Honda to pay fines for under-reporting defects

By Jeff Plungis, Bloomberg News

WASHINGTON (Jan. 9, 2015) — American Honda Motor Co. Inc. has agreed to pay a record $70 million in fines and submit to stricter oversight for failing to tell the U.S. government about warranty claims and more than 1,700 injuries and deaths linked to potential defects in its cars.

Auto makers are required to report such information under a 14-year-old U.S. law, and Honda's violations may have hampered the National Highway Traffic Safety Administration's (NHTSA) ability to quickly identify vehicle flaws.

“Honda and all of the auto makers have a safety responsibility they must live up to — no excuses,” U.S. Transportation Secretary Anthony Foxx said in a statement Jan. 8. “These fines reflect the tough stance we will take against those who violate the law.” Honda's violations came to light late last year as investigations into a global crisis over defective airbags cast doubt on the diligence of some auto makers to tell the government about all potential product defects. In a synopsis of an internal review filed with NHTSA in November, the auto maker blamed its underreporting on “inadvertent data entry or computer programming errors” that spanned 11 years.

“We have resolved this matter and will move forward to build on the important actions Honda has already taken to address our past shortcomings in early warning reporting,” Rick Schostek, executive vice president, Honda North America, said in a statement. “We continue to fully cooperate with NHTSA to achieve greater transparency and to further enhance our reporting practices.”

The civil penalties include two separate fines of $35 million, each the maximum allowable under U.S. law. One covers Honda's failure to report 1,729 death and injury claims to NHTSA from 2003 to 2014. The second fine covers lapses on completely reporting warranty claims and repairs offered under “customer satisfaction campaigns.”

The combined penalty exceeds NHTSA's previous record for a compliance violation by a single company, the $35 million imposed on General Motors Co. in May for mishandling the response to an ignition-switch defect.

Record year

NHTSA issued more fines in 2014 than at any time in its history — $126 million — showing it is taking a tougher stand on enforcement that is expected to continue, according to the regulator. The Honda agreement was signed just before the year ended and announced Jan. 8.

As part of that consent order, Honda will revise its regulatory compliance practices, improve personnel training and complete two outside audits on its data reporting, according to the U.S. statement.

The number of injury-claim omissions Honda admitted to has exceeded the 1,144 reports Honda filed over the 11-year period and in some cases involved the company not sharing with NHTSA information from police reports.

Eight of Honda's missing reports — spanning from July 1, 2003, to June 30, 2014 — involved Takata Corp. airbag inflator ruptures, and NHTSA knew of those incidents, the company said in November.

Honda President Takanobu Ito said then that the auto maker didn't share the same understanding as authorities of its obligations under U.S. law. He said local management made many mistakes filing early-warning reports, which NHTSA relies on to help spot potential defects.

Honda said in October it had asked for a third-party audit of potential inaccuracies in its reports to NHTSA. The company decided in September to include verbal claims from owners or their representatives to make its reporting more consistent with other auto makers, it said at the time.

The auto maker has said it has provided NHTSA detailed information relating to all known ruptures of Takata airbag inflators.

Auto makers face fines of $7,000 per violation per day for not abiding by the Transportation Recall Enhancement, Accountability and Documentation Act, which requires companies to tell regulators about customer injuries, lawsuits, warranty claims and complaints. The maximum civil penalty is capped by Congress at $35 million. The act became law in the wake of the Ford Explorer-Firestone tire recall in 2000.

GM, eager to demonstrate proactivity in the wake of the biggest recall in its history, disclosed 102 death and injury reports per 100,000 vehicles sold in 2014 through November. By contrast, Honda disclosed 2.4 reports per 100,000 vehicles sold over the same period.

The Center for Auto Safety, a research group that has been tracking recalls and defects since it was founded in 1970, asked transportation regulators in October to refer Honda to the Justice Department for a criminal investigation.

It cited a 2009 fatality and an August 2013 incident resulting in serious injury that weren't included in Honda's Early Warning Reports.

This Bloomberg News report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.