The U.S. community is no stranger to product recalls, especially those that pose an immediate danger to public health. Indeed, we are accustomed to seeing contaminated food products removed from store shelves, factories closed when listeria has contaminated our food supply, persons isolated when they have been diagnosed with a deadly virus like Ebola, and emergency teams deployed to communities impacted by natural disasters. Responses to such events have one thing in common: they never rely on just one method of communicating with the public about these dangers, and often include a mix of broadcast media, social media, public bulletins, city-wide sirens, community churches, and other approaches. Our traditional response has been effective in quickly isolating the danger to the public, thereby saving lives and reducing injuries.
For some curious reason, however, relatively little alarm and urgent action has been associated with the deaths and injuries that have resulted from the recognized failure of Takata airbags – 11 deaths and 180 injuries – a problem that was first reported by Honda about 8 years ago. [1] Unlike other national public hazards, millions of vehicle drivers are being forced to operate their vehicles with these defective airbags and endangering their lives and family members. Why? Presumably because there is a shortage of replacement parts. But there is more to this story than just a shortage of parts.
Especially troubling is the anemic airbag completion rate that automakers are showing in response to the national Takata recall campaign. According to a recent National Highway Traffic Administration (NHTSA) press release (12-9-16). [2] 46 million Takata airbags in 29 million U.S. vehicles have been recalled, but only 12.5 million of these airbags, or 27 percent, have been repaired. The ability of Takata to meet the 2019 completion deadline set by NHTSA looks really dim since an additional 64 to 69 million more inflators in 42 million U.S. vehicles are expected to be recalled over the next three years. Scott Upham, CEO of Valient Research, tracks airbag sales and recently stated in an interview that Takata is under tremendous financial strain from the recalls and likely to file bankruptcy unless help is provided by the Japanese government or automakers. [3]
The responsiveness of automakers to the national Takata recall has varied significantly and partially explains why the NTHSA declared recently that automakers were not doing enough to speed up the process. The following table displays the airbag repair completion rates by make of the vehicle as presented in the NHTSA web site.
Takata Airbag Completion Rates by Make of Vehicle, 2016
Make
|
Total Airbags Repaired
|
Completion Rate
|
Honda
|
8,289,301
|
50.31
|
FCA - Chrysler
|
1,469,233
|
33.77
|
Daimler Trucks North America
|
778
|
29.91
|
Toyota
|
1,478,852
|
29.52
|
Nissan
|
294,752
|
21.98
|
Ford
|
369,457
|
21.29
|
Subaru
|
185,470
|
19.60
|
Mitsubishi
|
19,719
|
17.30
|
Ferrari
|
441
|
15.58
|
BMW
|
246,301
|
13.23
|
Mazda
|
1,192,556
|
10.64
|
Daimler Vans USA LLC
|
1,822
|
2.33
|
Mercedes Benz
|
3,434
|
0.48
|
General Motors
|
671
|
0.22
|
Source: www.nhtsa.gov
What explains the anemic recall completion rate to a public hazard that has already resulted in 11 deaths and 180 injuries? In my view, shred responsibility falls on the shoulders of four key participants of the recall campaign: NHTSA, the automotive industry, the vehicle owners, and Takata.
Clearly, NHTSA is probably doing the best that it can within its legal constraints to expedite the Takata recall process, but the agency desperately needs more legislative support to force the automotive industry and vehicle drivers to comply with the recall objectives. To date, NHTSA has received relatively little support from lawmakers to accelerate compliance with the Takata recall campaign. Senator Bill Nelson, a Florida Democrat whose state has experienced several of the deaths and injuries resulting from the failed Takata inflators, shared his frustration with the slow pace of the recalls:
“The top priority must be doing whatever is necessary to get these potentially deadly airbags out of people’s cars as quickly as possible. If we wait another three or four years for these to get replaced, more people are likely to die.” [11]
Lastly, NHTSA’s method for establishing priority vehicles for airbag repair is limited in two important ways. Focusing repairs on vehicles located in hot and high humidity areas, for example, overlooks the many vehicles that will occasionally travel from less warm or low humid areas to hotter or more humid places like Texas. Secondly, focusing attention on older vehicles makes sense, but what plans are in place to communicate with the many vehicle owners who are more likely to buy used or older vehicles – such as the lower income, the elderly, immigrants, or other vulnerable groups?
- Toyota: As recently as 2014, Toyota was fined $1.2 billion by the U.S. Attorney General for their behavior in hiding safety defects from the public, calling it “shameful” and a “blatant disregard” for the law. A $1.2 billion criminal penalty, the largest for a car manufacturer in the U.S., was imposed by the Attorney General.[12]
- Volkswagen: Volkswagen recently reached settlements emerging out of lawsuits from car owners and the U.S. Department of Justice after the Environmental Protection Agency said Volkswagen had fitted many of its cars with software to fool emissions tests. One $1 billion settlement will give at least some owners of the remaining 80,000 diesel vehicles caught in the company's emissions cheating scandal the option of a buyback and provide all of them with compensation on top of any repurchase or repairs. The settlement with U.S. regulators and attorneys for owners of the 3-liter diesel cars will include a choice of a buyback for 20,000 vehicles. The company has reached a separate $1.2 billion deal with its U.S. dealers and is still facing potentially billions more in fines and penalties and possible criminal charges.[13]
- General Motors: GM has paid roughly $2 billion in criminal and civil penalties and settlements stemming from a faulty ignition switch linked to 124 deaths and 275 injuries. The switch can slip out of place, causing engines to stall and cutting power to the brake, steering and air bag systems. The defect prompted the recall of 2.6 million vehicles in 2014. The company had previously acknowledged that some of its employees knew about the switch defect for years before a recall was initiated.[14]
- CarMax: CarMax Inc. and two other major used auto retailers have agreed to settle Federal Trade Commission charges that they touted how rigorously they inspect their used cars, yet failed to adequately disclose that some of the cars were subject to unrepaired safety recalls. The proposed consent orders will prohibit them from making unqualified inspection or safety-related claims about their used vehicles if any are subject to open, or unrepaired, safety recalls.[15]
- Rental Car Companies: Starting June 1, 2016, rental car agencies must fix any and all open safety defects before renting out vehicles to customers, giving the safety agency power to investigate and punish violators for the first time. It seems incredible that rental car companies had no second thoughts about placing their customers in danger until they were forced to comply by a government order.[16]
Without aggressive government intervention, one can only imagine how many deaths and injuries could have resulted from the uncontrolled agreed of selected members of the automotive industry. This corporate greed and rather callous indifference to consumer safety has apparently re-surfaced in the Takata recall campaign as automakers appear content with doing the minimum required by NHTSA to communicate and support their customers during this crisis. For example, in recent interviews (4-15-16) with representatives of different automakers, a news reporter with the San Francisco Chronicle discovered the following car rental or loaner practices: [17]
- Most automakers do not offer a loaner vehicle or free rental car to vehicle owners who are required to wait for a replacement airbag – which could take several years.
- Honda has the most generous car rental policy that it communicates to customers via its web site. Since 2014, Honda has provided 232,000 loaner and rental cars to its customers – no doubt a key factor that has helped Honda achieve an airbag repair completion rate of 50 percent.
- Mazda also communicates via its web site that customers can request a loader if they have received a recall notice, a program that has resulted in 1,234 free car rentals.
- By contrast, Toyota, Nissan and BMW do not post information about car rentals on their web sites, but assume a more passive approach by providing a loaner car only if asked by the vehicle owner.
- Ford and Volkswagen do not offer vehicle owners any alternative transportation.
The extent of this corporate greed is further illustrated in a recent Senate report released in June 2016 by Sen. Mark Nelson (D-Fla.) that tells us even more shocking news: new cars are still being built with flawed Takata airbags, which will continue until 2018 to “phase out supplying the defective inflators to fulfill existing contracts.”[18] Worse yet, the newer versions of the airbags that are being installed today are expected to be recalled as well at a later date. As Sen. Mark Nelson explains it: “What’s troubling here is that consumers are buying new cars not realizing they’re going to be recalled….these cars shouldn’t be sold until they’re fixed.” Karl Brauer, a senior analyst with Kelley Blue Book added: “This may be the first time in history where multiple automakers are selling brand new cars with a known, and potentially deadly defect….the scope of this recall continues to expand, and the number of vehicles impacted by it has already reached a level that will take years to resolve.” Automakers, with the permission of the federal government, have apparently decided to place their sales and profits above the safety of their customers.
In addition, the refusal of automakers to use mass advertising to alert vehicle owners about the Takata recall campaign contradicts their standard industry practices. Mass advertising – a comprehensive strategy that incorporates television, radio, print, the Internet and social media -- is commonly used by automakers to market their vehicles to consumers, comprising millions of dollars in advertising expenditures each year. Although automakers may believe that they are saving advertising dollars by avoiding the use of mass advertising to alert vehicle owners about the recalled Takata airbags, perhaps they may re-consider their decision once the lawyers begin using mass advertising to represent the many disgruntled or injured consumers resulting from the recall. Really, it would not be that difficult to create a mass advertising campaign where automakers could pool their resources to more quickly alert vehicle owners about the defective Takata airbags. The U.S. Census Bureau, for example, has demonstrated the power of mass advertising in achieving a high response rate to the decennial census by incorporating a broad multilingual campaign that engaged different segments of the U.S. population. Such a campaign would be highly beneficial in accelerating compliance with the Takata recall campaign. The mass advertising campaign should also alert new vehicle buyers if their new vehicles will include a Takata airbag, whether it is currently defective or will become defective in the near future. Consumers have a right to know this information so that they can opt to purchase a different vehicle or perhaps delay their purchase altogether.
The Vehicle Owner: Are vehicle owners just ignoring the alerts to replace defective Takata airbags? Do they understand these notices? Or are they just indifferent to the recall campaign? Of course, one cannot answer these questions conclusively without hard evidence, especially given that no mass advertising has been implemented yet and auto dealers have been given wide latitude by the NHTSA to comply with the recall campaign. However, assuming that vehicle owners remain non-complaint even though (a) they are aware of the Takata recall campaign, (b) are offered a loaner or rental car while waiting for a replacement airbag, and (c) replacement airbags are available, it seems that the federal government should take charge and force consumer compliance as it has done in the past with the use of safety belts and automobile safety inspections. In addition, some states are suspending driving privileges to ensure compliance with government programs like child support. Consumer compliance, however, may not be the major impediment to the Takata recall program in the context of the weak support and corporate greed demonstrated by the automotive industry, as well as federal notices of encouragement that lack the force of law.
One mysterious question that emerges about consumer reaction surrounding the Takata recall campaign is: Where is the public outrage? Indeed, where are the advocacy groups, such as Mothers Against Drunk Driving (MADD), that have been effective in mobilizing consumers, creating broad media coverage, and shaping legislative changes on important social or health issues? Is the public just uninformed about the deadly consequences of defective Takata airbags, or has the public been sedated by the various philanthropic activities of automakers? Corporate giants have long recognized the importance of community investment to insulate their reputations from the wrath of communities that have been impacted by their defective products or controversial policies. Perhaps some of the corporate donations to communities – such as soccer stadiums or scholarships programs – should be shifted to support a broader mass advertising campaign that alerts vehicle owners about the recall campaign and availability of car rental programs.
While NHTSA and automakers continue to waltz around the programs and policies that could substantially improve compliance with the Takata recall campaign, consumers will increasingly lose their patience and becoming increasingly fearful of being the next victim of the deadly Takata airbags. Rather than wait for replacement airbags to arrive, vehicle owners may be considering other options, such as:
- Seeking a legal remedy if automakers refuse to provide a replacement vehicle
- Stopping car payments until defective airbags are repaired or replaced
- Starting a collective boycott against non-responsive automakers to obtain a replacement vehicle.
- Lobby lawmakers to push for legislation to immediately stop automakers from installing defective Takata airbags in new and used vehicles, whether they are currently defective or will become defective in the near future.
- Require automakers, dealers and rental companies to disclose to all buyers or rental customers whether a vehicle contains a Takata airbag that is currently defective or will become defective in the near future.
While NHTSA encourages vehicle owners to continue driving vehicles while they are waiting for replacement airbags, one attorney – Todd Walburg with Lieff Cabraser Heiman & Bernstein – has a different point of view. Mr. Walburg has sued many car companies on behalf of consumers and advises the owners of recalled vehicles “to stop driving the car immediately. Take it to a dealership and demand a rental car, because the safety of the owner and their families is at risk. If they don’t provide a rental car, look into legal options.” [19]
Takata: What do you tell the company that started the forest fire? At the very minimum, do not start more fires. Ironically, Takata continues to manufacture airbags with the same defective inflator design, and U.S. automakers will continue to install these airbags until the year 2018 to allow Takata to fulfill its current contractual agreements. Concern for the deaths and injuries that may occur with this arrangement has taken a backseat to the need to fulfill business contracts with the approval of our federal government. For unknown reasons, Takata became the favored supplier for automakers and has enjoyed a 30 percent market share of all airbag sales.[20] While Takata and automakers were enjoying their successful relationship, no one seemed too concerned that the honeymoon could be threatened by a massive recall of Takata airbags. Honda was the first to issue a recall of Takata inflators in 2008, while it took another five years (2013) for Takata to file a defect report about manufacturing problems with their airbags. A year later (2014), NHTSA asked several automakers to recall vehicles with Takata airbags in hot and humid regions because of airbag ruptures occurring in Florida and Puerto Rico.[21]
These milestones may seem reasonable given the complexities associated with the largest recall campaign in U.S. history. However, a recent blogpost on the web site of Valient Market Research [22] revealed key information suggesting that Takata delays may have had an ulterior motive. As Daniel Gremke, the blogpost writer tells us:
- Honda and Nissan, the two flagship customers of Takata, refused to financially bailout their longtime safety systems partner;
- Takata repeatedly failed to accept legal and financial responsibility for the deaths and injuries resulting from ruptured Takata inflators, and instead blamed their car maker customers for failing to properly test the airbag inflators before production approval throughout the 2000-2012 time period;
- Takata repeatedly manipulated inflator test data prior to submitting it to its OEM customers throughout the mid-2000’s. Despite concerns shared in internal memos by American Takata engineering executives about the Japanese practice of data falsification and manipulation, Takata continued this practice until its discovery several years ago.
- After a highly respected German technical research firm – Fraunhofer Institute – confirmed the problem with Takata’s chosen propellant for the airbag, Takata publicly admitted that it would change the airbag’s propellant formula after 2018.
Given its obvious efforts to falsify the test data, it is possible that Takata’s foreign ownership shielded them from criminal prosecution by the U.S. Attorney General as occurred when Toyota hid its safety defects in 2014. Interestingly, the delays associated with Takata’s refusal to accept responsibility for the deaths and injuries that its airbags have caused, coupled with the federal government’s reluctance to act more decisively in stopping the continued use of these airbags, have both given Takata ample time to populate increasingly larger numbers of U.S. vehicles with its defective airbags, thereby ensuring dependency on Takata well into the future. It seems incredible that the NHTSA would allow the continued installation of defective Takata airbags, especially when recognizing the current dismal airbag repair compliance rates by automakers; that is, because large numbers of vehicle owners are not getting their defective airbags replaced, what this business arrangement does is increase the number of time-sensitive land mines that will explode sometime in the future. In addition, many of these older vehicles will escape detection and repair since vehicle sales by individual owners are not being monitored very carefully. We should all worry about the population of used vehicles, since the average age of vehicles on America’s roads is 11.4 years and expected to grow rapidly as new cars become less affordable.[23]
Thus, it appears that no one in the automotive has been in a hurry to protect consumers from the defective Takata airbags. On the contrary, current NHTSA policies and automaker practices appear to favor the continued sales of vehicles with known defective Takata airbags over the short and long-term safety of consumers. In the meantime, the marketing of vehicles continues as usual while consumers are expected to accept the premise that they should blame a parts shortage for the deaths, injuries, and absence of rental cars that they are likely to experience. Are U.S. consumers so naïve, or will they take decisive action to change the course of the Takata recall campaign?
Suggestions to Facilitate the Takata Recall Campaign
As one of the largest recalls in U.S. history, it is reasonable to expect that the Takata recall campaign will take many years to achieve. However, the length of time that it takes to achieve 100 percent compliance will require all participants to make aggressive efforts to change their behavior, programs and policies. The following table summarizes the changes that I believe are needed to accelerate the Takata recall campaign.
PARTICIPANT
|
RECOMMENDED ACTIONS
|
Takata
|
·
Get the financial support needed from Japanese
banks to expand capacity to repair all defective air bags
·
Stop using the defective propellant in any
airbags, new and replacements
·
Allow third-party experts to monitor all
future testing of airbag products to avoid falsification of test data
|
Automakers and dealers
|
·
Stop using Takata airbags with defective
propellant formula
·
Disclose the use of Takata airbags to all
vehicle buyers so they have the option to refuse the purchase of that vehicle
·
Offer rental cars to all vehicle owners
waiting for airbag repairs – rentals that do not have any safety defects
·
Create a mass advertising campaign in multiple
languages by pooling resources with other automakers to deliver a
comprehensive message about the recall campaign
|
NTHSA
|
·
Stop Takata immediately from installing any
airbags that include the defective propellant
·
Require automakers to provide rental cars to
vehicle owners waiting for replacement parts, and publicize this benefit
widely
·
Require new/used auto dealers to disclose the
presence of Takata airbags to all consumers, regardless of whether the
airbags are currently defective or not
·
Require vehicle inspections to include a check
on compliance with the Takata recall campaign
|
Vehicle owners
|
·
Demand replacement vehicles and consider legal
remedies if request is denied
·
Stop buying vehicles that include a Takata
airbag with the defective propellant
·
Lobby lawmakers to create legislation with
penalties to force Takata, automakers and vehicle owners to comply with the Takata
recall campaign
·
Launch a high-visibility protest to expose
non-responsive automakers
|
Inquiries or comments regarding this paper
should be sent to Dr. Edward T. Rincon at edward@rinconassoc.com. To learn more about Rincón & Associates LLC, please visit our web site at http://www.rinconassoc.com.
ENDNOTES
-----------------------------------------
[1]
National Highway Traffic Safety Administration. Fact Sheet: Takata Recall
History and Key Terms. https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/120916-fact_sheet-takata_recall_history_and_key_terms-tagged.pdf
[2]
U.S. Department of Transportation. “U.S. DOT accelerates replacements of Takata
air bag inflators.” Press release of December 9, 2016. https://www.nhtsa.gov/press-releases/us-dot-accelerates-replacements-takata-air-bag-inflators
[3]
Davis, Todd. “Who’s NOT on the list? Up to 40M more cars added to Takata air
bag inflator recall.” Dallas Morning News, May 4, 2016. http://www.dallasnews.com/business/autos/2016/05/04/who-s-not-on-the-list-up-to-40m-more-cars-added-to-takata-air-bag-inflator-recall
[4]
Wire Services. “Takata air bag recall will end up affecting over 42 million
vehicles.” Dallas Morning News, December 19, 2016. http://www.dallasnews.com/business/autos/2016/12/09/takata-air-bag-recall-will-end-affecting-42-million-vehicles
[5]
Davis, Todd. “Who’s NOT on the list? Up
to 40M more cars added to Takata air bag inflator recall.”
[6]
Pender, Kathleen. “Takata recall: Some drivers get free rental cars, for
months.” San Francisco Chronicle, April 15, 2016. www.sfchronicle.com/business/networth/article/Takata-recall-Some-drivers-get-free-rental-cars-7252027.php.
[7]
Wire Services. “Takata air bag recall
will end up affecting over 42 million vehicles.”
[8]
Pender, Kathleen. “Takata recall: Some drivers get free rental cars, for
months.”
[9]
National Highway Traffic Safety Administration. “Effective Today: New Federal
law for recalled rental cars protects consumers from vehicle safety defects.”
Press release dated June 1, 2016. https://www.nhtsa.gov/press-releases/effective-today-new-federal-law-recalled-rental-cars-protects-consumers-vehicle
[10]
Wire Services. “Takata air bag recall
will end up affecting over 42 million vehicles.”
[11]
Davis, Todd. “Who’s NOT on the list? Up
to 40M more cars added to Takata air bag inflator recall.”
[12]
Vlasic, Bill and Apuzzo, Matt. “Toyota
Is Fined $1.2 Billion for Concealing Safety Defects.” New York Times, March 19, 2014. https://www.nytimes.com/2014/03/20/business/toyota-reaches-1-2-billion-settlement-in-criminal-inquiry.html?_r=0
[13]
Thanawala, Sudhin, Associated Press. “Volkswagen’s $1 billion deal on diesel
cars gives buyback option for owners.” Dallas Morning News, December 20,
2016. http://www.dallasnews.com/business/autos/2016/12/20/volkswagens-1-billion-deal-diesel-cars-gives-buyback-option-owners
[14]
Reuters. “General Motors Settles Ignition-Switch Cases GM case.”
September 6, 2016. http://fortune.com/2016/09/05/general-motors-settles-ignition-switch-cases/
[15]
Dorman, Frank. “CarMax and two other dealers settle FTC charges that they
touted inspections while failing to disclose some of the cars were subject to
unrepaired safety recalls.” Federal
Trade Commission press release dated December 16, 2016. https://www.ftc.gov/news-events/press-releases/2016/12/carmax-two-other-dealers-settle-ftc-charges-they-touted
[16]
National Highway Traffic Safety Administration. “Effective Today: New Federal
law for recalled rental cars protects consumers from vehicle safety defects.”
[17]
Pender, Kathleen. “Takata recall: Some drivers get free rental cars, for
months.”
[18]
Isodore, Chris. “New cars being built with flawed Takata airbags.” June 1, 2016. http://money.cnn.com/2016/06/01/news/companies/takata-airbag-recall-new-cars/
[19]
Pender, “Takata recall: Some drivers get free rental cars, for months.”
[20]
O’Donnell, Paul. “Are you affected? What
you should know about the record-setting Takata air bag recall.” Dallas Morning
News, May 6, 2016. http://www.dallasnews.com/business/business/2016/05/06/what-you-need-to-know-about-the-takata-air-bag-recall-the-largest-in-automotive-history
[21]
National Highway Traffic Safety Administration. Fact Sheet: Takata Recall
History and Key Terms.
[22]
Gremke, Daniel. “Takata’s Future: Implosion, Bail Out or Metamorphosis.”
January 7, 2016. http://valientmarketresearch.com/uncategorized/takatas-future-implosion-bail-out-or-metamorphosis/
[23] Valdes-Dapena. “Average U.S. car is 11.4 years
old, a record high.” http://money.cnn.com/2013/08/06/autos/age-of-cars/
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