5 Most Costly Product Recalls

AAA

Costly Product Recalls

It's the call every company dreads. A federal government watchdog saying, "We need to talk about your products. We think they're defective." It's a costly headache for a company now faced with having to refund its customers' money, give them replacements and hope that the problem doesn't worsen in the interim. Here are some of the most notorious product recalls of all time.

Cyanide In Tylenol

The incident that triggered the era of modern product recalls happened in October 1982. Seven Chicago-area people died after consuming Tylenol capsules that someone removed from drugstore shelves, inserted cyanide into and then restocked. Even though manufacturer Johnson & Johnson wasn't at fault, the company recalled all 31 million bottles of its pain relievers, which retailed at over $100 million. Tylenol's leading market share understandably cratered, but rebounded within a year. The rebound was in large part due to Tylenol's new tamper-resistant packaging.

Dell Laptops

Some laptop computers run hotter than others, but in 2006 Dell's Latitude and Inspiron models took temperatures to unprecedented heights. The computers were equipped with lithium ion batteries that exploded. Six Dell customers reported the spontaneous ignition, and to Dell's credit, it made quick work of the problem. The manufacturer offered replacement batteries to customers who had models with lithium-ion batteries. Dell sometimes even replaced the entire computer.

Ford SUVs And Firestone Tires

In 2000, the National Highway Traffic Safety Administration noticed a disproportionate amount of tread separation on Ford SUVs fitted with Firestone tires. The automaker blamed the tire manufacturer, the tire manufacturer blamed the automaker and the government argued that both parties knew that the tires were dangerous yet did nothing about it. Approximately 174 people died and, according to one source, roughly one out of every 4,149 tires was defective. Relations between the two companies cooled, almost 20 million tires were recalled and Ford ended up losing around $3 billion.

Roman Blinds And Roller Shades

According to the cliché, the deadliest room in the home is the bathroom. However, the living room, master bedroom and virtually any other whose windows feature closeable coverings threatened the top spot during the shade recall of 2009. The Consumer Product Safety Commission ordered the recall of 50 million sets of Roman blinds and roller shades in the belief that little children ran the risk of choking on the cords. Most of blinds didn't result in death, but freak accidents will happen.

Toyota Cars

In 2010 a Tennessee Realtor testified before the United States Congress, reciting a story about how her Lexus accelerated to 100 mph without her intervention. Toyota's best guess was that the woman let her floor mat bunch up underneath the brake, and then panicked. Copycat accusers followed, and soon Toyota had a public relations and logistical disaster on its hands. Under pressure from the National Highway Traffic Safety Administration (NHTSA), Toyota ended up recalling over 8 million vehicles worldwide.

Conclusion

Producers of consumer goods can only do so much to ensure that products will be used safely and responsibly. While consumers need to read the warning labels and use common sense, there always remains the potential for error. Today's products are unquestionably less harmful than those of previous generations, but the idea of a 100% safe marketplace of goods will continue to exist only in theory.
Related Articles
  1. Markets

    A Food Recall's Diminishing Effect on Stock Prices (KHC, CMG)

    A look at how the stock prices of companies in the food industry react during times of a recall.
  2. Insights

    Apple Issues Product Recall

    Apple has initiated a product recall for product adapters of its devices. But, it will not have a material impact on the stock's performance.
  3. Personal Finance

    Even Worse News About Airbag Recalls: What to Do

    The recall numbers are even higher than previously estimated. How to look up your car – and what to do if you find it on the recall list.
  4. Managing Wealth

    Dell Stock Doesn’t Exist. Here is Why

    Learn why Michael Dell took his namesake company private after being publicly traded for 25 years. Discover why going private is helpful for the company.
  5. Markets

    How Toyota Succeeds at Home and Abroad (TM)

    Japan's biggest car manufacturer is also one of North America's biggest, delighting shareholders with its high profit margins.
  6. Markets

    Toyota Stock: A Dividend Analysis (TM)

    Learn about Toyota Motor Corporation, its dividend policy, its historic dividend yield in comparison to the company's competitors and dividend safety.
  7. Investing

    Does the Dell/EMC Deal Make Financial Sense?

    Last week, Dell announced it would be buying IT provider EMC in a $67 billion deal, making it the largest technology deal ever.
  8. Investing

    Kellogg Stock Falls After Voluntary Snack Recall (K)

    Kellogg issued a recall for some of its snacks amid concerns that some of its products may have traces of peanuts that could trigger allergic reactions.
  9. Investing

    Toyota's 4 Key Financial Ratios (TM)

    Learn about important financial ratios for Toyota Motor Corporation that are crucial in evaluating the company's business and its financial statements.
  10. Markets

    What is an Original Equipment Manufacturer (OEM)?

    An OEM is a company whose products are used as components in another company's product.
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center