Road Hazard: Millions of Autos On U.S. Highways Recalled But Not Repaired

Safety

Road Hazard: Recalled But Not Repaired

Why we have millions of cars with unfixed safety recalls — and Germany has none.

October 1, 2014

This article appears in the Fall 2014 issue of The American Prospect magazine. The online version has been corrected.

On May 30, Angela Davidson, her husband Clarence, and their twelve-year-old daughter Kira drove a 2010 Dodge Ram down Highway 15 in California, when they heard a loud knock, followed by a popping sound. Seconds later, their truck came to a screeching halt. After seeing smoke rolling into the truck, Angela opened the door to jump out, though one of her legs was quickly burned. Clarence barely had time to get Kira out before the entire truck became engulfed in flames. The truck kept rolling backwards, causing a brush fire that burned more than three acres before the firefighters could put it out. Highway 15 was closed for almost four hours.

Eleven days earlier, the Davidsons had purchased the Dodge Ram from a CarMax dealer in Irvine; CarMax is the nation’s largest retailer of used cars and trucks. Angela says her family went to CarMax specifically because they advertise that all their vehicles are thoroughly examined, with expert technicians stamping a “Certified Quality Inspection” on each one.

When the Davidsons signed a contract on May 19 and drove their truck off the lot, they believed they had just purchased a safe vehicle for their family. A few days later, they contacted Dodge customer service with a question, and the representative informed them that, oh, by the way, there appears to be a July 2013 safety recall issued for the pinion in your truck’s rear axle, and it’s very important to get it fixed right away.

From the 2011 General Accountability Office report, Auto Safety: NHTSA Has Options to Improve the Safety Defect Recall Process 

“When I found out it was under recall I was furious,” said Angela. “I just felt like, this is so wrong, why would you guys sell us a car with an open recall like that? I thought of course CarMax would apologize and take the truck back.”

But CarMax—both the Irvine dealer and corporate headquarters—refused to take responsibility and told the Davidsons that it was up to them to repair their truck. Although the Davidsons then took the car to a local Dodge dealer, which may hold some responsibility for the ultimate explosion, CarMax apparently sold the Davidsons an unsafe vehicle. “How did they know that we wouldn't be killed the same day we bought it?” Angela wrote in a draft testimony of the experience. “The answer is, they didn't know. They just left it up to chance that we would even find out about the safety recall.”

Stories about vehicles like the Davidsons’ take on added significance in light of this year’s General Motors scandal, in which the automaker finally recalled nearly 2.6 million cars for an ignition switch defect known to company officials for more than a decade and linked to at least 54 crashes and 13 deaths. But six months after the recall, Automotive News reported that roughly 1 million car owners had yet to contact a dealership to fix their flawed ignition switches, and GM was struggling to track down contact information for many of those people.

In the United States, about one in every six cars on the road, or 37 million vehicles, has an unfixed safety recall. These are not minor problems; in safety recalls, the manufacturer or the National Highway Traffic Safety Administration (NHTSA) has determined that a car or piece of motor vehicle equipment poses an unreasonable risk to safety or fails to meet minimum safety standards. When a recall is in effect, manufacturers are legally obligated to do the repairs for free. Consumers, however, are not required to fix their car, regardless of the defect’s severity. In 2011, the Government Accountability Office (GAO) found the annual recall compliance rate in the United States averages 65 percent.

 

 

The latest GM episode is not the first major auto recall crisis to prompt public concern about unrepaired safety hazards. In August 2000, Ford Motor Company and Bridgestone/Firestone jointly announced a recall of 6.5 million tires after they linked them to more than 200 deaths and at least 700 injuries. Six years after the recall announcement, however, experts estimated that more than 200,000 faulty tires had yet to be replaced. An investigative reporter in Georgia even found some of the recalled tires still for sale in 2013.

In direct response to the tire recall, Congress passed the Transportation Recall Enhancement Accountability and Documentation Act (TREAD). TREAD established a new early warning reporting system, which requires manufacturers and their suppliers to regularly submit information about possible safety issues to NHTSA. “The TREAD Act represents an important first step towards strengthening our nation’s motor vehicle laws,” President Bill Clinton declared when he signed the bill in 2000. “And its vigorous and quick implementation will help save lives and prevent injuries.”

But recalls haven’t fallen. In fact, the number hit a new record this past July, with the most vehicles—39.85 million—ever recalled in a single year. “The problem is only growing,” said Chris Basso, a spokesman for Carfax, a web-based service that tracks the history of every vehicle based on its Vehicle Identification Number (VIN). “We have a recall [compliance] rate that leaves 35 percent of cars unrepaired and that number is likely to go up.”

“I want every vehicle fixed, and I've been clear about that all along,” GM chief executive Mary Barra said on CNBC, adding, however, that “ultimately it's the consumer who makes that choice.”

(PRNewsFoto/Highway Loss Data Institute)

Increase in noncrash fire claim frequency for vehicles with fire-related defects, before and after recalls.

 

But why are the repairs on safety recalls optional? The risk, after all, is not just to the car owners but also to those who ride with them and others on the road. In light of the public safety hazard, some countries have decided that it makes little sense for consumers to choose whether or not to repair defects on recalled cars. Germany, for example, makes those repairs mandatory. The German Federal Motor Transport Authority enforces that rule by refusing to renew the vehicle registrations of owners who fail to fix their cars. In 2010, Germany revoked owners’ registration due to outstanding safety recalls more than one thousand times. Consequently, the German annual recall compliance rate is 100 percent. Moreover, although German manufacturers aren’t legally required to bear the cost of the repair as they are in the United States, they do so nearly 100 percent of the time.

This combination of full compliance by the customer and full cost paid by the manufacturer creates an economic incentive for German car companies to build better cars the first time around. “There is a popular saying in Germany: Quality is if the customer comes back—not the product,” said Stephan Immen, a spokesman for the German agency. “The one responsible for the product knows what it means and acts corresponding to that.”

The United States could follow Germany’s example and make car registration renewal contingent on auto recall completion. Such a policy would be easy to carry out because DMVs can check each car’s VIN at the time of registration. Some states are already doing this successfully for energy emission standards. In California, if a vehicle owner fails to respond to an energy emission recall notice or the car fails to meet the state standard, the owner’s registration renewal will be denied until the repair is complete. Organizations like the Center for Auto Safety favor applying this same concept to auto safety recalls.

While taking time out of one’s busy life to get a car repaired isn’t something people are excited to do, states typically give owners 30 to 60 days to get it done, and in these cases, the owners have to pay for the cost of the emissions repair themselves. In contrast, if a similar system were applied to auto safety recalls, the repairs would be done at the manufacturer’s expense. Of course, giving up one’s car, even for just a few hours, may cause frustration and anxiety—often to the point where not fixing the car feels like the more sensible option. But manufacturers already sometimes provide free rental or loaner vehicles to individuals while their car is being repaired. GM recently offered this option to consumers who need to fix their car’s defective ignition switch.

 

Some auto safety reformers hope that small policy changes—like using particularly urgent language in the mailed notice letters—will motivate more owners to fix their cars. “Some manufacturers send pablum [recall notices], so people don’t really think they’re that important,” said Joan Claybrook, a veteran auto safety advocate who headed NHTSA from 1977 to 1981. “NHTSA has the authority to review those letters before they go and make sure they say ‘Alert! Alert!’”

Others have tried to raise the recall compliance rate by hiking penalties for irresponsible manufacturers. One bill introduced in Congress would require key management officials to disclose serious dangers with their products or face a fine and up to five years in prison. Another would require manufacturers to submit accident reports to federal regulators, who would need to make those documents immediately available to the public. And a third would eliminate the cap on civil fines—now $35 million—that the Department of Transportation can levy on automakers for failing to report known defects.

The sponsors of these measures hope that a combination of harsher manufacturer penalties and heightened efforts to disseminate information to the public will lead, eventually, to safer roads. But they have shied away from the most direct approach: making registration renewal dependent on getting the safety defects repaired. The battle over two more limited measures—requiring recall repairs in used cars and rental cars—suggests where the political problems lie.
 

 

Rental cars present what might seem to be an easy case for auto recall reform. After all, the rental car companies should be concerned about protecting their reputation for quality and the value of their fleets. But until recently, rental car companies could and would lease cars that were subject to safety recalls. In 2004, sisters Raechel and Jacqueline Houck, 24 and 20 respectively, rented a Chrysler PT Cruiser from an Enterprise Rent-A-Car dealer. This model had been recalled a month earlier after experts realized that the steering hose could leak and cause a fire. But the women were unaware because rental companies aren’t legally required to disclose safety recall information to customers. Driving down Highway 101 in northern California, the Houck sisters’ rental car caught fire and hit an oncoming semi-tractor trailer; they died instantly. After the accident, Enterprise tried to settle the scandal quietly, with a $3 million offer in exchange for the family’s confidentiality. The Houcks rejected the proposal and have been leading consumer safety efforts since.

Rental companies at first adamantly opposed changing their lenient recall policies, but activists and legislators continued to apply pressure. As a result, the four largest companies—accounting for 93 percent of the rental car market—now pledge not to rent vehicles that are subject to a safety recall.

But consumer groups insist that without a law requiring recall repairs, individuals are forced to just trust rental companies to abide by their public commitments. Thus reformers are fighting for the passage of a Senate bill, the Raechel and Jacqueline Houck Safe Rental Car Act, which would bar rental car companies from renting recalled vehicles to consumers. Even the American Car Rental Association, the policy voice representing the rental car industry, now supports the legislation.

But some powerful groups have worked hard to prevent the bill from becoming law. The Alliance of Automobile Manufacturers, the auto industry’s trade association, has refused to support the bill on the grounds that “it would give rise to a myriad of anti–consumer impacts” like increased rental costs for consumers. The real reason, though, is a concern that such a law would expose them to lawsuits.

“If Avis or Hertz has to take a car out of service for a week to get it fixed, particularly if it’s subject to a recall and the repair is not available, the rental companies may be looking at a car being out of service for three months,” said Clarence Ditlow, executive director of the Center for Auto Safety. “The auto companies are fearful that if this bill goes through they will be sued by the rental companies for the loss of use.”

The powerful National Automobile Dealers Association (NADA), representing sixteen thousand new car and truck dealerships with about thirty-two thousand domestic and international franchises, also opposes requiring rental companies to get defective cars fixed, arguing that the bill fails to differentiate one recall from another. (NHTSA does not distinguish recalls.) NADA says rental companies should only agree not to lease or sell defective vehicles if manufacturers issue “Do Not Drive” letters for recalls they deem to be the most serious. Rosemary Shahan, executive director of Consumers for Auto Reliability and Safety (CARS), says this is a cheap rhetorical trick because it is “extremely rare” for a manufacturer to voluntarily issue “Do Not Drive” letters—getting a company to issue a recall notice is hard enough as it is.

NADA’s political power also helps explain why Congress hasn’t passed a used car safety bill—a version of the Safe Rental Car Act, but for used cars. In California, a bill—S.B. 686—was introduced in 2013 that would have prohibited auto dealers from selling recalled used vehicles to consumers. Statewide polling revealed that 88 percent of Californians backed this policy. Angela Davidson testified about her CarMax experience at an S.B. 686 hearing in June. But the California New Car Dealers Association, CarMax, and others managed to kill the bill. Activists are now considering a 2016 California ballot initiative, but gathering enough signatures to qualify could cost nearly $1.5 million.

Lawyers for CarMax publicly have insisted that increasing financial penalties for manufacturers who delay recall notices, rather than barring dealers from selling unsafe vehicles, would “better result in consumer safety.” But dealers, like manufacturers, are no doubt worried that new legislation would hurt their ability to sell cars, and consequently cut into their profit margin.

The recall problem is compounded by the growing shortage of qualified mechanics and technicians able to diagnose issues and make the necessary repairs. According to the Auto Care Association, demand for auto technicians has outstripped supply since 2010, and the nation is short about ninety thousand mechanics given what is needed. One of the reasons Germany has done so well in retaining its manufacturing base is its investment in vocational educational programs. Germany’s ability to produce high-quality cars—and to fix them when problems arise—is undoubtedly linked to its strong commitment to train people to build, maintain, and repair them.

From the 2011 General Accountability Office report, Auto Safety: NHTSA Has Options to Improve the Safety Defect Recall Process 

 

Withholding car registrations makes the most sense as a way to raise compliance with safety recalls, but other alternatives have also surfaced to fix the unfixed-vehicle problem.

Shahan says, “First, we’ve got to focus on things that don’t penalize the consumer who didn’t make the defective product.” CARS supports legislation requiring DMVs to issue recall warnings when vehicle registration notices get sent in the mail. Car insurance companies could also help by sending reminder notices to customers when they see evidence of an outstanding safety recall. “What we’ve found is that the reason a lot of the unfinished recalls are not done is because the consumer doesn’t know about it,” said Ditlow. Research shows that newer cars are repaired in higher numbers than older cars, so the sooner a recall is announced and the sooner the owner learns about it, the greater chance there is that it will actually be repaired.     

This past February, NHTSA announced that it would institute a new mandatory label to help owners clearly identify recall mailings. But relying on the mail is proving increasingly difficult, as owners change addresses or hand off their cars, and the DMV often lacks reliable, updated records.

In light of these challenges, NHTSA and manufacturers are exploring new ways to reach vehicle owners through such means as text messaging, mobile apps, and emails. But some auto safety advocates worry about the growing digital divide. “Not everyone has access [to the Internet],” said Shahan, who also says that government agencies need to do more to reach people who speak languages other than English.

From the 2011 General Accountability Office report, Auto Safety: NHTSA Has Options to Improve the Safety Defect Recall Process 

 

Despite the political hurdles, momentum is building for more substantial auto recall reform. In April, the Obama administration recommended that Congress ban the sale and rental of unfixed recalled vehicles. Then this summer, New York City became the first city to prohibit the sale of recalled used cars. Jay Rockefeller, the outgoing chairman of the Senate Commerce Committee, also recently introduced legislation that would give NHTSA new authority to order unsafe vehicles off the road, rather than merely suggesting they get repaired. His bill, the Motor Vehicle Safety Act of 2014, would also bar the sale of unrepaired used cars.

In the public policy world, there are a lot of intractable problems for legislators, activists, and reformers to tackle. Unfixed auto safety recalls are not one of them. This is a problem we can solve. It is not a fantasy to imagine a decent system that helps vehicle owners expediently take care of their safety problem with as little inconvenience as possible, so millions of unsafe cars are no longer on the road. It may take several steps; perhaps dealing with rental cars first, then used cars, and then all cars. But eventually, we could see an improvement in public safety and perhaps even higher-quality automotive manufacturing.

Auto safety reform has produced some of the most important public health advances in the last half-century; the advent of seatbelts, airbags, and drunk-driving legislation has saved hundreds of thousands of lives. Each time the government took steps to tighten safety regulation, the auto industry argued that the proposed changes were too costly, unfair, or futile. But the changes have been accepted, and hardly anyone wants to go back. The poll showing 88 percent of Californians favoring the Safe Rental Car Act ought to encourage politicians to tap into the public support for reform. As Shahan says, “These days, there isn’t much that polls at 88 percent.”

CORRECTION: The original version of this article misstated which entity argued that "instead of barring dealers from selling unsafe vehicles, increasing financial penalties for manufacturers would 'better result in consumer safety.''' This position was taken by lawyers for CarMax, not the National Automobile Dealers Association (NADA). We regret the error.

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