Billions Lost to Defective Product Claims

Photo of vehicle damageWhen a defective product is recalled by a manufacturer or company, the same company absorbs the costs of collecting and repairing the product. This process can cost manufacturers millions, if not multi-billions depending on the size of the company and number of defective products recalled. For example, Japanese company Takata has had to recall between 60-70 million automobiles – one of the largest global recalls to date — due to defective airbags whose deployment killed 20 people so far. The cost of recalling and repairing the cars has cost Takata an estimated $25 billion and has bankrupted the company.

Due to the consumer protection laws in place, manufactures are responsible for bearing the costs of a product recalls. Sometimes insurance will cover a defective item but, such as in the case of Takata, product recalls do lead to lawsuits. If a company is found liable, it may be required to deal with:

  • Replacement costs
  • Government sanctions
  • Lost sales
  • Medical costs

While some companies will be able to recover from short-term recalls, long-term effects can still be detrimental to the company. For example, another automotive recall, this time involving Toyota, resulted in the company’s stock plummeting by 20%. In most cases, defects in products come from outsourcing parts from other countries and the sacrifice of product reliability for cheaper means of production. Many parts and production come from Asia and according to Allianz Global Corporate & Specialty (AGCS), the area is known for producing lower quality products. However, product defects don’t come from just cheap parts. Products could also be recalled due to programming issues, such as phones being recalled due to faulty security programs or defective software.

If you’re facing a defective product claim, don’t hesitate and contact the Law Office of Stanley A. Davis today. During this consultation, a Nashville attorney can offer sound advice based on years of handling cases just like yours throughout Tennessee.

Psalm 23:1, The Lord is my shepherd, I lack nothing.”

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