The nation’s largest auto safety recall a decade ago provided a foundation to build one of the fastest-growing startups in Orange County.
Recall Masters Inc. is still helping auto dealerships, rental companies and original equipment manufacturers replace Japan-based Takata airbags, a massive undertaking that’s progressed slowly since Honda issued the first recall in 2008.
In November 2014, the National Highway Traffic Safety Administration (NHTSA) called for a nationwide recall within two weeks of a New York Times report claiming Takata was aware of dangerous defects in its airbags years before the company filed reports with federal regulators.
Since then “we became the industry leader in raising awareness,” Recall Masters Chief Operating Officer Dan Beres said last week at the company’s new headquarters in Laguna Hills.
Indeed, the company employs a subscription model from nearly 2,000 customers that use its suite of products directly or through partner networks, including Irvine-based Mazda Motor of America Inc., BMW and AutoNation USA (NYSE: AN).
Revenue for the 12 months through June topped $6.4 million, skyrocketing 531% over two years.
The percentage jump claimed the No. 1 ranking among small companies—annual sales under $10 million—according to this week’s issue dedicated to the fastest-growing private companies in Orange County.
AI to Find Recall
Recall Masters supplies proprietary data through machine-learning algorithms that process millions of vehicle identification numbers (VINs) everyday from more than 45 sources, including motor vehicle departments, mobile phone databases and tow truck lists.
Its mobile app allows consumers to scan at no charge VINs for recall alerts, car history and available parts. It recently launched MotorSafety.org, a non-profit unit focused on raising consumer awareness on recall repairs through alerts and an open database.
“There are over 70 million vehicles on the road today in the U.S. that have open safety recalls,” Beres said.
Under a safety recall, manufacturers are ultimately on the hook to notify the public and vehicle owners, but are only required to send one notification within 90 days of a recall, according to Beres.
Many manufacturers lack ownership data as vehicles change hands and cross state lines.
To exacerbate matters, used car dealers are not required under federal law to inform consumers about unrepaired safety recalls on the vehicles they sell.
Recall Masters has established call centers in Florida and Puerto Rico to help auto dealers create recall departments. More than 17,000 dealerships are in the U.S. alone.
“There is a huge recall epidemic,” Beres said.
U.S. recalls actually sank to a four-year-low in 2017, 30.7 million units according to the NHTSA. But that’s still nearly double the 17.6 million new cars and trucks that dealers sold.
Demand for Recall Masters’ content has fueled a hiring push and expansion into a nearly 16,000-square-foot office under renovation near the Santa Ana (5) Freeway. The space, more than six times the size of its prior digs in Aliso Viejo, houses about 40 employees and can accommodate dozens more as it ramps up software engineering, marketing and sales.
“We’re continuously hiring here,” Beres said. “We want to hire data scientists and software developers and start bringing them in-house.”
The company was started in 2015 by auto marketing veterans Ron Lopes and Christopher Miller, and Beres said it’s profitable and hasn’t raised capital from institutional or outside investors. Miller, the chief executive, and Lopes, the vice president, both previously worked at Mycustomerdata, an Aliso Viejo-based firm that provides customer retention information to franchise dealers. Miller’s resume also boats programming experience at large banks including London’s HSBC. He provided more than $400,000 of seed capital to help launch Recall Masters.
Recall Problems for Years
The faulty Takata airbags, which have been known to burst with exploding shrapnel upon deployment, have killed at least 15 drivers and passengers, and injured more than 250 in the U.S., according to NHTSA. The recall has involved 34 auto brands.
Issues related to Takata’s deadly air bag inflators continue to surface.
Takata recalled an additional 3.3 million airbags in January, and late last month, NHTSA warned millions of car owners the air bags are increasingly prone to explode during a collision after exposure to hot and humid conditions.
Some 37 million vehicles equipped with 50 million defective Takata air bags are still under recall, according to NHTSA.
“We’re going to have this problem for years to come,” Beres said.
Michigan-based Key Safety Systems in April acquired Takata’s non-airbag business assets for $1.6 billion in bankruptcy proceedings, and in June renamed the company TKJP Corp.
In February, Takata reached a $650 million settlement related to consumer protection claims in 44 states and Washington, D.C., but a small percentage is expected to be paid to those injured and families of the deceased, due to the predecessor company’s financial problems and bloated debt of more than $9 billion.
