Federal Government Directs Further Air-Bag Recalls

FTC workshop cites need for independent shops to get involved in repairs.

In May, the U.S. Department of Transportation’s (DOT) National Highway Traffic Safety Administration (NHTSA) announced that it was expanding and accelerating the recall of Takata air-bag inflators. This decision followed the agency’s confirmation of a root cause behind the inflators’ propensity to rupture.

Ruptures of the Takata inflators have been tied to 10 deaths and more than 100 injuries in the United States, and the increasing numbers of air-bag recall and safety initiatives have prompted growing support for giving the independent aftermarket a green light to perform necessary warranty repairs.

Under that recently amended consent order, Takata was required to make a series of safety-defect decisions that will support vehicle manufacturer recall campaigns of 35 million to 40 million inflators, adding to the already 28.8 million inflators previously recalled.

The recall data released by NHTSA in June stated that a total of 8,867,284 air bags had been repaired relative to the Takata recalls. This included 5,023,431 driver-side air bags and 3,843,853 passenger-side air bags.

The expansion of recalls is planned to take place in phases between now and December 2019, meaning that all Takata ammonium nitrate-based propellant driver and passenger frontal air-bag inflators without a chemical drying agent (also known as a desiccant) will be recalled.

No surprise, then, that panelists at a recent Federal Trade Commission (FTC) workshop repeatedly cited the need for involvement by independent repairers. And other industry observers also believe the agency should use state periodic motor vehicle inspection programs (PMVI) to assist in identifying recall vehicles, as well as educating vehicle owners about the recalls.

The repair process for air bags had become so overwhelming by December 2015 that NHTSA announced it had selected John D. Buretta, a partner in the law firm of Cravath, Swain & Moore, to serve as the Takata monitor. Buretta became responsible for assisting the agency in providing oversight of both the coordinated remedy program and of Takata’s compliance with the consent orders.

According to Mark Rosekind, NHTSA administrator, Buretta and his team “offer tremendous experience in complex corporate investigations. They will play a significant role in helping oversee Takata’s compliance with its obligations under NHTSA enforcement orders, and in implementing the Coordinated Remedy Program to accelerate and prioritize the largest, most complex consumer-safety effort in U.S. history.”

On June 30, NHTSA called on the news media and the public to assist in finding higher-risk vehicles in the air bag recall pool. According to NHTSA, new test data on a particular subset of defective Takata air-bag inflators in 2001-2003 Honda and Acura vehicles show a far higher risk of ruptures during air bag deployment, prompting an urgent call from NHTSA to ensure that unrepaired vehicles in this population are found and fixed before they cause further injuries or fatalities.

“With as high as a 50 percent chance of a dangerous air-bag inflator rupture in a crash, these vehicles are unsafe and need to be repaired immediately,” said U.S. Transportation Secretary Anthony Foxx. “Folks should not drive these vehicles unless they are going straight to a dealer to have them repaired immediately, free of charge.”

But who better to assist in identifying these vehicles than independent repairers? Many of these vehicles will likely get repaired in independent repair shops.

Congress’ most recent “Fixing America’s Surface Transportation Act of 2015,” commonly known as the Highway Bill, continued to pile additional vehicle safety responsibilities onto NHTSA. This includes requiring rental-car agencies to repair any and all open safety defects before loaning out vehicles to customers.

“When a family picks up a rental car on vacation, they should be able to expect it is free of any known safety defect,” said Foxx. “I thank Congress and the safety advocates who helped turn this common-sense idea into law.”

Federal law prohibits any company or dealer with fleets greater than 35 vehicles to rent unrepaired recalled vehicles. It also extends NHTSA’s recall authority to cover rental car companies for the first time, giving the safety agency power to investigate and punish violators.

“This law gives NHTSA one more tool to protect the safety of U.S. motorists,” said Rosekind. “It’s critical that every recalled vehicle – whether new, used, rented or leased – is repaired as soon as possible. Rental agencies operate some of the largest fleets, so this law will go a long way in ensuring the cars and trucks on the road are safe.”

It’s important to note that in 2014 alone there were close to 900 recalls affecting 51 million vehicles nationwide. NHTSA has said that it will seek 100 percent remedy completion rates in open recalls. Although, according to the DOT, about 25 percent of recalls are not addressed each year.

As part of NHTSA’s effort to accelerate the Takata remedy, the agency has made the following recommendations for automobile manufacturers:
• Adopt alternative communication methods to reach and motivate vehicle owners to repair affected vehicles (particularly focusing on using new and emerging technologies)
• Enhance dealer programs and incentives to increase remedy completion rates and improve the remedy process for consumers
• Engage potential partners in the private sector to identify vehicles that need to be repaired
• Recover parts from salvage vehicles to ensure they’re not reused in other vehicles as a “repair” part

Although NHTSA discussed recommendations to include independent repairers in the recall strategy, this was not part of its outreach strategies. However, Daniel L. Goldberg, a partner in the law firm of Morgan, Lewis & Bockius and an expert on dealer/manufacturer relationships, participated in the above-mentioned FTC workshop that addressed vehicle warranties. Goldberg noted in his presentation regarding warranty repairs that:
• Every OEM that is part of the competition for retail sales offers warranties.
• Warranties help dealers market the sale of new vehicles to consumers.
• Warranty work is immune from competition from manufacturers or independent repair shops. Dealers do not need to advertise, but have a captive customer base.
• Competition and product improvements have increased the average length of warranties in recent years, benefitting consumers and extending the period for which dealers enjoy the legislative monopoly on providing warranty repairs.
• Warranties bring customers to a dealership, expose them to new vehicles on the showroom floor and attract customer-paid work in conjunction with, or after, warranty coverage ends.
• Warranty work gives dealers a captive customer base to impress with the quality of their service and also provides a competitive advantage for post-warranty repair work not enjoyed by independent repair shops.

Goldberg advocated a marketplace decision for warranty work, as far as determining if a dealer or an independent performs the repair. And he added that independents might need to be appointed or designated for warranty work by manufacturers.

The 114th Congress also considered legislation that would include state motor vehicle agencies to assist with recalls. However, this vehicle safety legislation did not move forward before Congress adjourned for the summer.

For more information on warranties and recalls, visit ASA’s legislative website: www.TakingTheHill.com.