Automakers tell Senate: 'Don't raise our recall violation fines'

The auto industry is urging Congress not to raise the maximum penalties for recall related infractions.

Automakers are urging members of Congress to reject a plan aimed at increasing the maximum penalty for untimely recall-reporting practices. Penalties would skyrocket from roughly $17 million to $250 million under the new proposal. The bill, sponsored by Senators Mark Pryor of Arkansas (D) and Jay Rockefeller of W. Virginia (D), was drafted as a way to strengthen auto safety measures, and reform the National Highway Traffic Safety Administration's safety recall practices.

The legislation is partly due to the questionable recall practices conducted by Toyota Motor Corp, who paid approximately $50 million to the NHTSA in fines in 2010. Federal law stipulates that an automaker must report any safety defect within five days of discovery, which Toyota failed to do on numerous occasions. In 2004, Toyota did not inform the NHTSA about issues regarding their 4Runner SUV until 11 months after discovering the problem. Additionally, Toyota was sluggish reporting their now infamous “sticking accelerator pedal” defect in a timely manner in 2007 and 2010. The NHTSA fined Toyota the maximum allowed of $16.4 million for each of the three cases, totaling an estimated $49.2 million.

As if the Toyota case did not supply Congress with enough ammunition, the NHTSA just fined BMW $3 million for similar violations last week. Aside from not promptly notifying the NHTSA, BMW was also found guilty of not providing a sufficient amount of information in regard to the recalls as required by law.

Despite the surmounting evidence facing the auto industry, automakers want Congress to reject the hike in fines. A number of groups, including the Alliance of Automobile Manufacturers, Association of Global Automakers, National Association of Manufacturers and American International Automobile Dealers Association, have all expressed displeasure with the proposal. This faction of agencies includes car giants like General Motors Co., Ford Motor Co. and Chrysler Group LLC.

The coalition expressed their feelings in a joint letter to Senate stating:

"The proposed increases are so out of proportion either to the current penalty structure or the penalty structure for other manufacturers under the Consumer Product Safety Act as to appear unfairly punitive. The proposed increases should be scaled back to a more appropriate level."

Aside from raising penalties for slow recall reporting, the bill would also mandate event data recorders on new vehicles, implement new regulations on pedal placement, and raise odometer-resetting fraud from $100,000 to $1 million. So far, the coalition of automakers has only stated that they are opposed to the increased penalties.

The Senate is set to debate the bill this week, so stay tuned for more information.