There is an ever-increasing role of complex software in many of the devices that we use on a daily basis. Perhaps no more stark than the increasing usage of software in mass produced automobiles occupying today’s roadways. Modern automobiles rely more and more on their internal computers to not only bring us new found innovations such as automatic braking but also to perform tasks such as fuel mixture management that were previously handled by analog systems. For example, according to WIRED Magazine, the Chevrolet Volt relies on 10 million lines of code in its operation; about 2 million more than required to operate an F-35 fighter jet. As software and computer technologies begins to inherit more responsibility for automobile safety features, they also begin to face more scrutiny by NHTSA for warranty and recall activity.
In July 2015 alone, we saw several large recalls related to software malfunctions. Fiat Chrysler recently announced a voluntary recall of approximately 1.4 million cars equipped with certain radios due to an issue with potential “software exploitation” to be fixed with a software security patch. A statement from the company indicated that FCA US has applied network-level security measures to prevent the type of remote manipulation demonstrated in a recent media report. These measures – which required no customer or dealer actions – block remote access to certain vehicle systems and were fully tested and implemented within the cellular network on July 23, 2015. The recall includes Dodge, Jeep, Ram and Chrysler vehicles. While Chrysler indicated that no defects had been found, the recall was motivated out of an “abundance of caution.”
On July 15, 2015, Japanese automaker Toyota recalled 625,000 2012 – 2014 Prius V models worldwide to fix a software issue. Specifically, the current software settings for the motor and generator control engine control unit, or ECU, and hybrid control ECU can result in higher thermal stress in certain transistors, the company said in a statement, which can cause warning lights to illuminate and send the car into a failsafe mode. This defect prompted Toyota to issue a safety recall. This Toyota recall is a good example of how software has taken on a more prevalent role in safety and vehicle operation.
General Motors also recalled nearly 780,000 midsize SUVs worldwide because of a problem with the vehicles’ power liftgates, which can suddenly fall and strike people. The recall covers models that are equipped with the power liftgate option supported by a system that is designed to return the liftgate to the closed position in a slow and controlled manner. The affected vehicles, however, have a problem in their prop rod recovery system software, causing it to potentially be unable to detect or stop a liftgate from falling too quickly after the liftgate is open if the gas struts have worn out.
In yet another recent example, Jaguar Land Rover recalled approximately 65,000 Range Rover sport utility vehicles after discovering a keyless entry software glitch causes some of the vehicles’ doors to fly open unexpectedly, which may distract drivers or cause a crash.
Stout Analysis of Recalls Involving Software
Stout has examined various NHTSA databases since 2000 and has observed trends in the warranty and recall activity for software issues. Since the end of 2012, there has been a marked increase in recall activity for software issues. For the primary light vehicle makes and models we analyzed, there were 32 unique software-related recalls that affected about 3.6 million vehicles from 2005 – 2012. However, from the end of 2012 to June of 2015, there have been an additional 63 software-related recalls affecting an additional 6.4 million vehicles. When analyzing software related recalls as a proportion of total recalls, similar noteworthy observations become apparent. In 2005, the proportion of recalls involving a software-related issue was approximately 0.30%. Through the first 6 months of 2015, this percentage has increased to approximately 4.3%, and this trend is showing no signs of reversing.
Analysis of OEM 573 disclosures points to additional developing trends in the industry. Only 7 of the 32 software related recalls from 2005 – 2012 named suppliers within 573 disclosures (21.9%). Since 2012 however, 37 of the 63 software-related recalls have listed suppliers within 573 disclosures (58.7%). This may indicate increasing supplier involvement in automotive technology and software design and manufacturing.
The observed increases in unique Technical Service Bulletins (TSBs) and NHTSA Complaints relating to software issues are consistent with the increases observed in recall activity. Relating to TSB and complaint data, several statistics are worth noting:
With the trend towards increasing software integration and vehicle complexity, there is an even greater risk of “soft” defects relating to a variety of technologically-enhanced systems and components. This is evidenced in each of the datasets Stout has analyzed, and this trend is showing no signs of stopping. As the industry makes the gradual but nearly certain progression towards more complex and connected vehicles, this trend will be one worth monitoring in the months and years to come.
Neil Steinkamp is a Managing Director at Stout. He has extensive experience providing a broad range of business and financial advice to corporate executives, risk managers, in-house counsel and trial lawyers. Steinkamp has provided consulting services and has been engaged for several years as an expert in numerous matters involving automotive warranty and recall costs. His practice also includes consulting services for automotive OEMs, suppliers and their advisors regarding valuation, transactions and disputes. Mr. Steinkamp can be reached at +1.646.807.4229 or email@example.com.
 “Statement: Software Update.” Fiat Chrysler Press Release, July 24, 2015
 “ Toyota Recalls 625K Prius Hybrids Over Software Glitch,” Law360, July 15, 2015
 “GM Recalls 780K SUVs Over Power Liftgate Problem,” Law360, July 10, 2015
 “Jaguar Recalls 65K Range Rovers Over Door Latch Issue,” Law 360, July 8, 2015
 Primary light vehicle makes include GM, BMW, Chrysler, Honda, Hyundai, Mitsubishi, Mazda, Nissan, Toyota, Volkswagen, Volvo, Nissan, Mazda, and Mitsubishi.