Major Automakers Seek Reform Bill Changes

Major automakers want significant changes in auto safety reforms that are part of a two-year highway reauthorization bill.

Mitch Bainwol, President and CEO of the Alliance of Automobile Manufacturers, told the House Energy and Commerce Committee on March 22 that it should make major changes in the $109 billion bill that the Senate approved on a 74-22 vote. The alliance — which represents Detroit's Big Three automakers, Toyota Motor Corp., Volkswagen AG, and seven others — says many "provisions should be revised or removed on the basis that they inappropriately divert resources from more pressing priorities."

Automakers want the House to reject the provision in the Senate bill that would hike fines to $250 million for failing to recall vehicles properly, up from about $17 million. "Motor vehicle manufacturers are already subject to higher civil penalties than other similarly situated manufacturers of consumer products," says Bainwol's written testimony. "The proposed increases are well out of proportion and unfairly punitive. The proposed increases should be scaled back to a more appropriate level." The Senate bill, aimed at reforming the National Highway Traffic Safety Administration, mandates safety belts on all commercial buses and requires a number of new safety regulations. But the House version of a highway bill has no new auto safety provisions.

For more than a year, proponents have pushed Congress to strengthen auto safety measures in the wake of sudden-acceleration concerns in Toyota Motor Corp. vehicles. The provisions, sponsored by Senators Mark Pryor, D-AK, and Jay Rockefeller, D-WV, would not take effect until at least one year after passage. The measure also would require automakers to prevent drivers from being able to see "broadcast television, movies, video games, and other forms of similar visual entertainment" while driving. The bill would require NHTSA to study rules aimed at reminding parents and others of unattended children left behind in back seats of vehicles.

Automakers say before any new rules are written a study of the problem is needed. "Without such an understanding, it is not possible to evaluate the anticipated effectiveness of potential countermeasures," Bainwol's testimony says.

The Senate bill would also require automakers to install reminders for riders in the back seat to wear their seat belts. Automakers want that requirement removed. "While the industry voluntarily developed and installed these systems for front seat passengers, it would be far more complex and expensive to develop a similar system for rear seat passengers," Bainwol's testimony says.

Automakers have questioned the need for new auto safety measures. They note that in 2010, the number of road deaths fell to its lowest number since 1949 — less than 33,000. Recall fines are rarely levied. Toyota paid nearly $50 million to settle three NHTSA complaints that it delayed recalls, while last month BMW AG paid $3 million after NHTSA said a review of 16 recall campaigns in 2010 showed it hadn't notified the government within the required five days after determining a safety defect.

The bill would also dramatically hike fines for odometer fraud to up to $1 million from a current maximum of $100,000 for some fraudulent actions. It would require the study of rental truck crashes. Separately, Reps. Henry Waxman, D-CA, and G.K. Butterfield, D-NC, want Transportation Secretary Ray LaHood to require owners of used cars that are up to 24 years old to disclosure the actual mileage driven. Under current law, owners must only disclose the true mileage in vehicles less than 10 years old. The auto safety bill would seek to improve the vehicle recall database and website. It would create a hotline for mechanics, dealers and auto workers to call to make anonymous complaints of safety problems with vehicles. It would also require new regulations on pedal placement, push-button ignitions and electronic performance issues. Automakers argue that requiring NHTSA to write new rules in these areas are unnecessary.

One provision could potentially be a boon for trial lawyers seeking to file product liability lawsuits against automakers. The new rule would revise the law to set a "presumption" that confidential business information disclosed to the agency is not exempt from disclosure under the Freedom of Information Act. "This section unnecessarily throws into question an issue that has already been the subject of two rulemakings and three separate legal challenges. It should not become law," Bainwol's written testimony says.

National Highway Traffic Safety Adminstrator David Strickland told a House panel that higher fines would help deter automakers. Strickland said the $17 million maximum fine is a "pittance to most of these automakers" because of their large size. "We feel that a more significant penalty would frankly create a greater incentive for manufacturers to comply with the rules," Strickland said, saying it is "high time" that Congress hike the fines. "We don't want to be issuing fines. We want people to be complying."

Strickland said one day a future automaker may decide that the cost of a recall fine is cheaper than complying with the law. He noted that some recalls can cost hundreds of millions of dollars.

Automakers must notify NHTSA within five days of determining that a vehicle has a safety defect. Automakers want the House to reject the higher fines. The Alliance of Automobile Manufacturers - the trade group representing Detroit's Big Three and nine other automakers - says automakers already have lots of reasons to comply with the law.

The Senate bill, aimed at reforming NHTSA, mandates safety belts on all commercial buses and requires a number of new safety regulations. But the House version of a highway bill has no new auto safety provisions. Proponents have pushed Congress to strengthen auto safety measures in the wake of sudden-acceleration concerns in Toyota Motor Corp. vehicles. The bill would also require NHTSA to study rules pertaining to unattended children in back seats of vehicles.

Recall fines are rarely levied. In 2010, Toyota paid nearly $50 million to settle three NHTSA complaints that it delayed recalls, while last month BMW AG paid $3 million after NHTSA said a review of sixteen recall campaigns in 2010 showed it hadn't notified the government within the required five days after determining a safety defect.

Strickland also wants Congress to give NHTSA the power to require used car dealers or rental companies to fix vehicles that have been recalled before they are sold or used. He has also proposed speeding up the appeal process of recalls. He called for sending those challenges to an appeals court immediately "to ensure that manufacturers have the opportunity to challenge orders while avoiding lengthy district court trials during which time no recall is in effect."

Rep. Marsha Blackburn, R-TN, who chaired the hearing, doubted that many Republicans would support higher fines. "We need to think about the best ways to incentivize safety that makes sense and works for everyone," she said.

Strickland has previously endorsed some provisions including:

Increased authority to address safety hazards caused by some imported motor vehicle equipment
Protection for consumers affected by safety defect or noncompliance calls from manufacturers who file for bankruptcy
Increases in the total amount of civil penalties NHTSA can seek for safety-related violations

Transportation Secretary Ray LaHood, on March 21 called on the House to immediately pass the Senate bill. But LaHood declined to comment on the safety provisions in the Senate bill.

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