The Shimano crank recall is substantially bigger than the norm, with 2.8 million affected products worldwide – and Wilsons’ keen cyclists affected too. Ian Baguley checks his cranks, and the considerations for commercial insurance programmes.
The subject of this article is of interest to us. Actually it is more than that, with a number of keen cyclists at Wilsons, it covers an issue that affects up to 2.8 million cyclists worldwide and some of us personally, having the product fitted to our bikes. This is tinged with some concern over the reports of injuries and potential for further incidents.
From an insurance perspective it is of interest as an example of a corporation handling a product recall on a global scale. Product recall cover is a risk we discuss routinely with clients. Perhaps in time it will also be an example of how investors will judge the corporate governance in relation to the recall. This latter point relates to ESG, Environment, Social and Governance judgements major corporations are aware institutional investors, pension funds, financial advisers and fund analysts are now required to consider.
As you can see from the picture above this article concerns a consumer cycling product, called a chainset/crankset, namely the pedal arms and front rings that connect the cyclist’s pedals to the chain used to drive the bicycle forward. In this case the products are medium to high level performance road bike components, used by amateur road cyclists right up to Tour De France teams. The product could have been fitted by a manufacturer to a road bike costing around £2,000 up to circa £12,000 plus, hence the circa 2.8 million products in the affected manufacturing periods from 2012 to 2019.
In 2020 and 2021 reports started emerging of the bonding (glue pads) in some units failing, resulting in the outer side of the product breaking away from the bike, as in the picture above. In America an Instagram page titled ‘Thanks Shimano’, was started by a rider that suffered the failure and this started to attract posts from riders around the US and worldwide, with photos of broken chainsets. As a result the cycling press started to report on the problem.
Fast forward to September 2023 and the manufacturer Shimano, a Japanese corporation and one of the world’s largest bike component manufacturers, was required by the Consumer Product Safety Commission (CPSC) to issue notice of a product replacement recall in the United States, with a recommendation that cyclists with the affected product do not ride their bike. The notice referred to there being 4,519 reported incidents with the CPSC noting six injuries ‘including bone fractures, joint displacement and lacerations’. The recall and replacement in the US applies to circa 760,000 units.
It is worth noting at this point that there is no single global consumer regulation or an industry regulator covering cycling products. You may have heard of Union Cycliste Internationale (UCI), based in Switzerland, which is the regulator for global cycling competition that can ban products from cycle races, most commonly on performance advantage grounds, but the UCI has no powers over consumer products.
The position in the US on the product recall seems clear, however Shimano has chosen to adopt a different approach outside of the States. In Europe instead of a do not ride your bike and replacement product recall, for the affected batch codes, the manufacturer has through press releases and the cycling press asked cyclists with one of the listed products to visit a Shimano dealer for an inspection. If the inspection fails an equivalent replacement will be provided, if the inspection is passed Shimano states the following:
There is therefore a crucial difference in the approach in the US to elsewhere in the world, that may arise from a strong US consumer regulator or perceived risk of litigation.
At this point the UK Government’s Office for Public Safety & Standards issued a report on 3/10 titled ‘Shimano 11 speed crank arms for bicycles’, which states that ‘the affected cranks have a ‘medium risk’ of sustaining injuries and ‘the affected products do not meet the requirements of the General Product Safety Regulations 2005’
Shimano have commented that it only regards those products failing the inspection tests as being due further action.
Whilst some legal commentators have stated that the UK Government report increases the risk of litigation in the event of an injury arising from use of the affected product, there is uncertainty resulting from the inspection process Shimano has announced. Whilst it is evident that any obvious failure of the product when inspected by a dealer will be replaced, what is the position if the unit passes the inspection and then subsequently fails when riding? There have been a number of reports of the product failing without prior warning.
Affected cyclists and the european bike industry have some difficult decisions arising from the Shimano’s inspection process. For the bike industry dealing with reduced sales volumes post the Covid surge this provides work through this winter, but with customer concerns to deal with and the potential for being included in litigation in the event of a failure shortly after the dealer inspection. For the affected cyclists who have usually bought a performance road bike to ride at speed, including out of the saddle efforts that place greater strain on the drivetrain, a difficult decision arises if the inspection is passed. Will the rider be happy to put the issue out of their mind and ride their bike as normal or decide to buy a new chainset. Cyclists selling their used bikes may also be concerned if the chainset has one of the affected batch codes, will it be sufficient to have a bike serviced and inspected by a bike shop before sale, if available and what disclosure to the buyer would be required?
It will be interesting to see where this goes and hopefully there will be no further reports of injuries. It will be one of the largest cycling product recall programs and a reflection of the increase in the popularity of road cycling in recent years.
With such a large number of units involved, this issue may have an effect on the development of cycling products going forward. Shimano’s Hollowtech products have been around for many years, but the product concerned used a new bonded construction method that has delaminated. It has always been known that reducing weight may affect the durability of a cycling product. One of the early developers of mountain bikes in the US Keith Bontrager made a now famous statement on cycling components, ‘Strong, Light, Cheap – pick two’.
More generally this issue is an example of how a manufacturer can incur significant costs, resources and management time demands arising from product failure and recall, as well as any reputational damage. The risk requires discussion and due consideration where appropriate within commercial insurance programmes.
Wilsons -Think.
Article drafted by:
Ian Baguley ACII Dip PFS, Financial Adviser & Account Director at The Wilson Organisation