Hertz Agrees To Government Oversight Of Recalled Cars

In the face of an industry-wide safety investigation, the nation's second-biggest rental car company has taken the rare step of asking for government regulation to ensure that autos under recall are fixed before they're rented. Hertz has struck an agreement with safety advocates to ask Congress to put recall oversight of the industry under the National Highway Traffic Safety Administration (NHTSA). Sen. Charles Schumer, D - NY, and Sen. Barbara Boxer, D - CA, say they plan to introduce legislation to do that after Congress reconvenes.

NHTSA has been investigating the auto-rental industry for more than a year after the industry was accused by safety advocates of renting cars that were recalled by automakers but not repaired. According to NHTSA, which sets and enforces motor-vehicle safety standards, all safety recalls involve a risk to motor vehicle safety, and the vehicles should be fixed promptly.

Federal law prohibits manufacturers and new car dealers from selling recalled vehicles before they are fixed. But it doesn't apply to rental car companies. NHTSA has jurisdiction over auto manufacturers. But it's had no authority over the rental companies. The companies are the largest buyers of new cars and the largest source of used cars in North America. The agency has said it would welcome jurisdiction over the industry.

Enterprise, the largest auto-rental company, and Avis Budget, the third-largest, haven't joined Hertz in its agreement with Sacramento-based Consumers for Auto Reliability and Safety. Enterprise spokeswoman Laura Bryant says large recalls in recent years prompted Enterprise to "make significant changes and improvements" in its inspection and repair of recalled vehicles. "Proposed legislation to date has not reflected these changes and, therefore, is well-meaning but unnecessary," she says.

Avis Budget Group spokesman John Barrows says rental car companies would be unfairly singled out by legislation forcing them to ground recalled vehicles until they are repaired, and leave taxi and limousine companies untouched. Nonetheless, Barrows says, Avis Budget Group has been reviewing the agreement between Hertz and consumer advocates.

Hertz Senior Vice President Richard Broome says the agreement to seek government oversight of safety recalls conforms to the company's policy of not renting recalled vehicles until they are repaired.

Rosemary Shahan, President of the consumer group, says, "It's unprecedented for a major rental car company to actively support a new federal law that would require the industry to ground unsafe, recalled cars until they're fixed."

Meanwhile in other news regarding the rental company, Hertz Global Holdings Inc. reported on February 22 that it swung to a fourth-quarter profit of $47.1 million from a loss a year earlier as worldwide car rentals surged. An improving economy set the foundation for the better-than-expected growth. The company said it had record car rental revenue for the full year as well as four consecutive quarters of double-digit growth in its equipment rental business.

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