You are using the word 'theory',
@jfoldbar, in the sense of: I just pulled this out thin air.
@tygerdawg is mentioning very well tested concepts. Engineers and scientists use the word theory in a different way. It confuses people. 'It means I know this stuff and how it got this way. If it needs tweaking I listen and test until my hypothesis works great in the real world.'
What he is talking about: precise control of procedures, materials, constant measurements to make sure parts are in tolerance, and quality tests on assemblies, sub-assemblies and completed cars.
This whole thing is a balancing act on the part of the manufacturer. An example:
Do I make parts locally and have complete control over quality, at a greater price to me. Do I subcontract out locally and have less control?
As control of parts manufacturing goes down, there can be a cost penalty for testing somebody else's parts. They do not test and measure every part, just some. How often to test and how evaluate results are mathematically determined -- and way beyond what is needed here.
This falls under the topic of Reliability Engineering - lots of statistics and models of testing regimes. One goal is called 6 sigma. That is statistics jargon for 'a set of management techniques intended to improve business processes by greatly reducing the probability that an error or defect will occur.' Management speak, if you like. Clearly it does not always prevent problems. He mentions VW as a mjor corporate failure. VM circumvented vehicle emissions testing. They programmed their car computers to behave differently in terms of ignition and fuel consumption when tested. What the cars really do on the road is to dump out lots more pollutants and consume more gas. VW saved big bucks and broke a bunch of laws. His conclusion - and mine: So much for 6 sigma certification.
A measurement of product quality is something called mean time before failure - MTBF. Let's take a part of a car: an axle bearing . They create a model of how a car is driven. Not everyone drives the same, so that is taken into account. Next they figure out how many revolutions the axle bearing has to endure, how many panic stops, speed bumps, and everything else. They translate that into a driving time in hours- the point at which 50 out of 100 of the bearings have failed. MTBF. So a part will operate reliably and not fail for most people up to some point before MTBF. So manufacturers warrant (pretend* to pay for replacements) of parts before say 50000 miles of operation or five years - whichever comes first. They are betting that because the MTBF is really 7 years, it won't cost them too much money or bad publicity (which is worse for excessive failures) for the warranty - which as an estimate, is in the sale price anyway.
Cars have computers now. Those computer parts and sensors have an MTBF. So do individual drive train parts, and the whole assembly does, too. Everything.
So, a lemon is a car for which people have expectations of perceived quality, the quality violates that perception. It can be anything from transmission to dome light repeated failures that trigger the lemon response.
Causes
1. made from parts for which reliability testing is poor by design or delusion.
2. MTBF estimates for some parts have problems. Those often result in a recall.
3. Like Toyota did, pretend there is no problem because admitting some is not as advertised or implied is "bad". Or they simply are dishonest. - this was/is a corporate culture problem.
4. What VW did, in essence, produced large numbers of lemons. They violated consumer perceptions. Not to mention laws all over the world.
*pretend in the sense that consumers pay up front (in the purchase price) for a part the expected failure repairs, whether or not they have any.
Note: you can buy extended warranties, which gives you an idea of what car makers think the MTBF really is.