Tag Archive | "NHTSA"

Recalled Cars Create A Costly Problem for U.S. Auto Dealers

Honda Motor Co’s order that its U.S. dealers stop selling some 2.2 million of the automakers’ most popular models is compounding financial and regulatory headaches for car dealers stuck with millions of vehicles that have potentially hazardous air bags or other safety defects, reports Reuters

With the recalls affecting Honda vehicles dating back several years, used-car dealers are facing increased pressure. It is legal under federal law to sell used cars with unrepaired safety defects that are subject to recall, but dealers that operate under franchises with manufacturers could be violating those agreements.

It is illegal to sell new cars that are subject to a recall under federal law.

Because some used-car dealers operate independently of any manufacturer, the growing number of used cars that need safety repairs is creating divisions among dealers. The National Highway Traffic Safety Administration says this difference creates a “safety loophole.”

John Isaacson, a Honda dealer in Auburn, Maine, said he was hit by three recalls the same day, but would respect Honda’s ban. “If people are selling these with open recalls, customers get mad,” Isaacson told Reuters. “Over time, it’s not good for business.”

Regulators have taken steps to address sales of used cars subject to safety recalls.

In a settlement last month with General Motors Co and two dealer groups, the Federal Trade Commission warned automakers and dealers not to claim that used vehicles sold as “certified pre-owned” cars had undergone comprehensive inspections if repairs required under a recall had not been done.

“Companies touting the comprehensiveness of their vehicle inspections need to be straight with consumers about safety-related recalls,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement.

As in Honda’s case, manufacturers sometimes issue a “stop sale” on models subject to recall and can penalize their franchise dealers if they sell such cars.

The head of the California New Car Dealers Association, Brian Maas, said one of his members had 15 percent of his inventory affected by the Honda recall.

However, dealers outside the new vehicle franchise system, whether independents or chains such as CarMax, the largest U.S. used-car retailer, can sell such cars.

AutoNation Inc, the largest new vehicle dealer group in the United States, has said it will not sell a new or used vehicle that needed repairs under a recall, and Chief Executive Mike Jackson is calling on rivals to do likewise.

In the meantime, Jackson told Reuters, the policy is proving costly, in part because the chain has to stock more vehicles to make up for the roughly 16 percent of inventory it cannot sell.

AutoNation, with its huge network of dealerships, can “afford to do the right thing,” said Kelley Blue Book analyst Rebecca Lindland. Smaller dealers need to turn cars quickly and cannot afford dead inventory.

Honda has said parts to repair the Takata airbags will not be ready until late summer.

CarMax says it is transparent about recalls on its used cars, including a link on each car’s listing on the website to search for open recalls. Carmakers do not allow CarMax to perform recall repairs, so customers are “best positioned” to get repairs at franchised dealers after purchase, the company says.

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Transportation Bill Paves the Way Toward Digital Vehicle Transactions

WASHINGTON, D.C. — Billed as a down payment for building a 21st century transportation system, the recently passed Fixing America’s Surface Transportation Act, or Fast Act, contains a provision that clears a key hurdle in the industry’s drive toward a fully digital transaction.

Inside the 1,300-page bill President Obama signed into law on Dec. 4 is language that allows states to begin digitizing odometer disclosures, notices and related materials. The language’s inclusion also means states will no longer have to apply to begin accepting electronic signatures on odometer disclosures — a cumbersome process that took years to complete and often didn’t result in approvals.

The law, which will also direct $305 billion in funding toward transportation projects over the next five years, places the responsibility on states to implement appropriate data authentication and security measures.  John Brueggeman, an executive with the Motor Vehicle Software Corp. — a Southern California-based firm founded in 2005 to help states modernize the vehicle registration process — said the e-odometer language removes a key deterrent for states looking to go paperless.

“The paper registration process is outdated,” Brueggeman said. “We live in a digital economy and this new law will not only allow for a faster and more convenient process for automobile buyers, it will also increase accuracy and efficiency at state motor vehicle departments across the county.”

F&I managers should expect immediate benefits once states move to electronic signatures for odometer disclosures, Brueggeman said. They will no longer have to mail handwritten disclosures to the DMV, nor wait for the DMV to receive and manually process the documents before mailing back verifications.

In states that move to electronic disclosures, Brueggeman said dealers will receive immediate confirmation once they input a customer’s signature into their database and then electronically submit it to the DMV. The time saved, he added, should allow F&I managers to spend more time presenting and selling their products to more customers.

“We know that in our business, sending paper to the DMV and back to the dealer was not adding any value in the process of selling a car. It was simply taking time,” Brueggeman said. “The focus for us was to make it more efficient, more transparent, and faster.”

The e-odometer provisions should also help reduce odometer fraud, as the information dealerships enter into a state database will become permanent record. And, if an odometer is altered, there will be a record of that change as well. Either way, Breuggeman said, electronic signatures offer a form of transparency paper can’t match.

“The amazing thing about digital is that we always have a record of what happened and when it happened,” Brueggeman said. “And so you can’t always prevent fraud, but at least this [digital] gives investigators a better chance to track it.”

States have, for the most part, embraced the move to a paperless transaction, with California being the first to adopt electronic lien and titling in 1989. Today, 24 states have implemented some sort of electronics titling program, with five additional states looking to pass legislation that would allow them to digitize the titling process.

The last hurdle was digitizing the federal disclosures. A provision was included in the 2012 federal transportation bill that directed the National Highway Traffic Safety Administration to develop rules to allow for electronic odometer disclosures, but the agency has yet to propose those rules. The 2016 transportation bill means states no longer have to wait for the agency to act.

“The e-odometer language included in the transportation bill removes one of the last major impediments to fully electronic consumer vehicle purchase transactions,” said Brian Maas, president of the California New Car Dealers Association in a press release. “This opens up the field for entrepreneurship and innovation for dealers to move from paper-based transactions to an electronic transaction system.”

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Feds Fine Fiat Chrysler $70 Million

DETROIT, Mich. – The federal agency in charge of vehicle safety in the U.S. has leveled a $70 million civil penalty on Fiat Chrysler Automobiles for the company’s failure to report some legally required safety data, reports mlive.com

The U.S. Department of Transportation’s National Highway Traffic Safety Administration announced the penalty Thursday. It follows FCA’s admission in September that it had at times failed to provide Early Warn Report data to NHTSA.

NHTSA uses that data to spot potential defects and issue safety recalls.

“Accurate, early-warning reporting is a legal requirement, and it’s also part of a manufacturer’s obligation to protect the safety of the traveling public,” U.S. Transportation Secretary Anthony Foxx said in a statement. “We need FCA and other automakers to move toward a stronger, more proactive safety culture, and when they fall short, we will continue to exercise our enforcement authority to set them on the right path.”

The latest fine is in addition to a $105 million penalty the agency announced in July. Together, FCA now owes $175 million in civil penalties, including $140 million due in cash and $35 million due later if it does not meet certain requirements of a July consent order.

One of those requirements is for FCA to provide results of a third-party audit it hired to determine the full extent of the reporting error. The automaker also must provide any missing early-warning data.

As part of the consent order, FCA also acknowledges failure in early warning reporting, dating back to 2003.

The government investigation ultimately looked into 23 recalls covering 11 million cars by FCA.

FCA is the fifth company in the last 14 months to be penalized by NHTSA for failure to meet early warning reporting requirements. The agency has also penalized Honda, Ferrari, motorcycle maker Triumph and specialty vehicle makers Forest River and Spartan Motors.

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Chrysler Posts a 3% Drop in Profit After $90 Million Fine

DETROIT —  Fiat Chrysler Automobiles said on Wednesday that profits at its American subsidiary fell 3 percent in the second quarter, primarily because of a record civil penalty against the company for violating federal safety laws, reports the New York Times.

The subsidiary, which encompasses operations of the former Detroit automaker Chrysler, reported net income of $598 million for the quarter compared with $619 million in the same period a year ago.

The decrease was attributed to a charge of $90 million for fines agreed to with federal regulators, as well as a $71 million charge to extinguish debt.

Last week, Fiat Chrysler signed a consent order with the National Highway Traffic Safety Administration to resolve the government’s wide-ranging investigation of 23 vehicle recalls covering more than 11 million vehicles.

The order called for a cash fine of $70 million and a commitment by the company to spend $20 million to satisfy safety performance requirements, including buying back defective vehicles.

Fiat Chrysler could be assessed another $15 million in penalties if further safety violations are discovered by an independent monitor, according to the order.

Last week, the company’s chief executive, Sergio Marchionne, said the Chrysler subsidiary had committed to overhaul its safety practices and recall procedures. “We need to comply 100 percent of the time,” he said.

While its results dropped from a year ago, Chrysler remains the Italian-American automaker’s most profitable business unit.

Revenue for the subsidiary, which include Chrysler’s North American and international operations, rose 11 percent during the quarter, to $22.6 billion.

Its worldwide vehicle sales increased 5 percent, to 780,000, in the quarter, from a year earlier. The subsidiary ended the quarter with a United States market share of 12.4 percent, which represented a slight increase from the second quarter in 2014.

The subsidiary also improved its cash position during the period, ending the quarter with net cash — excluding financial liabilities — of $2.1 billion. At the end of the first quarter, it had about $1.2 billion

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Over 40,000 Daimler Vans Will Need New Airbags

Daimler AG made 40,061 vans from 2005 to 2008 with airbags that must be replaced, the National Highway Traffic Safety Administration said, reported by Bloomberg Business.

The affected vehicles, the 2007-2008 Freightliner Sprinter 2500 and 3500 and the 2007-2008 Dodge Sprinter 2500 and 3500, were manufactured from July 1, 2005, to July 31, 2008, and “are equipped with a passenger side frontal air bag that may be susceptible to moisture intrusion which, over time, could cause the inflator to rupture upon its deployment,” the NHTSA said in a report posted Saturday.

Daimler Vans USA will notify Freightliner owners and Fiat Chrysler Automobiles NV will alert customers who bought the Dodge model, according to the NHTSA. Dealers have been instructed to replace the airbags free of charge. No schedule has been announced for the swaps.

 A seventh death tied to faulty airbags was confirmed Friday by the U.S. agency. A 22-year-old woman died two days after an April 5 crash. Takata Corp., which produced the air-bag inflator that ruptured and injured the woman, agreed on May 19 to expand its recall effort to cover about 34 million units — the largest product-safety recall ever in the U.S.

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NHTSA Admits Faults in GM Investigation

The National Highway Traffic Safety Administration admitted Friday it made a series of errors in its handling of General Motors Co.’s delayed recall of 2.6 million cars with faulty ignition switches linked to 109 deaths and more than 200 injuries, reports The Detroit News. The federal agency pledged to make significant reforms.

NHTSA is bracing for what are expected to be scathing reports into the GM recall from the Transportation Department’s Office of Inspector General and Government Accountability Office. The safety agency released its internal findings in part to show it already was making significant reforms. NHTSA said it is making changes to spot defect problems earlier, and announced that a three-member team would advise the agency on its restructuring.

In two internal reports released Friday, NHTSA said it failed to hold the Detroit automaker accountable; didn’t understand alternate theories how the company’s air bags worked; and didn’t follow up on trends from its own data and investigation.

It acknowledged it missed numerous chances over nearly a decade to discover the deadly defect in 2.6 million Chevrolet Cobalts, Saturn Ions and other small cars. In those cars, which since have been recalled, the key can inadvertently turn off the engine and disable power steering and air bags.

Still, the report places most of the blame on GM for failing to disclose problems to NHTSA.

In May 2014, NHTSA fined GM a record-setting $35 million for delaying the recall and GM had to agree to up to three years of intensive monitoring. GM CEO Mary Barra fired 15 and disciplined five after an internal GM report showed a “pattern of incompetence and neglect.”

GM said in a statement Friday, “We support the changes to NHTSA’s organization announced today and we will continue to work collaboratively with NHTSA toward our shared goal of improving automobile safety in all respects.

NHTSA Administrator Mark Rosekind said the agency was not disciplining or firing anyone as a result of Friday’s report. It was the agency’s most forthcoming admission that it shoulders some of the blame in failing to discover the defect. In testimony before Congress last year, NHTSA largely rejected responsibility.

Rosekind didn’t want to focus on blame, seeking instead to emphasize how to improve the system. “There is no single individual who can be blamed for the things that happened previously,” he said, adding there was no evidence that NHTSA employees intentionally failed to do their jobs.

Part of the problem is funding, Rosekind said. The White House proposed tripling NHTSA’s auto defects budget and doubling the number of staff assigned to it. But Congress has shown little interest in doing so.

‘Crucial first step’

Sens. Ed Markey, D-Mass., and Richard Blumenthal, D-Conn., said they were happy NHTSA is finally acknowledging its errors. “Unfortunately, for more than a decade, NHTSA failed to address the information and evidence it had in its own database linking defective ignition switch to fatal accidents,” they said.

The pair said NHTSA must “put in place permanent measures necessary to prevent another tragedy like this from ever happening again.”

Clarence Ditlow, head of the Center for Auto Safety, praised the self-assessment and said Congress must give NHTSA more funding.

He called it “a crucial first step toward restoring the integrity of the agency’s enforcement process and the ability to hold the auto industry accountable for defects that kill and injure … The assessment also sets into motion new internal processes to correct deficiencies in agency procedures that missed defects like GM ignition switch, Jeep fuel tank and Takata air-bag inflators.”

The Justice Department is nearing a decision on whether to pursue criminal charges against GM and impose a fine that could be in excess of $1.2 billion as part of a settlement that is likely to come by summer’s end. The Securities and Exchange Commission and 50 state attorneys general also are investigating.

The announcement comes ahead of a forthcoming report from the Transportation Department’s Office of Inspector General into NHTSA’s handling of GM’s ignition issues. That report is expected to harshly criticize the agency’s handling of the issues.

The Government Accountability Office also is investigating NHTSA’s handling of the recalls as part of a broader assessment of the agency’s performance sought by Congress.

In September, the House Energy and Commerce Committee sharply criticized NHTSA’s handling of the GM complaints between 2007 and 2014, saying it had made “inexcusable errors.” A committee report said that after NHTSA declined to open an investigation into air-bag failures in Cobalts and other cars in 2007, the agency was deeply reluctant to revisit that conclusion even after new crashes and reports came to the agency’s attention.

One of the NHTSA reports found the agency “did not hold GM accountable for providing inadequate information.” That was despite the fact that “GM’s responses often contained very little information and included invocations of legal privilege.” It said the agency did not “push back and request more information.”

Team to address changes

U.S. Transportation Secretary Anthony Foxx said Friday he is naming a three-person team that will spend the next year advising NHTSA on implementing changes outlined in the reports.

The team includes Joseph Kolly, director of the Office of Research and Engineering at the National Transportation Safety Board; J. Victor Lebacqz, former associate administrator for aeronautics research at NASA; and James P. Bagian, a former NASA astronaut who directs the Center for Healthcare Engineering and Patient Safety at the University of Michigan, where he is a professor at the medical and engineering schools.

NHTSA has long been criticized for being too cozy with automakers. But since Rosekind was confirmed as NHTSA’s new administrator in December, the agency has taken a much more aggressive approach to auto safety issues. At the same time, some senior officials have announced plans to retire.

NHTSA pressured Takata Corp. last month to declare 33.8 million vehicles with its air bags defective, announced it would hold an unprecedented July 2 hearing into Fiat Chrysler’s safety issues and prodded Ford Motor Co. to expand a door latch recall.

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