After tide of recalls, auto industry does some soul-searching

Source: Boston Globe, By: Bill Vlasic and Hilary Stout, Originally Published: 12.31.14

DETROIT — Spurred by a decade-old ignition switch defect in millions of General Motors vehicles, the auto industry this year has issued more recalls involving old models — those made five or more years ago — than ever before, an analysis of federal recall records by The New York Times shows.

More than 60 million vehicles have been recalled in the United States, double the previous annual record in 2004. In all, there have been about 700 recall announcements — an average of two a day — affecting the equivalent of 1 in 5 vehicles on the road.
The eight largest automakers have each recalled more vehicles in the United States this year than they have on average since 1966, when data collection began, with GM, Honda, and Chrysler each setting corporate records, the review by the Times found.

While automakers are cleaning up years of defects that previously went undetected or ignored, driving has become statistically safer, partly because of added technology in newer vehicles. Yet the lapses of the past cover a wide range of parts used in multiple models, driving up the number of recalls.

The GM ignition switch defect, affecting various models between 2003 and 2011, has been linked to at least 42 deaths.

“What you’re seeing is the makeover of the entire industry,” said Bob Carter, the senior sales executive in the United States for Toyota.

The auto industry’s intense focus on formerly neglected safety issues has changed how it approaches even the most basic safety practices.

Like most other automakers, Toyota routinely notifies car owners of safety recalls with the minimum legal requirement of mailing a first-class letter.

But in recent months, the automaker has taken the unusual measure of hiring outside companies to track down owners of vehicles equipped with defective air bags that can explode. The contractors have been instructed to make direct contact with the owners by telephone.

“Sending out letters just isn’t enough anymore,” Carter said. “We need to call the consumer and explain the importance of getting their cars repaired.”

The attention to safety has also awakened car owners. The National Highway Traffic Safety Administration, the nation’s top auto regulator, is on pace this year to receive 80,000 complaints from consumers about possible defects — about double the average annual number.

“I keep getting recall letters as I’m waiting for one thing and no parts available for another,” a driver of a 2013 Dodge Durango complained to safety regulators this month. “How is one supposed to feel safe, knowing my car can ‘stall without warning,’ have an ‘under hood fire’ or have my ‘brakes fail’ at any moment?”

David Friedman, who has served as the NHTSA’s temporary chief this year, said in an interview that the agency, which has been criticized by lawmakers for being too lenient with automakers, had put the industry on notice that problematic vehicles needed to be identified and repaired more quickly — or automakers will risk maximum punishment.

To that end, Friedman held individual conferences with executives of a dozen car companies last summer. Before the meetings, he urged them to read an internal report on GM’s ignition switch problems to understand the consequences when a company neglects to fix a deadly defect, he said.

“There were some clear lessons learned that I wanted to make sure every automaker knew regarding the poor way GM handled this,” he said.

GM has led the pack in cleaning up problems, issuing about 80 recalls covering more than 26 million vehicles, including 2.2 million small cars with the defective ignition switches.

Honda commissioned an outside audit that found it had underreported deaths and injuries in accidents to regulators, and the company promised organizational and staffing changes to better comply with federal laws.

Fiat Chrysler, which is recalling Jeeps with gas tanks that can catch fire in a high-speed collision, created a new department overseeing vehicle safety led by a senior executive.

Toyota overhauled its safety practices a few years ago after a spate of recalls for unintended acceleration resulted in a criminal penalty in March of $1.2 billion, the largest for a carmaker in the United States. Still, the company this year has had to take further steps to improve its recall rates on vehicles with defective air bags made by the supplier Takata.

Even auto suppliers are scrambling to revise contracts with carmakers to clarify responsibility for parts that turn out to be defective.

“They’re scared,” said Thomas Manganello, a Detroit lawyer who represents supplier firms. “The concern is they are building to the automaker’s specifications, and then being held liable.”

While GM has spent billions of dollars fixing recalled cars and setting up a fund to compensate ignition switch accident victims and their families, the company has had to take extreme measures to restore trust in its products and management.

GM has reorganized its sprawling engineering organization and centralized all safety functions under a new vice president, Jeff Boyer.

In his first extensive interview on GM’s new direction, Boyer said that a hundred people had been added to his safety team, including 35 product investigators.

The biggest change, he said, was the close involvement of executives in monitoring safety investigations, potential recalls, and repairs.

“We have executive leadership defined at each phase of the process,” Boyer said, adding that he regularly updates Mary T. Barra, the chief executive, and the GM board on any active safety issues.

As far as consumers are concerned, Boyer said, GM is reaching out to owners of recalled vehicles by letter, e-mail, social media, and phone banks. “We need to make sure we reach out in the most effective way possible,” he said.

The GM crisis, in particular, has prompted concern in Washington that carmakers have become lax on safety, combative with regulators, and insensitive to consumers.

After seven congressional hearings — and, in GM’s case, multiple continuing state and federal investigations — some lawmakers say they are convinced that only stiffer fines and the threat of criminal prosecution will motivate companies to make safety a top priority.

“What we have seen is a lack of sufficient incentives for companies to correct safety defects and act responsibly,” said Senator Richard Blumenthal, a Connecticut Democrat.

GM has already been fined $35 million by the government for its failure to address the faulty switches, and it remains under investigation by the Justice Department, the Securities and Exchange Commission, and 47 state attorneys general.

Separately, the attorney general of Arizona filed suit against the automaker in November, claiming it had defrauded consumers in that state of $3 billion.

And even with its internal changes, the company’s reputation for quality and safety will take years to rebuild. “GM has changed on the surface, but it has yet to walk the walk,” Blumenthal said.

It is unclear how much bipartisan support will emerge in Congress for new safety laws that, among other things, could hold auto executives criminally liable for deliberately concealing safety defects.

Blumenthal said he planned to introduce four sweeping auto safety bills in the next legislative session in response to the year’s crises. But Representative Fred Upton, Republican of Michigan, who led the House investigative hearings on GM, said legislative solutions cannot be “quick fixes,” and stressed the need for stricter enforcement by the NHTSA of existing regulations.

“Whatever changes Congress makes, the federal agency that serves as the public’s watchdog must be vigilant,” he said.