls. So is its naming of Texaco. When Ford Motor Co. recalled more than 1 million cars and trucks on May 13, it neither identified the maker of the catalytic converters that broke down too soon nor specified whether Ford or a vendor was to blame for the seats that could catch fire.

Saturn, the product of eight years' rethinking the car biz by General Motors Corp., is taking a different route. "There should be a sharing of risk and reward" among carmakers and suppliers, says Alan G. Perriton, Saturn's director of materials management. One risk: severe damage to a supplier's reputation.

NAMING NAMES. Suppliers are being asked to bear other burdens, too. Carmakers are jettisoning scores of inspectors, insisting that suppliers be responsible for parts meeting specifications. That leads to new financial responsibilities. "Suppliers increasingly are asked to catch it on the warranty side," notes David E. Cole, director of the Office for the Study of Automotive Transportation at the University of Michigan.

But more than at most companies, Saturn depends on the quality commitments of its suppliers. Saturn has asked vendors to do more engineering and design in return for the chance to supply the carmaker virtually indefinitely. It first named the supplier of a problem part on Feb. 13, when it pointed to Hyperion Corp., a joint venture of Japan's Tachi-S and Johnson Controls, as the reason it recalled 1,210 cars with faulty seat-adjustment mechanisms.

Not many consumers readjust their seat backs each spring. Coolant is another matter, and that could spell big trouble for Texaco, which has about 16% of the U. S. market. So when the refiner learned that it would be named in the Saturn recall, it rushed an explanation to customers. The recall, it said, was the result of a freak accident, a characterization Saturn agrees with. A special erder of coolant contained too much sodium hydroxide, making it much more caustic and corrosive, especially for Saturn's aluminum engines. As a result, Texaco may have to pick up part of the tab for replacing the contaminated cars. The cost hasn't been figured yet since each car's damage hasn't been studied. But, says Texaco spokesman Paul Weeditz, "we will bear the costs associated with standing by our product."

SATISFIED CUSTOMERS. Those costs could soar, given Saturn's determination to keep customers happy. Take John and Davina Manna of Bayonne, N. J. Rather than wait three weeks for Saturn to deliver an exact replica of their old car, they chose a red model off the lot. It had a sunroof, unlike their previous car, but Saturn tossed in the $530 option for free. Saturn also paid for a rental car for a day and drove the Mannas to the rental company's lot. Says Davina: "They did a lot they didn't have to."

Michael Salerno, a Saturn of Jersey City vice-president, at first worried about what the recall would do to Saturn's reputation. But the next day, he sold two cars on the news that Saturn was replacing, not just fixing, bad cars. "We're now advising our people to mention the recall and what Saturn's doing about it," he says. This recall could turn out to be a carmaker's good fortune.James B. Treece in Detroit


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus