Feds Push For New Laws To Speed Recalls, Raise Fines

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. 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.

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.

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.

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.

Back to NAFA Connection