Takata Recall Campaign: Consumer Safety Threatened by Corporate Greed and Government Missteps

If you are one of the unfortunate owners of a vehicle that has been recalled due to a defective Takata airbag, I feel your pain. Driving a vehicle with an airbag that could explode on impact and kill or injure you or your passengers is unnerving to say the least.  But being forced to drive it without access to a replacement vehicle from the auto dealer where it was purchased clearly puts the nail in the coffin.

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.

NHTSA cautions that these airbag completion rates do not represent the real-time status of recall performance since there are inherent delays in the repair status and the time that the repair is reported to NHTSA. Also, the agency explains that it is difficult to compare completion rates because “some recalls include vehicles that have been under recall for many years, whereas others reflect recalls that have only just started or have only started in a discreet geographic area due to parts restrictions.”  Nonetheless, it is safe to assume that these completion rates are a snapshot of the current challenge facing each automaker.  Honda, for example, had the largest number of recalled airbags but has managed to complete repairs for 50.3 percent of these airbags.  By contrast, automakers with large numbers of defective airbags had completion rates that were considerably lower:  Chrysler (34%), Toyota (30%), and Mazda (11%).  Most of the automakers had completion rates under 30 percent. Regardless of whether these completion rates were influenced by the lack of replacement parts from Takata or not, it is discomforting to hear from NHTSA that automakers may not be making their best efforts to reduce the number of potential deaths and injuries resulting from the defective Takata airbags. [4]

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.

The NHTSA:  NHTSA has struggled to engage automakers and vehicle owners through its various directives and policy initiatives.  The agency’s standard news coverage about the Takata recall simply “urges” vehicle drivers to check their vehicle identification number on www.safecare.gov and to contact automotive dealers to replace the defective airbags. NHTSA has ordered 19 automakers to recall nearly 42 million cars, making it the largest recall in U.S. automotive history.[5]  The agency required automakers to send two notices to vehicle owners, mostly by mail,[6]   which is not likely to reach about 20 percent of consumers who move on a monthly basis and may not provide a forwarding address. The dismal airbag repair completion rates prompted NHTSA to voice its concern to automakers that they were not doing enough to contact vehicle owners, and “encouraged” them to try other tactics like mass advertising or social media – which are not legally required. [7]   NTHSA’s directives to the automotive industry were hampered by two other realities:  (a) it cannot legally force automakers and dealers to provide rental cars to customers who sometimes have to wait years for a replacement airbag, and (b) auto dealers selling used cars were not legally required to disclose to customers if a defective Takata airbag was present in the vehicle.[8] Curiously, it was not until June 1, 2016 that NHTSA issued a federal directive that required rental car agencies to fix any and all open safety defects before renting out vehicles to customers.[9]   More recently, the NHTSA ordered automakers to submit a “recall engagement plan” within 90 days to substantially improve their outreach to vehicle owners.  NHTSA has also initiated bus tours in high-priority states to improve awareness of the recall campaign among vehicle owners.[10]

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?

The Automotive Industry:  With the possible exception of Honda, some automakers have allowed corporate greed to shape their response to the millions of potential Takata recall victims who were, ironically, responsible for their success.   In some respects, this comes as no surprise since automakers have not always shown good faith towards its customers and have required federal intervention to protect consumers from deaths and injuries.  Four key examples come to mind:

• 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]