Auto recalls make strange bedfellows

Blog Post

It is no wonder that industry-wide optimism was on full display at the recent North American International Auto Show in Detroit. U.S. auto sales set a record high last year, and the future promises even more excitement as automakers race to equip their cars with enhanced digitalization, green technologies, and a range of autonomous capabilities. Indeed, the coming years may be dynamic and positively transitional for the industry.

Yet, unhidden by this optimism is the darker reality of the countless safety recalls that have plagued the auto sector over the last 18 months. Think GM ignition switches, Takata airbags, and Toyota power window switches, to name but a few. Some recalls have resulted in record fines for certain companies, and, just to ensure the message hits home, last month the National Highway Transportation and Safety Administration tripled the amount in fines it can levy for auto safety infractions from $35 million to $105 million per violation.

Industry players respond with voluntary accord

That, according to some industry-watchers, is why several days ago 18 automakers, including the Big Three and most major foreign players, entered into a voluntary accord with NHTSA in which each company agreed to abide by four “proactive safety principles.” In sum, the companies and NHTSA agreed to:

  1. “continue to emphasize and actively encourage processes that promote steady improvement in vehicle safety and quality within our respective organizations, across the industry, and with other stakeholders,”
  2. “continue to incorporate advanced methods in data analytics into the analyses and examinations of Early Warning Reporting data to better identify potential risks earlier,”
  3. “explore and employ new ways to increase safety recall participation rates by the public by working toward the aspirational goal of 100 percent participation,” and
  4. “explore and employ ways to work collaboratively in order to mitigate those cyber threats that could present unreasonable safety risks.”

Overall, the parties profess that,

“[b]y acknowledging the Principles above, automakers and NHTSA are committing to work together to develop a collaborative, data-driven, science-based process, consistent with the law, to advance these objects and thereby we are emphasizing our commitment to further enhancing the safety of roadway users.”

Critical reaction: Will accord be enough?

Critics have already emerged. Perhaps one former NHTSA administrator best summed up the opposition by calling the agreement “toothless,” incapable of implementation, and “worth only the cost of paper [it is] written on.” He further stated that “[t]here is nothing preventing the auto industry from disregarding or outright violating these principles,” and that the American people are not best protected by a “kumbaya between the federal agency charged with issuing regulation and the industry seeking to avoid regulation.” Other critics argue that the agreement’s reach is too limited because it does not include any suppliers, some of which are among the companies subject to recent recalls.

Proponents, on the other hand, see value in taking a more proactive approach to auto safety issues. “Real safety is finding and fixing defects before someone gets hurt, rather than punishing them after the damage is done,” said the U.S. Secretary of Transportation, who hopes to improve the use of early warning reporting data and find ways to work with legislators, insurers, and state DMVs to enhance recall participation. Proponents further hope that, as part of the agreement, analysis of the aviation industry’s successful anonymous safety reporting system will lead to implementation of a similar system with similar results in the auto sector.

As carmakers seem bound and determined to reach bold new frontiers in technology and innovation in the near term, it will be interesting to know whether and to what extent implementation of the “proactive safety principles” actually affects NHTSA’s soaring recall rate and the auto industry’s manner of doing business. But for now, NHTSA insists that there will be no curtailment in recalls for qualifying safety violations, which is why every company should know its legal rights, obligations, and options sooner rather than later when faced with a potential recall.

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