1. Product Recall ETM 627 Sydney Herrin - A. O. Smith 75 Gallon Gas Water Heater 12/1/2014 1 What: A. O. Smith 75 Gallon Natural and Propane Gas Water Heaters Recall Date: April 3, 2008 Why: “The water heater’s flue gas temperatures can exceed safe limits and produce excessive temperatures in the venting unit, posing a fire hazard. Also, the water heater’s exhaust can leak into the surrounding room, posing a carbon monoxide hazard [1].” Incidents: None reported. Number of Units Sold: 1500 ($1000 - $2500) When Sold: November 2007 to January 2008

2. Management Issues 2 Recognition of Problem: “The recall involved 75 gallon ‘cross-fire’, natural gas and LP 300 & 301 series built between November 12, 2007 and December 12, 2007. The range of serial numbers of the affected models is between L07A071460 to M07A072884 [2].” Speed of Response: A. O. Smith reacted quickly since the recall was issued only 5 months after the first affected models were built. Also, the remedy (immediate discontinuation of use and a free repair) was ready when the recall was issued [1]. Responsibility: A. O. Smith admitted responsibility for omitting 1 or more of the 4 necessary flue baffles during manufacturing. Baffle omissions can cause flue temperatures to run higher than ANSI standard allows and can create a risk of fire and excessive carbon monoxide [2]. ETM 627 Sydney Herrin - A. O. Smith 75 Gallon Gas Water Heater 12/1/2014

3. Technical Details 3 ETM 627 Sydney Herrin - A. O. Smith 75 Gallon Gas Water Heater 12/1/2014 Baffles create turbulence and resistance for flue gases to enhance heat exchange [3] Missing baffles decreases efficiency for flue gas combustion and heat exchange from the flue gases to the water Increased amount of uncombusted gases are vented which causes excessive levels of carbon monoxide Flue gas retains excessive amount of heat when vented since it does not lose as much heat to the water, which could overheat the venting unit potentially causing a fire Flue baffle for gas-fired water heater [3]

4. Impact of Recall 4 Legal Consequences: There were not any articles specifically citing legal consequences in association with this recall. Perhaps this is due to the cooperation and quick response of A. O. Smith with the U.S. Consumer Product Safety Commission. Reputation: There were not any articles indicating a change in reputation specifically due to this recall. However, a search for A.O. Smith water heater reviews brings up www.consumeraffairs.com with 283 customer reviews from July 2008 to January 2014. Many of these reviews are negative and indicate dissatisfaction with A. O. Smith’s warranty fulfillment and malfunctions with various water heaters, including two complaints about the water heaters causing fires. This leads to some suspicion about no incidents being reported with this or other similar recalls for A. O. Smith water heaters [4]. www.consumeraffairs.com Sales: According to A. O. Smith stock history, there has been a steady increase in their stock value especially since early 2009 and there was not a significant change in their stock value at the time of the recall [5]. There were also several financial releases indicating record sales for the past couple of years [6]. So, this recall did not appear to have a significant impact on A. O. Smith sales. ETM 627 Sydney Herrin - A. O. Smith 75 Gallon Gas Water Heater 12/1/2014

5. References 5 [1] A.O. Smith Recalls Gas Water Heaters Due to Fire and Carbon Monoxide Hazards. (2008, April 3). Retrieved November 11, 2014, from http://www.cpsc.gov/en/Recalls/2008/AO-Smith-Recalls-Gas-Water-Heaters-Due- to-Fire-and-Carbon-Monoxide-Hazards/ [2] Safety Recall - Missing Baffles. (2014, January 1). Retrieved November 11, 2014, from http://www.hotwater.com/safety-recall-notice/ [3] Patent US5544625 - Flue baffle for gas-fired hot water tanks. (1996, August 13). Retrieved November 30, 2014, from http://www.google.com/patents/US5544625 [4] A. O. Smith Water Heaters. (n.d.). Retrieved November 30, 2014, from http://www.consumeraffairs.com/homeowners/ao_smith.html [5] Stock Information. (n.d.). Retrieved December 1, 2014, from http://investor.aosmith.com/stockquote.cfm [6] Financial Releases. (n.d.). Retrieved December 1, 2014, from http://investor.aosmith.com/releases.cfm ETM 627 Sydney Herrin - A. O. Smith 75 Gallon Gas Water Heater 12/1/2014