Stericycle Recall Index Q1 2014
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1 Stericycle Recall Index Q AUTO RECALL TREND
2 Quarterly Recall Index, Q Each quarter, Stericycle ExpertSOLUTIONS analyzes cumulative recall data to examine changes in the regulatory environment and identify emerging trends. Historically, we ve analyzed information from three regulatory agencies the CPSC, FDA and USDA. The Q Stericycle Recall Index contains an analysis of recall data from these organizations and includes a new data source: the National Highway Traffic Safety Administration (NHTSA). In addition to adding this category to examine recall trends in the auto sector, we ve also changed the way in which we re formatting our report. Consistently, we will focus our Index analysis on relevant trends and produce scorecards calling out key takeaways in each industry. With the unprecedented amount of media coverage on major auto recalls witnessed in the first three months of the year, we focused the Q Recall Index analysis on the auto industry specifically. Read below for our examination of the leading factors for auto recalls over the last four years, and the challenges they pose for manufacturers and consumers alike. NHTSA related units recalled 13M Q M Q
3 Auto Recall Pileup: Trend Report The number of NHTSA related recalled units, comprised of autos, child seats, equipment and tires, has soared this year. There were 13 million NHTSA related units recalled in Q1 2014, versus 4.5 million units in Q The challenges of this increased volume are exacerbated by the fact that the 13 million recalled units were produced in the last 15-years. With so many different model years and replacement parts required, the recall process is prolonged and the disruption to consumers and car manufacturers is greater. One need look no further than recent headlines to see the public relations challenge this rise in recalls has created for manufacturers. The problem is compounded by lack of response from car owners. According to NHTSA, nearly one-third of recall notices will be ignored by vehicle owners. One reason for this is that many recalled autos end up resold to other consumers who may be unaware of the recall or whether the issue was fixed. Last year, some 3.5 million used cars went up for sale online with unfixed recalls, according to CarFax. Bottom line: auto recalls are getting more complex and an extended recall process for a global manufacturer can negatively impact the brand and cost the company millions in fines levied by the government. Auto recalls are very different and potentially more disruptive than other industry recalls. Unlike food that can be thrown away, or a drug that can be removed from store shelves, an auto recall asks for direct involvement and action by the public. Those affected must drive the impacted vehicle to the dealership so the problem or defect can be fixed. This call to action interrupts schedules and daily life and can pose a serious safety hazard. With multiple touch points along the way, auto recalls often grow increasingly complicated and this complexity can impact successful recall management. Auto manufacturers do have a few inherent advantages when it comes to executing a recall, such as: Autos are required to be registered, which means that customer data is available to use when sending out notifications. This can mean a more targeted recall approach, which helps remove cars from the road faster. Auto dealerships networks are extensive and play a key role in notifying consumers and act as a point of contact to bring the cars back to be fixed. They provide an opportunity for human interaction, which can turn a negative experience into a positive one for the consumer. Nearly one-third of recall notices will be ignored by vehicle owners. National Highway Traffic Safety Administration 2014 Stericycle ExpertSOLUTIONS TM All rights reserved. 2
4 Recalls Steady But Units Pile Up From 2010 through 2013 there were 2,752 separate NHTSA recall events for an average of 688 per year. This volume has remained relatively constant over the last four years despite the fact that there are seven million more cars on the road today than there were in For the first quarter of 2014, NHTSA reports show 131 recalls. Units Recalled 28M Over 13M in Q M M However, with more cars on the road every year, the number of actual units recalled is growing as recall events are significantly increasing in both size and scope. In 2011, there were 17.5 million units recalled. In 2012, we saw 18 million units recalled, and in 2013 the number soared to nearly 28 million for an increase of 54% over the prior year. This year in the first quarter alone there have already been more than 13 million units recalled. In fact, Q showed the highest number of auto units recalled in any given quarter over the past three years. Given that many recalled cars are never repaired, the number of unfixed cars on the road piles up year after year. For those that are repaired, these large upticks in recalled units increase the complexity of recalls by putting more stress on the supply chain to produce replacement parts. These large-scale events also complicate the consumer notification and communication process, making it challenging for manufacturers to effectively manage the recall execution. Q showed the highest number of auto units recalled in any given quarter over the past three years. 3
5 It s Not Just the Beaters, Clunkers and Rust Buckets New cars are not necessarily safer, nor are they less likely to be recalled. When looking at the average age of recalled cars, 70% of the vehicles affected in Q recalls were produced in the last five years with models ranging from Electrical systems came in second with 242 or 8.4% of recalls and service brakes came in third with 214 or 7.4%. Fourth was engine and engine cooling at 174 (6%) and the fifth leading cause was power-train at 164 (5.7%) During the past four years, equipment has been the number one cause of auto recalls with a total of 682 recalls or 23.6%. Equipment is the category for mechanical and electrical issues as well as problems resulting from faulty AC and navigation systems. As technology advances and cars have more features, more recalls may occur due to equipment, mechanical malfunctions or software-related glitches. During the past four years, equipment has been the number one cause of auto recalls. Top Causes for Recalls engine & cooling recalls 214 service brake recalls 682 equipment related recalls or 23.6% of recalls 242 electrical system recalls 164 power-train recalls 2014 Stericycle ExpertSOLUTIONS TM All rights reserved. 4
6 Recalls Spare None In looking at the auto manufacturers involved in these auto recalls, only 25.6% or 738 of all recalls from 2010 through Q were issued by the top 10 U.S. manufacturers. Smaller manufacturers as well as companies that produce car equipment and parts such as child seats, tires and navigation systems made up the vast majority. This suggests that auto recalls are becoming more dispersed across auto manufacturers, leaving no one unscathed. With more and more auto manufacturers involved, the management of recalls is becoming more complex. Smaller manufacturers, as well as companies that produce car equipment and parts (such as child seats, tires and navigation systems) actually made up the vast majority. What s Under the Hood? Driving is so pervasive in our society, and the number of vehicles on the road will only increase in the years to come. Polk Automotive predicts that by 2018 there will be 260 million cars and light trucks on the road. Auto recalls impact daily life and safety, so it s critical that affected vehicles are removed from the road quickly and fixed. By partnering with a recall expert and having a recall readiness plan in place, an event can be contained and resolved with greater speed and effectiveness. If auto recalls are not handled carefully and are prolonged for any reason, consumer safety, as well as the brand, are at risk. Experian Automotive There were nearly 248 million light cars and trucks on the road in the U.S. in late
7 The Recall Scorecard Executive snapshot of statistics compiled from FDA, USDA, NHTSA, and CPSC recall announcements. FDA Recalls Includes Food, Pharmaceutical, Medical Device 553 TOTAL RECALLS This is up from 529 total FDA recalls from Q4 of % of FDA recalls were international, a trend that has continued to grow over the past four quarters. Medical Device Recalls } 243% rise in units 29.3 M 330 TOTAL RECALLS This is the average number of recalls in the medical device industry in the past two years. 72% 8.5M Q Units Recalled 56% Q Q Q were international, a 7% increase from Q were nationwide, a continued trend of over 70% nationwide recalls over the past year. of units and recalls were Class II. 93% 13 Fewest Class I recalls in two years. Class I is the most hazardous to the public. Automotive Recalls Q showed the Q1 highest 2014 showed number the of highest auto units number recalled of auto in units the past recalled 3 years in the past 3 years. There has been one recall of a child s seat every quarter since Q with the exception of Q and Q3 2013, but there is no consistency in terms of recalled units Stericycle ExpertSOLUTIONS TM All rights reserved. 6
8 Pharmaceutical Recalls } 30% rise in units 7.7 M 88 TOTAL RECALLS an increase of 38% from the previous quarter. 83% 5.9M Q Units Recalled 22 Q Q Q % were international, up from 22% in Q The trend of complexity continues as 83% were nationwide, up from 81% in Q Units are up due to 1 large recall of over 1.5M units (21% of affected product). companies in total, nearly a quarter of which had... events. company had... recalls, and accounted for less than.. of the affected units. Food Recalls 135 TOTAL RECALLS This is relatively unchanged from the previous quarter. While Q had nearly the same number of recalls as the prior quarter, the number of recalled units is down. 43% Undeclared allergens such as dairy, shellfish and wheat were behind a number of food recalls. 7
9 USDA Recalls 44 % recalls were due to undeclared allergens. Three recalls of one million or more pounds, including one Class I of over 8.5 million pounds. CPSC Recalls 18 TOTAL RECALLS 1364% increase in pounds This is consistent with Q4 which had 19 recalls. 5 recalls due to no inspection surpasses annual numbers from last year. 10 Million more pounds than the highest quarter in the past two years. More than double the total amount recalled in the past 2 years combined. 13 } 129% rise in units 938,134 Q children s/infant recalls, which accounted for 16% of total CPSC recalls in Q M Q Child Units Recalled 80 TOTAL EVENTS This is a 16% increase from the 69 recalls of Q4 in companies had units recalled in Q1 2014, a 13% increase from Q recall events involving sports/rec equipment in Q1 of This is up from 14 events in the last quarter of recall events involving home furnishings in Q1 of This is up from 12 events in the last quarter of recalls of one million or more. 284 injuries were connected to recalls, but no deaths Stericycle ExpertSOLUTIONS TM All rights reserved. 8
10 Explanation of Stericycle ExpertSOLUTIONS and the Stericycle Recall Index Stericycle ExpertSOLUTIONS helps partners minimize risk to the public and to their company brand by executing and planning for product recalls efficiently, effectively and compliantly. Each quarter, we analyze cumulative recall data across six product categories. This helps our partners navigate the regulatory environment and identify trends. How the Stericycle Recall Index is Compiled The Stericycle Reciall Index gathers and tracks cumulative data from the four primary federal agencies that oversee recalls in the United States: the Consumer Product Safety Commission (CPSC), the Food and Drug Administration (FDA), the Food Safety and Inspection Service (FSIS) of the United States Department of Agriculture (USDA), and the National Highway Traffic Safety Administration (NHTSA). Recall trends are calculated from FDA enforcement reports and news releases published on agency websites. FDA Data To track trends in food, pharmaceutical, and medical device recalls, the Stericycle Recall Index uses information publicly available in news releases posted on the FDA website. For additional insight into recalls governed by the FDA, Stericycle collects and analyzes data from the agency s weekly enforcement reports, which provide additional details including recall class, quantity of units affected and number of reported incidents. CPSC Data For further insight into consumer product recall trends, Stericycle analyzes data from CPSC recall announcements. When compiling statistics and analyzing trends for consumer product recalls, the Stericycle Recall Index uses standard product categories and hazards recognized by the CPSC. 9
11 USDA Data For additional insight into food recall trends involving meat, poultry, and egg products, the Stericycle Recall Index collects and analyzes data from recall announcements posted on the USDA s FSIS website. Statistics and trends are compiled using standard product categories, classifications, and reasons for recalls as recognized by the USDA. NHTSA Data To understand trends in the automotive industry, the Stericycle Recall Index analyzes data from NHTSA reports on recalls of autos, child seats, equipment and tires. Terminology Announced recalls represent those recalls documented in news releases published on agency websites. Enforced recalls refer to those recalls documented in weekly FDA enforcement reports. Their documentation can lag behind announced recalls by weeks or even months because the recall process may take time to complete. A Class I recall, according to the FDA, is a situation in which there is a reasonable probability that the product will cause serious adverse health consequences or death. A Class II recall is a situation in which the product could cause temporary or medically reversible adverse health consequences or where the probability of serious adverse health consequences is remote. The FDA defines a Class III recall as a situation in which the product is not likely to cause adverse health consequences Stericycle ExpertSOLUTIONS TM All rights reserved. 10
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