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Critics Fear Trump WIll Pump The Brakes On Auto Fines

THE DETROIT NEWS
http://www.detroitnews.com/story/business/autos/2017/06/02/trump-auto-fines/102445136/

Washington — Former National Highway Traffic Safety Administrator Mark Rosekind referred to the final years of the Obama administration as the “era of Big Recall,” but safety groups are concerned that the age of muscular enforcement of federal rules for auto safety may come to an end under President Donald Trump.

Obama’s second term saw record fines for automakers: General Motors Co. was forced to pay a then-record $900 million fine over its handling of vehicles with a dangerous ignition-switch defect ultimately linked to 124 deaths and hundreds of injuries. Volkswagen Group paid $2.8 billion in criminal fines and $1.5 billion in civil penalties for programming its diesel cars to trick federal testers into believing the engines released far less pollution into the air than they do.

Additionally, Japanese air bag manufacturer Takata Corp. was fined $200 million and agreed to pay $1 billion in criminal penalties over faulty air-bag inflators that could rupture in humid conditions. In the case of Volkswagen and Takata, criminal charges were filed against the companies.

John Simpson, privacy project director at the Santa Monica, California-based Consumer Watchdog group, said he fears the Trump administration will put the damper on the aggressive enforcement of federal statutes that allow regulators to levy hefty fines against automakers who are found to have safety violations.

“The Takata air bag enforcement action under Mark Rosekind was an excellent example of NHTSA working on behalf of consumers, something that happens all too infrequently,” Simpson said. “The fact that President Trump hasn’t even bothered to name a NHTSA administration does not bode well for consumers. I fear NHTSA will be nothing more than a handmaiden for the auto industry during his time in office.”

Rosekind, the former NHTSA, administrator declined to comment on the Trump administration’s plans for auto regulation. He said in a high-profile speech in his final year in office that big fines and large recalls that marked the tail end of the Obama administration were not automatically a sign of success for auto regulators.

“The era of Big Recall is not a sign of progress for us,” Rosekind said in a speech at a meeting of the Society of Automotive Engineers in January 2016. “Record civil penalties are not a metric of success. If we’re levying a big fine, it means there has been a safety crisis.”

Rosekind promised in the 2016 speech to change the culture at the highway safety administration and encourage automakers to be more forthcoming with reporting potential safety problems early during his final year in office.

“Success for NHTSA is a change in safety culture,” he said then. “A proactive safety culture doesn’t avoid talk of problems. It certainly doesn’t conceal them. A proactive safety culture seeks out problems, rewards those who identify them, and addresses them aggressively. A proactive safety culture infuses every part of an organization, from the lab to the test track to the factory floor to the c-suite.”

The Trump administration has promised to create a more business-friendly environment for U.S. corporations, and the new president has paid particular attention to the auto industry in his early months in office.

Transportation observers note that while Congress increased the cap on the amount the Department of Transportation could fine automakers from $35 million to $105 million in 2015, the most eye-popping fine that was levied against Volkswagen was done under the Clean Air Act, which gives regulates greater leeway to drop the hammer on environmental scofflaws than the transportation department typically enjoys.

Michelle Krebs, a market analyst for Autotrader, said Volkswagen’s fines were likely higher because their case involved intentional deception of federal regulators.

“Volkswagen was unique because it was purposeful,” she said. “We didn’t know air bags were going to explode under humidity.”

Auto industry observers have chafed at times at the hefty fines that were levied by NHTSA under the Obama administration.

“When you look at what Volkswagen faced with Dieselgate, for a recall where nobody died, we’ve never seen numbers that high,” Rebecca Lindland, senior analyst for Kelley Blue Book, said, noting that Volkswagen was fined under rules that allow for much higher penalties for environmental scofflaws than typical auto safety fines garner.

Krebs said the Trump administration has talked a lot about reducing regulations that are burdensome to U.S. businesses, but she said “it’s not clear if that is going to happen in transportation.

“We haven’t see a lot out of DOT,” she said. “It looks so far like (U.S. Transportation Secretary) Elaine Chao is focused on infrastructure.”

Chao told lawmakers in a Senate hearing last month that safety is one of her top priorities, despite the lack of activity at NHTSA since she took over.

“As I mentioned during my confirmation, my three priorities are safety, infrastructure and the future,” Chao said during a hearing of the U.S. Senate Environment and Public Works Committee.

The White House has declined to comment on the president’s plans for filling the vacancy at the head of NHTSA.

Simpson said he had hoped to see more activity from Chao in her early months in office in the absence of a full-time NHTSA chief.

“I had hopes that Secretary Chao would be — given her previous Washington experience — a key player in the Trump administration, but she has been virtually invisible,” he said. “I guess the good news is that she hasn’t done anything harmful; she just hasn’t done anything.

“Although NHTSA has sometimes been captured by the auto industry it is supposed to regulate, consumers now have nobody at the helm of the agency that is supposed to keep our highways safe,” Simpson added.

Lindland said the Obama administration’s desire to bring the hammer down on automakers was not the only factor in the increased number of vehicle recalls that were issued in recent years.

“Recalls have changed so much in the last 10 years because we have a lot more shared platforms and shared parts,” she said, citing the fact that Takata’s air bags were used in 34 vehicle brands and the recall will affect about 42 million cars in the U.S when it is completed.

“I don’t think any manufacturer sets out to sort of game the system,” Lindland continued. “I think there is a little bit more responsibility because what happens is people don’t buy your product. ... Buying back goodwill is far more expensive than anything NHTSA could do with fines.”

klaing@detroitnews.com

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Twitter: @Keith_Laing