Auto dealers poised for victory on recall provision in U.S. highway bill – Automotive News

Posted: Wednesday, November 18, 2015

WASHINGTON (Bloomberg) — It was supposed to be the response by Congress to a historic string of auto safety lapses that rocked the industry.

Instead, lawmakers are finalizing a highway bill that would let dealers sell used cars with outstanding safety recalls.

Besides the language for used car sales, dozens of other industry-friendly provisions are being decried by consumer groups as House and Senate negotiators will meet starting Wednesday to reconcile different versions of a bill that will set national safety policy for the next six years. Current funding expires Nov. 20; a measure the House passed Monday would extend that two weeks.

“For 25 years, the highway bill has been a success story, saving tens of thousands of lives,” said Jackie Gillan, president of Advocates for Highway and Auto Safety, a Washington consumer group. “This year’s bill drives safety off a cliff.”

Last year’s General Motors ignition-switch fiasco helped push the total number of recalls in the U.S. to 64 million cars, more than double the previous record. Then Honda Motor Co. paid $70 million for failing to properly report death, injury and warranty data to U.S. regulators.

This month, Takata Corp., the maker of faulty airbags linked to seven deaths and 100 injuries in the U.S., agreed to a civil penalty that could reach $200 million, an all-time-high. That was the third time this year a misbehaving company paid a record-breaking fine to auto-safety regulators.  

Industry exemptions

Yet the House voted to pare back the vehicle-safety budget for the National Highway Traffic Safety Administration and carve out exemptions to trucker rest regulations. The Senate voted to hide truck and bus company safety scores from the public. More significantly for safety advocates, neither chamber of Congress added criminal penalties for auto executives that knowingly violate safety rules.

The Senate — though not House — version of the bill would for the first time ban the rental of cars with safety defects. Auto dealers, however, successfully argued that loaner cars, such as those given to consumers while their vehicles are in the shop, should be treated differently than rental cars.

Consumer groups and the Obama administration pushed Congress to go even further, to ban the sale of used cars with open safety recalls. Neither the Senate nor the House included a used-car ban.

Dealer pushback 

The National Automobile Dealers Association argued in congressional testimony and letters to lawmakers that cars with safety defects aren’t a public threat because only about 9 percent of recalls issued by automakers or NHTSA are accompanied by stop-drive orders. Most routine recalls, the group said, allow owners to continue driving affected vehicles while automakers line up parts and schedule repairs.

“Dealers agree that all safety defects need to be repaired, but not all safety defects present an immediate danger to drivers,” NADA spokesman Jared Allen said in an interview. “There isn’t a dealer out there that would sell or loan a vehicle they believed to be unsafe to drive.”

But even within the auto dealer community, the legislation created debate. AutoNation CEO Mike Jackson has gone against the NADA, saying grounding cars with open recalls should be the industry standard — as it is at AutoNation dealerships. 

Most other efforts to beef up NHTSA to help prevent future safety crises like the failure to detect the GM ignition-switch defect or the record-breaking Takata airbag recalls were left out of the bill.

NHTSA budget 

In fact, NHTSA’s funding was targeted by the House bill. It proposes to cut the agency’s budget for vehicle safety by $15 million in each of the next six years compared to the Senate version, which matched the Obama administration request.

Both versions of the highway bill make increased NHTSA funding contingent on reforms recommended by the Transportation Department’s inspector general.

Lawmakers have other mandates for the agency in the legislation. They want NHTSA to outline every Dec. 1 any planned regulations, guidelines or changes to its policy priorities, make automakers responsible for covering defect repairs for 15 years from the current 10 years, and force automakers to retain records for 10 years instead of 5 years.

“I’m pleased that we were able to achieve these important reforms, but we have a lot more road to cover,” House Energy and Commerce Committee Chairman Fred Upton, R-Mich., said in a Nov. 5 statement. His committee was responsible for the auto safety provisions in the highway bill.

Criminal penalties? 

Safety groups wanted criminal penalties for auto executives who knowingly withhold information about defects, much higher fines for auto companies that violate safety laws.

The bill increases the maximum fine for a single violation from $35 million to $105 million, short of the $300 million the Obama administration recommended. The Senate Commerce Committee voted against amendments to add criminal penalties.

“No one wants to risk going to jail for their job,” said Laura Christian, mother of a woman killed in a crash involving a defective GM ignition switch, in an interview. “The bill is pro-auto, not pro-consumer. The auto industry’s grip on Congress has to end.”

Safety rules have helped the U.S. reduce traffic fatalities by nearly 25 percent over the past decade, said Wade Newton, spokesman for the Alliance of Automobile Manufacturers. The fatality rate per per 100 million miles of travel is half what it was in 1990, he said.

“We are living in the safest period in motor vehicle history,” Newton said.

 Safety groups released a public poll Tuesday that underscores how unpopular policies written into the highway bill are with the U.S. public: 84 percent of Americans support criminal liability for auto executives and 86 percent support the ban on selling used cars with safety defects. 

For Joan Claybrook, a longtime safety advocate who has helped craft highway bills since the 1980s, said Congress is missing its chance to make needed fixes to the law following the spate of corporate scandals that has led to record numbers of vehicle recalls. 

“Instead of decisive action to improve safety, we’re being given a steady stream of corporate loopholes,” Claybrook said.

Automotive News staff contributed to this report.

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