A record-setting year for recalls and high-profile problems with General Motors and Toyota are mixing together to create a cauldron of proposed laws aimed at making automakers be accountable or pay up in a significant way.
In fact, some members of Congress and the Obama administration are pushing for changes that would force automakers to move more quickly to report potential problems and dramatically stiffen the penalties for attempting to skirt those rules.
When General Motors admitted to wrongdoing in the handling of its faulty ignition switch, it received a record fine of $35 million from the National Highway Traffic Safety Administration (NHTSA). The previous high was $17.5 million paid by Toyota related to its unintended acceleration problems. That figure was doubled to the current level in 2012.
“Our current fines and penalties are not tough enough to ensure that every business is playing by the same rules,” said Katherine McFate, president and CEO of the Center for Effective Government, a Washington D.C.-based watchdog group.
“We have to make sure that the businesses that are willing to put the health of the American people at risk face heavy sanctions. The bad actors should not have a competitive advantage over responsible businesses that adhere to health and safety standards.”
However, the push is on to make the new maximum fine $300 million. Transportation Secretary Anthony Foxx is pushing for the dramatic increase because the fines need to be “more than a rounding error.” He notes that a $35 million fine is hardly a deterrent to a company with revenues exceeding $155 billion annually.
(Failure to recall may cost automakers $300 million. For details, Click Here.)
Clarence Ditlow, executive director of the Center for Auto Safety, agrees with tougher sanctions for automakers that are non-compliant, but also wants to see the way problems are reported to NHTSA revamped so trends can be discerned more quickly.
He noted that one of the issues surround the GM problem is that there was a reliance on the codes used to report problems were ineffective, which allowed the problem to linger undetected by NHTSA personnel.
Ditlow’s not alone in his desire to see change. It would seem at this point, all of the laws governing what automakers are required to report and when they need to so are up for examination.
(Click Here to see how NHTSA is forcing GM to change is safety culture.)
Currently, automakers are required to recall vehicles within five days after determining they pose an unreasonable risk to driver safety. One of the points of contention in GM’s case was the length of time the company knew about the problem. However, it was GM’s culture of silence that caused the issue to not be brought to top executives within the company.
The administration’s proposed law would “make individuals who commit violations … or who cause their companies to violate” laws on timely auto safety recalls liable for civil penalties if they “act willfully to cause or commit a violation.” The result would be that employees could be charged under the proposed law.
Senator Richard Blumenthal, D-Conn., has barraged GM with criticism about the handling of the ignition switch recall. He said he believes an ongoing Justice Department investigation will find a cover up.
However, he and two of his Democratic colleagues, Tom Harkin (D-Iowa) and Bob Casey (D-Pa.) recently introduced the “Hide No Harm Act of 2014,” which among many things levies a five-year prison sentence for executives who hide information from federal safety regulators as well as providing protection from criminal liability for those who provide notice that such activities are ongoing.
“This measure would criminally punish corporate officials who conceal that a product is dangerous,” he said in a statement. “Penalties for severely risking consumers’ lives or health should be more than money paid by the corporation, in effect the cost of doing business.
“This new law also would protect and create a legal safe harbor for whistleblowers who disclose defects and dangers. The goal is to assure that GM’s corporate anti-consumer concealment never happens again.”
(To see why Sen. Claire McCaskill blasted GM’s top attorney, Click Here.)
Additionally, NHTSA could order automakers to stop sales and order immediate recalls if it found “an imminent hazard of death or serious injury.” Right now, federal officials must now go through a two-step process to order a recall: an investigation and engineering analysis and an administrative hearing to order the recall. If the agency clears those hurdles, it gets an order from a judge.
However, some Democrats in Congress would like to see a stiff set of rules. In June, the chairman of the Senate Commerce Committee, Sen. Jay Rockefeller, D-W.Va., put forth a measure to increase NHTSA staffing, which would be paid for by a new-car fee. The fee would increase funding by more than $100 million to $280 million by 2017.
The Alliance of Automobile Manufacturers, which represents GM, Ford Motor Co., Fiat Chrysler Automobiles, Toyota Motor Corp. and several other makers, predictably objected to the bill saying that the plan doesn’t really change anything about the process and simply just adds more money to the cost of a new vehicle.