July 29, 2015
NHTSA started the week with a bang – wresting from a formerly defiant Fiat Chrysler its signature on a detailed Consent Order, admitting that it violated the Safety Act in myriad ways, agreeing to pay a $105 million fine, buy back some unremedied recalled vehicles and allow a Special Monitor to look over its shoulder.
Since May 2014, when General Motors signed a Consent Order in the ignition switch defect now officially associated with 124 deaths and 269 injuries, the agency has wrangled 10 such agreements with manufacturers – large and small, suppliers and equipment manufacturers. That’s a Consent Order every six weeks.
And these settlements are not the namby-pamby compromises of as recent vintage as June 2013, when the agency quietly closed its inquiry into Ford’s failure to launch a timely recall. Ford agreed to pay a $17.3 million and NHTSA agreed not to publicize it to make a very embarrassing and unpleasant bit of business go away.
[Ford was fined for failing to recall 2001-2004 Ford Escape and Mazda Tribute vehicles to correct an earlier recall repair to the cruise control cable. Ford had first recalled the vehicles in December 2004 for an accelerator cable that could migrate out of position and become stuck in a wide-open position. Unfortunately, if the repair wasn’t done incorrectly, it could increase the potential for that very dangerous condition. Ford knew it had a problem because by October 2005 it issued a Technical Service Bulletin warning service techs that a failure to follow the correct repair procedures could make things worse, and admonished dealers that all vehicles in their inventory, along with recently delivered vehicles had to have the repair – the installation of a newly designed accelerator cable. Ford did file the TSB with the Recall Management Division, but did not bother to share this news with current owners. The RMD accepted the paperwork without further comment. Nothing happened until 2012 when the Center for Auto Safety filed a petition after the horrific death of 17-year-old Saige Bloom. Bloom was driving her just-purchased 2002 Escape back home when she died in an unintended acceleration crash in Payson, Arizona, with her mother following in another car. It had only had the first recall repair. (If you want to be thoroughly depressed read NHTSA’s “Tough” Stance on Ford Recall – Eight Years Too Late.)]So the money looked serious. But, as both parties to the agreement had acted abominably, the settlement language was laden with contingencies such as:
“WHEREAS, information supplied by Ford during the Preliminary Evaluation supports a tentative conclusion that Recall 12V-353 may have been untimely.”
Eighteen months later, the agency and its new Administrator Mark Rosekind were publicly bragging that “in 2014 alone, NHTSA issued more than $126 million in civil penalties, exceeding the total amount collected by the agency during its forty-three year history.” We are just finishing the seventh month of 2015 and the agency has levied $230 million via Consent Orders alone– pushing double 2014’s total.
The 10 Consent Orders are:
2014
May – GM fined $35 million failure to submit timely recall in ignition switch defect
Oct. – Ferrari fined $3.5 million for a failure to submit Early Warning Reports
Aug. — Hyundai-Kia fined $17.3 million failure to submit timely recall in a brake defect
2105
Jan. Honda — $70 million for failure to submit Early Warning Reports
Feb. Ricon — $1.7 million for continuing to sell defective wheelchair lifts, while recalling the lifts to remedy a fire hazard
March – Graco fine $10 million for failure to submit timely recall in child seat buckle defect
May –Takata civil penalties held in abeyance. The supplier failed to launch nationwide recalls in airbag inflator defect.
July 10 Forest River $35 million for failure to submit Early Warning Reports and failure to submit timely recall in two cases
July 10 Spartan Motors $9 million for failure to submit Early Warning Reports and failure to provide timely remedies in three recalls.
July 20 Fiat Chrysler Fiat $105 million for a variety of failures in 23 recalls
Consent Orders vs. Settlement Agreements
Consent orders are a relatively new enforcement strategy for the agency. The National Highway Traffic Safety Administration administers the Safety Act, and is authorized to levy civil penalties for its violations, but it cannot compel an automaker to pay them unless the agency goes to court. And, to take that route, the transportation department must do so through the U.S. Attorney General and the Department of Justice.
In the past, NHTSA eschewed litigation and settled for a compromise – civil penalties in the interest of expediency. Settlement agreements allowed the automaker to deny any wrongdoing, pay the money and go about its business.
Take, for example, in the December 2010 $16 million settlement agreement with Toyota over its decision to wait year recall U.S. pick-up trucks of defective tie rods. In October 2004, the automaker disclosed to NHTSA that it had recalled Hilux and Hilux Surf vehicles sold in Japan for defective relay rods – but not its U.S. counterparts, Toyota 4Runner, the Toyota Truck and Toyota T100. The rods had a tendency to snap, leaving the driver with no steering controls. But Toyota blamed it on driving conditions unique to the Japanese market and said it had no U.S. reports. On September 6, 2005, Toyota finally recalled the defective steering relay rods on its U.S. Toyota pick-ups. Litigation, however, revealed that Toyota had actually received at least 44 reports in the U.S. since as early as 2000, including crashes involving rollovers and injuries, as well as lots of warranty repairs for broken relay rods.
NHTSA had Toyota dead to rights. The automaker clearly lied and straight-up violated the timeliness provisions of the recall regulations, but it was allowed to formally assert its innocence on the record– as it was in its April 2010 $16.4 million settlement with NHTSA for failing to recall sticky accelerator pedals in the U.S., when it had done so in Ireland and the UK and its December 2010 $16.4 million settlement for failing to launch a timely pedal entrapment recall.
NHTSA’s half-a-loaf solution got it a few headlines, but industry still had the upper hand. Settlement agreements appeared to have no deterrence effects – they were bad for safety; and actively injurious to civil litigation victims who suffered great harm from defects that were remedied at industry’s leisure.
Consent orders are very different in substance, tone and legal muscle. For one, they are court-enforceable. Second: denials of wrongdoing are out. Third: fines are only one aspect of the penalty. In these Consent Orders, NHTSA extracted agreements from automakers to perform all kinds of actions from buybacks to the installation of Special Monitors, reports outlining plans and procedures for the “aggressive assessment of defect trends.”
Child seat maker Graco, for example, was given a long list of remedial actions it is required to take, including the development of improved safety messaging, a scientifically tested program to increase the effectiveness of consumer product registration, and increased consumer participation in recalls and to sponsor an annual industry meeting with safety advocates on defect trends in child safety seats.
Allan J. Kam, a retired agency senior enforcement attorney, observed that NHTSA’s use of a Special Monitor in the case of Chrysler Fiat may be the agency “trying to leverage its investigative activities given its limited manpower and resources.”
“This technique puts an obligation for a lot of the legwork to be done by someone other than the Office of Defects Investigation,” he says. “The staff of ODI is overworked and understaffed, and is about the same size as when I came to work for agency in 1975. In the intervening 40-plus years, the size of fleet and the complexity of the vehicles has increased exponentially.”
The Beginning and the Beginning of the End
The last fire-breathing NHTSA administrator was Joan Claybook, who took an aggressive enforcement stance from 1977 to 1981. Where the Reagan administration tried to pull every last tooth from government regulators and regulations without any anesthetic, the Clinton administration applied marketing. In 1993, President Bill Clinton and Vice President Al Gore launched the Re-Inventing Government Initiative. Regulatory heads were ordered to cut obsolete regulations, reward results, get out of Washington to the grassroots and “negotiate, don’t dictate.”
Gore not only authored the initial report, the National Performance Review, he led the subsequent effort, the National Partnership for Reinventing Government. Agencies were to apply customer service principles to their work and form “regulatory partnerships.” The intent of promoting government-industry cooperation over conflict in service to providing citizens with clean air and water, untainted food and safe products was good. In practice, however, Gore’s the-wolf-shall-dwell-with-the-lamb vision of government-industry relations seemed only to sharpen industry’s appetite for mutton—at least in the auto world.
In the two decades that followed, NHTSA rarely issued a civil penalty. NHTSA forbore all manner of disrespect and flouting of regulations – Part 573 Notice of Defect and Noncompliance submissions in which manufacturers claimed there was no safety defect, and its recall remedies were actually customer satisfaction campaigns. Missing discovery-of-the-defect chronologies were the norm. When NHTSA proposed to disallow automakers’ blatant attempts to use the (49 CFR) Part 573 to draw a cloak of immunity around themselves in litigation, they screamed that it wouldn’t do recalls at all, kicked and held their collective breath until NHTSA obligingly dropped it.
Manufacturers grew relaxed about their mandated Early Warning Reporting obligations. In the face of industry resistance, the agency resorted to cutting bad safety deals – like the ornamental trailer hitch Chrysler Fiat agreed to add to its Jeep Grand Cherokee and Liberty vehicles that in no way will keep their exposed fuel tanks from exploding in rear impacts – when it did anything at all.
But the increasingly rapid cycle of safety crises – Toyota Unintended Acceleration in 2009, the GM ignition switch scandal in 2014; Takata airbag inflators in 2015 was battering the hell out of NHTSA in Congress and in the press. It looked incompetent, apathetic, weak. And it couldn’t go to the Hill and make a case for more resources without flipping that narrative.
It’s hard to pinpoint the exact moment that the agency had tired of its role as industry concierge, but The Safety Record Blog first smelled smoke in January 2014, when the agency took the rare step of demanding that Graco recall more than 5.6 million rear facing infant, convertible and booster seats for buckles that refused to unlatch. On January 14, 2014, the agency it sent a recall request letter, pushing hard against Graco’s assertions that there was no safety problem, and it was their customers’ fault for letting the kiddos drink juice in car seat, gumming up the works. It threatened to go to an even rarer Initial Decision.
Graco, only inclined to recall some of the affected models, submitted a Part 573 with all the caveats manufacturers had been routinely adding. Recall Management Division Chief Jennifer Timian went after Graco, hammer and tong. She called its Part 573 “seriously deficient in numerous respects;” its language and content “incomplete and misleading, to both the agency and consumers,” and told Graco to try again.
Graco’s continued defiance earned it a Timeliness Query and Special Order in March in which it was compelled to explain why it had failed to recall infant seats with the same harness buckle. By July 2014, Graco threw in the towel and added another 1.9 million seats to the March recall. Graco’s resistance earned it its very own $10 million Consent Order. (see Graco’s Perception Problem)
While The Safety Record Blog has been among the agency’s most vociferous critics, we are heartened to see this new enthusiasm for enforcement. The use of Consent Orders with provisions that call upon violators to take corrective actions is a very positive step. The challenge will be for NHTSA to ensure that violators fulfill the terms of the these orders, even as it will, no doubt, issue more in the future.
Thirty four years is a long time to wait for the pendulum to swing, but, for now, the momentum is going in the right direction.