COMMENT: Volvo: the latest industry recall

By Datamonitor Commentwire | 3 December 2003

Volvo is to recall 71,000 vehicles worldwide. Although no accidents have occurred and the recall is precautionary, the Volvo brand, which is known for its safe, family oriented image, could find itself scorched. The industry should be aware that increased recall rates could lead to a public perception of reduced product quality.

Volvo is to recall around 71,000 cars following reports of driveability problems due to petrol leaks into the engine. No fires have resulted from the leaks and the recall is precautionary. The recall includes about 15,000 cars in the US, 9,000 in Sweden and 8,000 in the UK.

The company has sent letters to the car owners of 2003 and 2004 models of the V40 and S40, asking them to take the car to the closest Volvo repair centre to be checked. The procedure will involve a securing clamp being installed to prevent any problem.

This recall is unlikely to have an immediate effect on Volvo car sales. However, this latest recall plus previous recalls of other models may reduce customers' overall confidence in the Volvo brand over a period time.

Brand loyalty decreases when customers have negative experiences with reputation, quality and reliability. Volvo's reputation is very much based around the safety and reliability of its cars. While it is too early to say how hard the recall will hit the brand, it is certain that the company cannot trivialize the problem. Although Volvo is well established in the family car segment, this recall might affect its recent strategy to broaden its image and move into different niche markets such as the luxury and sports segments.

Recalls on new vehicles are becoming increasingly common in today's fast-moving automotive industry. As the automotive industry faces a decrease in profits, vehicle manufacturers have not only reduced vehicle production but also their R&D and innovation budgets. The danger is that the public may start to associate automotive manufacturers' cost-cutting measures with increasing recall rates and perceive cost-cutting exercises as resulting in reduced product quality.

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