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A Guide to Recent Automotive Industry Fines and Recalls

| Aug 3, 2015 | Analysis

In 2014, the federal agency responsible for automobile safety issued $126 million in fines against automakers, an amount greater than that which was collected in the agency’s prior forty-three year history. The National Highway Traffic Safety Administration (NHTSA) shows no signs of slowing down, fining Fiat Chrysler a record-breaking $105 million just  last month.

Man turning the ignition key of his car

NHTSA Administrator Mark Rosekind stated that penalties like these are needed to deliver “a very clear message to the entire industry that manufacturers have responsibility for the complete and timely reporting of … critical safety information.”

But recently, the focus of some of the criticism has shifted from automakers to NHTSA itself.

An audit report from the Department of Transportation’s (DOT) Office of Inspector General blames deficient procedures used by NHTSA’s Office of Defects Investigation (ODI) for delays in identifying and eliminating a switch defect present in several General Motors (GM) vehicles. The report, which provides seventeen recommendations for NHTSA reform, has led the agency to begin a restructuring process.

The events that culminated in the recent fines date back over a decade. Earlier this year, NHTSA fined Honda $70 million for apparently failing to report 1,729 death and injury claims and for failing to report certain other warranty claims. Honda allegedly began underreporting claims in 2003. In addition, accused of failing to make timely completion of recalls and notification to consumers, Fiat Chrysler has accepted a record fine and increased NHTSA oversight. Those recalls involved vehicles as old as the 1994 Jeep Grand Cherokee.

In at least one case, though, NHTSA’s own internal practices apparently contributed to a lengthy delay in fixing an auto safety problem.

In 2001, GM reportedly discovered a defect in its Saturn Ion. In some vehicles, the ignition switch moved from the “run” position to the “accessory” position when jostled by a knee or heavy keychain while the car was running. This change in position disabled power steering, brakes, and air bags, increasing the likelihood of accidents and fatalities.

After GM noted the problem in 2001, a supplier apparently urged the company to examine the link between the ignition system and air bag deployment when rolling out the Chevrolet Cobalt in 2004. GM’s subsequent analysis did not lead to a discovery of the switch defect. By 2005, GM had apparently received “numerous” field reports and consumer complaints of keys moving out of the “run” position, shutting off vehicle power. According to a report by the Democratic staff of the House Committee on Energy and Commerce, GM engineers opened inquiries into the complaints and reports but rejected all proposed solutions, determining that no answer presented “an acceptable business case.”

A GM engineer working on the Cobalt reportedly stated in a 2013 deposition that GM made a “business decision not to fix [the] problem.” An investigation by former U.S. Attorney Anton Valukas purportedly found that GM engaged in “a pattern of incompetence and neglect” but did not intentionally cover up the defect.

In February 2014, GM notified NHTSA that a defect existed in 619,122 cars. Over the next several months, 8.7 million vehicles were recalled domestically, eventually costing GM billions of dollars in repairs. NHTSA subsequently issued a $35 million fine, which was at the time the highest civil penalty paid as a result of an NHTSA investigation of violations stemming from a recall.

NHTSA, too, apparently missed opportunities to fix the switch defect: in 2007 and 2010, ODI looked into the problem and concluded that there was no correlation between the crashes and air bag failures. Not until 2012 did NHTSA officially attribute a crash to the defect. Following the recalls, a House Committee on Energy and Commerce report pointed to “a number of key failures and missed opportunities” by the agency.

NHTSA responded in early June with a “workforce assessment,” pledging to make reforms but placing most of the blame on GM for failing to disclose the problem. The assessment indicated that increased funding might solve the agency’s procedural defects: NHTSA requested an additional $89 million in funding and an additional 380 employees.

But the recent DOT audit report instead emphasizes the importance of correcting deficiencies in NHTSA’s defects investigation process. Calvin Scovil, DOT’s Inspector General, now believes that “allocating more resources to an effort or to an agency whose processes aren’t in line in the first place does not seem like a good idea.”

As NHTSA begins restructuring itself, it continues investigating defects. The agency recently expanded its probe into defective air bags manufactured by Takata Corporation, which earlier this summer recalled air bags found in over 30 million vehicles made by over a dozen different automakers, including Honda, Chrysler, and GM.

This essay is the first in a three-part series, Getting Defective Vehicles Off the Road.



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