NHTSA uses FCA order to clean up industry, close loopholes

By Ryan Beene, Crain News Service

WASHINGTON (Aug. 3, 2015) — The National Highway Traffic Safety Administration's (NHTSA) July 24 consent decree with Fiat Chrysler Automobiles (FCA) seeks to punish and remedy the auto maker's safety shortcomings while also addressing recall issues vexing the entire industry.

The agreement and its record-setting $105 million penalty stemmed from a NHTSA probe into violations that occurred in 23 FCA safety recalls since 2009. But the terms of the pact — especially its list of nearly 30 “performance obligations” — also are designed to spread and cement the lessons of recent safety crises involving General Motors Co., Takata Corp. and American Honda Motor Co.

“It doesn't have any teeth with other OEMs, but what it's trying to do is set up a model or a standard of behavior within the industry,” said Clarence Ditlow, executive director of the Center for Auto Safety in Washington, D.C., and a vocal critic of FCA recently.

Central to the pact is a top-to-bottom revamp of FCA's current recall and defect practices, a process that will be overseen by an independent monitor who will report to NHTSA and will have broad authority to hire staff and investigate safety issues. That represents a deeper level of scrutiny than similar consent orders imposed on GM and American Honda in the last 18 months.

“What you've seen is an evolution of the consent orders to try and get more and more future safety,” NHTSA Administrator Mark Rosekind told reporters last week. “What started in GM with some independent oversight has clearly evolved now to having a monitor, which was used by DOJ previously with Toyota.

“We have tried to take the best of what we learned from every one of these and continue to improve each one of these actions.”

That approach may help NHTSA satisfy some of the public demand for tougher safety standards and enforcement, even as legislative efforts to strengthen auto-safety laws and boost regulators' resources languish in Congress.

“This may be a way for NHTSA to leverage its limited manpower in the enforcement area by requiring this independent monitor to do a lot of the legwork that NHTSA can't do itself because it doesn't have the person-power to do it,” said Allan Kam, a former NHTSA enforcement attorney and safety consultant.

For example, the deal calls on FCA to impose penalties, such as withholding incentives, on car dealerships that sell unrepaired recalled vehicles, new or used. That's aimed squarely at tightening the so-called used-car loophole that has allowed unrepaired used cars to be sold to unwitting buyers, as was the case with Carols Solis IV, who died in Texas in January from injuries caused by a defective Takata airbag in a Honda Accord he had bought secondhand.

Federal and state lawmakers have proposed several bills to close that loophole in the past year, but they have faced resistance from dealers and industry lobbyists who consider it too burdensome.

NHTSA will make FCA ease that burden, ordering it to lead an effort to compile recall data — based on vehicle identification numbers — from other auto makers to be made available for bulk recall searches, a key need for dealers seeking to check their used-car inventories for recalled cars.

Another provision bars FCA from postponing a decision about whether to issue a recall until it finds a root cause or a proposed fix. That was a factor in both the GM switch and Takata airbag cases.

Under the deal, FCA must fund a number of “outreach” initiatives over the next three years to share best safety practices and help improve recall participation industrywide.

It will be required, for example, to develop and “scientifically” test options for making recall notifications more effective.

With so much work entrusted to FCA, effective monitoring will be key, Mr. Ditlow said.

“If it's a Fiat Chrysler show from start to finish, is it really going to be good?” he asked. “Because you're depending on the same company that had bad practices for so many years that led to this consent agreement.”

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