In a show of just how much damage a product recall can do to a bottom line, Johnson and Johnson has been reported to have taken charges of $3 billion, and their earnings forecast for 2012 is below previous projected numbers.
In 2010, the company’s DePuy Orthopedics Division announced a recall of their “metal-on-metal” hip replacement device. The issue involved the shedding of metal fragments, which led to debilitating injuries in those who had the device implanted. The failure rate for the recalled product hovered around the 30% rate, three times the norm for similar products. The full cost of the various recalls to the company can’t yet be measured since settlements have not yet occurred.
Right around the time that the artificial hips were being recalled, Johnson & Johnson also recalled a number of medicines, including Tylenol and Motrin, due to a lack of quality control at certain factories.
For the quarter, the company earned $218 million, compared with $1.9 billion a year earlier.
As a Los Angeles personal injury lawyer, I can attest that recalls are an important tool in keeping companies held accountable. They may hurt a company’s financial outlook, but companies should be able to rebuild as long as they do the responsible thing. A personal injury lawyer in Los Angeles like myself sees recalls not as a detriment to business but as an integral part of developing a trusting relationship between corporation and consumer.
