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Hertz Asks for Federal Oversight of Recalled Cars

Rental industry under fire for potential safety lapses.

by on Feb.21, 2012

Hertz has agreed to support legislation that would require rental vehicles to be repaired before being returned to rent-a-car lots.

With the industry facing criticism for ongoing safety lapses, rent-a-car company Hertz is calling for government oversight to ensure that recalled cars are fixed before being rented to consumers.

Two senior lawmakers say they will introduce legislation to do just that in the coming weeks.

Though rental firms like Hertz and Enterprise, the largest in the field, are the single biggest purchasers of new cars in the U.S. they are not subject to regulation by the National Highway Traffic Safety Administration, which oversees automotive manufacturers.  NHTSA can block the manufacture and sale of vehicles experiencing safety defects but it is currently powerless to prevent them from being rented out.

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Nonetheless, NHTSA has been investigating the rental industry for more than a year following revelation that rental companies have frequently allowed vehicles subject to safety recalls to remain on rental lots.  As first reported in July 2010, officials with Enterprise, Alamo and National acknowledged in court they would delay making safety-related repairs, in one manager’s words, “when demand called.”

The issue came to the surface that summer when Enterprise was struck with a $15 million judgment in a case involving the death of two women who had rented a car that subsequently collided with a tractor trailer due to defects that had not been repaired.  The rental firm initially tried to blame the victims, alleging the driver was “suicidal or on drugs.”

During the trial, Mark Matias, a former San Francisco-area manager for Enterprise admitted on the stand that, “When demand called, we rented out recalled vehicles.  It happened, I won’t lie.”

Hertz has broken with the rest of the industry, reaching an agreement with California-based Consumers for Auto Reliability and Safety, or CARS, to ask for new government oversight that would bar the rental of vehicles covered by a recall until they are repaired.

Enterprise has so far resisted pressure to sign the agreement, though a spokesperson indicated the rental giant has made “significant changes and improvements” in its policies to ensure vehicles covered by recalls are inspected and repaired as necessary.  The firm described the proposed legislation – to be introduced by Senators Chuck Schumer and Barbara Boxer – as “well-meaning but unnecessary.”

Avis Budget Group, the industry’s third-largest renter, says it is reviewing the agreement.

In a statement on its corporate website, Hertz noted, “It is (already) the policy of The Hertz Corporation to promptly repair all vehicles subject to manufacturer recalls.”

The company reports that 184,000 of the vehicles in its fleet were subject to some form of safety-related recall in 2011.

Rosemary Shahan, president of CARS, hailed Hertz for its decision to sign onto the safety group’s petition and called it, “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.”

It remains to be seen if the support of Hertz will convince Budget and other rental firms to sign on – or to win Capitol Hill of the proposed measure at a time when there is strong resistance to any new government regulations.

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