April 2, 2007
PHILADEPHIA, PA. – A recall of 450,000 tires imported from China has exposed a loophole in the regulations that do not provide consumers with a remedy if an importer cannot afford to conduct a recall. The importer’s discovery of the defect – through a spike in warranty claims – also demonstrates the importance of the public accessibility to Early Warning Reporting data.
In June, Foreign Tire Sales, of Union, N.J., appealed to NHTSA for aid in recalling an estimated 450,000 light truck tires sold under the names Westlake, Telluride, Compass and YKS, asserting that the manufacturer, the Hangzhou Zhongce Rubber Company, had left a critical component out of the tire. Hangzhou officials have denied that the tires are defective. Initially, FTS said that it would go bankrupt if it were required to recall, replace and dispose of the defective tires. But NHTSA was unmoved by FTS’s hardship claims and ordered it to file a remedy plan.
With other sub-standard Chinese products much in the news and its faint echoes of the Ford Explorer/Firestone tire scandal, the recall has received intense media coverage and triggered politicians’ outcry. Charles Schumer, a New York Democrat, publicly called for some government action stating that “China has been asleep at the switch when it comes to safety inspections.” Then, a quartet of U.S. Senators, including Democrats Debbie Stabenow and Carl Levin of Michigan, Robert Casey of Pennsylvania and Sherrod Brown of Ohio wrote a letter to President Bush, urging him to force NHTSA to expedite the recall. In Connecticut, Attorney General Richard Blumenthal warned retailers to stop selling the tires, because they could put motorists at risk.
Within a week, FTS announced a sort of first-come, first-served recall, in which the importer would replace consumers’ tires until it ran out of a reported $8-9 million set aside to compensate consumers. But it’s more than likely that FTS’s recall fund will exceed the claims. Given, what, at best, is likely to be a 30 percent return rate for the replacement tires, it is probable that FTS can handle the number of claims before running out of cash. FTS could have faced a much greater liability, had NHTSA chosen to levy the civil and criminal penalities allowed under the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act.
According to the Defect and Non-Compliance report and exhibits to FTS’ lawsuit filed against the Chinese manufacturer, FTS contracted the Hangzhou Rubber Company in 2000 to design and manufacture light truck tires that it would import and sell wholesale. Hangzhou worked with FTS engineers to ensure that the tires could meet all federal safety standards. At a May 2002 meeting, FTS stressed the importance of tire safety, informing the Chinese manufacturer that light truck tires had been the focus of many recalls and were under government scrutiny. FTS urged Hangzhou to produce tires with nylon cap plies to increase their endurance. Initially, the tires passed endurance tests, the report said.
According to FTS, in October 2005, the company suspected that something was wrong with the tires, after it noticed a sharp increase in the number of warranty adjustments on the tires. But Hangzhou officials assured them that the tires were sound. FTS began conducting its own tests, it told NHTSA. An analysis revealed that some tires seemed to have an insufficient or missing gum strip – a key safety feature to preserve the integrity of the belts. The company alleged that it confirmed its suspicions in May 2006, after an ambulance crash in New Mexico prompted FTS to examine the blown tire that caused the rollover. FTS said it removed tires from other ambulances and found insufficient or missing gum strips on tires manufactured in 2004 and 2005. FTS stopped buying tires from Hangzhou in June 2006, the report said.
On August 12, 2006, Rafael B. Melo, Claudeir Jose Figueiredo and Carlos Souza were passengers in a 2000 Chevrolet Express 2500 Cargo Van, bearing a Compass Telluride steel belted radial made in China in 2004. The van was traveling south on Pennsylvania Route 476, when the tire experienced a tread / belt separation causing the van driver to lose control. The vehicle rolled over and the three passengers were ejected. Melo and Figueiredo died in the crash. Souza suffered a permanent brain injury. The driver, who remained in the vehicle, suffered less severe injuries.
According to FTS’s defect report, Hangzhou admitted to FTS in September 2006 that it had reduced or omitted the gum strip from an unspecified number of tires, FTS alleges. Hangzhou officials also told FTS that in January 2006, it began to reintroduce some amount of the gum strip back into the tires. In March 2007, FTS did further testing and analysis and found that the Hangzhou tires experienced tread / belt separations at 25,000 miles. FTS asserted in its defect report that it isn’t sure how many of the tires it imported may have missing or insufficient gum strip, because Hangzhou has refused to specifically identify them by Tire Identification Number. FTS also told NHTSA that the number of defective tires could be much higher, because other importers may have sold Hangzhou tires of similar construction.
On May 4, the families of the three passengers sued FTS, as did the van driver. The Melo, Figueiredo, and Souza lawsuit, filed by Jeffrey B. Killino, an attorney with Woloshin & Killino, prompted FTS to file an $80 million lawsuit against the Hangzhou Rubber Company and notify NHTSA of the defect.
“This is a prime example of a private lawsuit with a substantial public benefit,” said, who represents the families of the deceased and injured. “There are nearly half a million of these substandard tires out there, unbeknownst to consumers. The Hangzhou Rubber Company deliberately and secretly removed a safety feature from these tires and two young men died as a direct result. This was a tragedy that didn’t have to happen, but hopefully we can prevent future fatal crashes.”
The case raises serious concerns about the efficacy of NHTSA’s Early Warning Reporting regulation, a provision of the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act. The TREAD Act was passed in October 2000, in the wake of the controversy over the safety of Ford Explorers equipped with Firestone Wilderness ATX tires. The SUV’s tires wound up shouldering the blame for a spate of Explorer rollovers that killed at least 270 people – according to a NHTSA tally. Since 2003, auto, tire and other manufacturers are required to submit certain types of data-warranty claims, production numbers, property damage claims, injury-causing and fatal incidents, consumer complaints and field reports-as part of an early warning system to alert regulators to defects. The rules themselves have been controversial, and manufacturers and public safety advocates have fought in federal court over the data’s accessibility.
“This recall neatly makes the case for public access to EWR data. An agency with very limited resources is being flooded with massive amounts of information,” said Sean E. Kane, president of Safety Research & Strategies. “It’s not surprising that a rise in warranty claims of a very small subset of tires – without a death or serious injury claim – didn’t catch NHTSA’s attention. Public access provides a significant societal benefit – public access to EWR only enhances its value and NHTSA’s enforcement ability if researchers and safety advocates are also reviewing these data.”
The FTS / Hangzhou tire situation was predicted by the Rubber Manufacturers Association (RMA) in their presentation at May 2007 Government Industry meeting. Laurie Baulig, the RMA’s counsel, pointed to the rise in imported tires and limited (NHTSA) enforcement resources. While the RMA was keen on pointing to potential problems with imported tires, the association is actively fighting to keep EWR data out of the public hands.
The FTS recall also brings to light a gap in the regulations that allows an importer to sell an automotive component in the U.S., without having the financial capability to remove a defective product from the marketplace and make consumers whole if necessary. According to NHTSA staffers, FTS isn’t the first importer to discover a major defect and then claim that a recall would bankrupt the company. Other recalls have forced other small importing operations – including one run by California college students – out of business.
Copyright © Safety Research & Strategies, Inc., 2007