Improving the Recall System for the 21st Century

November 20, 2014

Well, here we are again. Another vehicle defect crisis, another round of Congressional hearings, this time only months after the GM and NHTSA were taken to task for allowing the ignition switch defect to spiral out of control.  This time the Senate delves into the Takata airbag inflator defect, another agency-assisted hazard that has been festering for more than a decade. Today’s Roman circus is entitled “Examining Takata Airbag Defects and the Vehicle Recall Process.” 

When cornered, NHTSA likes to lob the numbers of recalls and investigations like some flash-bang grenade at critics, but the blinding light of those stats illuminate nothing.  Safety Research & Strategies and The Safety Record have plowed through literally hundreds of recall records; we’ve spent hours reading and documenting the regulatory record that established today’s ineffective system. On the back end, we’ve dealt with the victims of failed recalls – families angry to get a notice a month after the defect killed a loved one, or bewildered by the fact that a tire service technician unknowingly put a recalled tire on the SUV that suffered a catastrophic tread separation a month later.

In our humble opinion, the “recall process” needs a process – for manufacturers one that reflects our modern age of communications. Today, people who want to sell you things dog you keystroke by keystroke on the Internet, cars can talk to you and the governments are toppled with the help of Twitter. Yet, our danger alert system relies on the mail (with apologies to the U.S. Postal Service). Now that there appears to be bi-partisan support for possible remedies, we have some suggestions.

The regulations governing the recall system were established in the mid-1970s. And, in nearly 40 years, they have been subject to small tweaks. The agency recently implemented a web-based Vehicle Identification Number look-up service for consumers to determine whether a specific vehicle has had a remedy applied.[1] But the regulatory framework for how vehicle manufacturers are required to reach out to customers when a recall is required has not changed. Despite massive technological leaps in the ways companies communicate with consumers – email, smart phone apps, QR codes – and in the case of automobile manufacturers — on-board telematics, the recall system is stuck in the past. As is required by the current regulations, vehicle manufacturers send initial and follow-up notices via first-class mail. Despite advances in consumer data-gathering, automakers rely on outdated vehicle registration information aggregated by R.L Polk & Co. to develop their notification lists.

Tire manufacturers and consumers face more daunting hurdles in achieving acceptable recall completion rates. The current system was established when recalls and government defect investigations of tires were rare, and manufacturers neither desired nor expected the consumer to be an active participant in the process. Consumers and tire professionals trying to identify a defective tire still rely on this antiquated paper-and-pencil system that rarely averages more than a 20 percent return rate. The system fails because there is no way to identify and track individual tires once they leave the manufacturer.

For its part, NHTSA has done little to enhance its own enforcement capabilities.

The agency has no bright-line benchmarks for recall completion rates. It often does not notice when a manufacturer does not appear to remedying many vehicles. It has used its powers to investigate unsuccessful recalls infrequently. Nor does the agency visit the recall completion data to examine trends with the aim of improving rates.

The recall system must step into the 21^st century. Manufacturers spend enormous amounts of money and use sophisticated communication techniques in selling their products, but when it comes to informing their customers of a safety problem that needs correction, there is less enthusiasm in devoting company resources. NHTSA refrains from requiring manufacturers to use specific technologies. Rather, it issues performance standards which allow automakers flexibility in reaching a safety goal. We suggest that setting a goal for manufacturers with penalties for failure to achieve them and engaging NHTSA more directly in the enforcement process would lead both to work harder at ensuring that recalls are successful.

The Safety Recall Improvement Act 2015?

The Safety Recall Improvement Act would institute several improvements to the recall system for vehicles, equipment and tires:

• Require NHTSA to analyze recall completion rates, identify the factors the make a recall a success and report its findings to Congress. This information could be critical to establishing other policies to improve the recall requirements.

• Institute benchmarks for acceptable recall completion rates. Manufacturers would be required to repair 85 percent of the vehicles in the fleet within 18 months, excluding those that were exported, stolen, destroyed or otherwise removed from the recall target population.

• Require Recall or Audit Queries for recalls that fall below 85 percent. NHTSA would be free to launch investigation into recall effectiveness before the six quarters ended, but would be required to investigate manufacturers that fail to meet the 85 percent repair rate after 18 months

• NHTSA would be empowered to level civil penalties specifically for failure to achieve the minimum benchmark.

• Require that tires have a non-coded date of manufacture visible on both sides of the sidewall.

• Require manufacturers to automate the identification of recalled tires to assist tire retailers, tire service center, consumers and others in quickly and efficiently determining the recall status

• Require the National Highway Traffic Safety Administration to add a TIN look-up to its public vehicle safety database that is searchable by tire make and model and tire identification number; can be aggregated and downloaded.

 

Current Regulations

The responsibilities of manufacturers in launching a recall and notifying the National Highway Traffic Safety Administration, dealers and consumers are proscribed in CFR 49 Parts 573 and 577.

 

Part 573 Defect and Noncompliance Responsibility and Reports

This section sets forth manufacturers’ responsibilities in informing NHTSA and the proper procedure they are required to follow in announcing recalls. The regulation outlines when manufacturers must report a defect to NHTSA – within five working days of determining a defect or non-compliance exists – and the specific information required in a Part 573 Notice of Defect and Noncompliance, such as the recall population, a chronology of the defect’s discovery, the consequence of the defect and the remedy.

In terms of codified responsibilities that relate to recall notification, Part 573 specifies that manufacturers must maintain lists of owners, purchasers, dealers, and distributors to be notified of the recall and that manufacturers must file with the agency 18 months’ worth of recall remedy data in the form of quarterly reports.[2]

§ 573.8 Lists of purchasers, owners, dealers, distributors, lessors, and lessees.

(a) Each manufacturer of motor vehicles shall maintain, in a form suitable for inspection such as computer information storage devices or card files, a list of the names and addresses of registered owners, as determined through State motor vehicle registration records or other sources or the most recent purchasers where the registered owners are unknown, for all vehicles involved in a defect or noncompliance notification campaign initiated after the effective date of this part. The list shall include the vehicle identification number for each vehicle and the status 49 CFR Ch. V (10-1-11 Edition) of remedy with respect to each vehicle, updated as of the end of each quarterly reporting period specified In § 573.7. Each vehicle manufacturer shall also maintain such a list of the names and addresses of all dealers and distributors to which a defect or noncompliance notification was sent. Each list shall be retained for 5 years, beginning with the date on which the defect or noncompliance information report required by § 573.6 is initially submitted to NHTSA.

Part 577 Defect and Noncompliance Notification

This section lays out the requirements for notification, including phrases and statements that must be used in the letters to vehicle owners. Recall regulations require that manufacturers notify “registered owners determined from state motor vehicle registration records, augmented with corporate records. Notifications to purchasers are by first class mail. Notifications to dealers and NHTSA are to be by certified mail.”[3]

The regulations also outline the characteristics of the envelope:

“The recalling manufacturer shall mark the outside of each envelope in which it sends an owner notification letter with a notation that includes the words "SAFETY RECALL "NOTICE" all in capital letters and in type that is larger than that used in the address section, and is also distinguishable from the other type in a manner other than size.”[4]

The owner notification letter must be headed by the phrase “IMPORTANT SAFETY RECALL” and must provide, at a minimum: a clear description of the defect; an evaluation of the risk to motor vehicle safety; a statement of the measures to be taken to obtain the remedy; a statement that the defect/noncompliance will be remedied without charge; a statement of the earliest date on which the defect/noncompliance will be remedied; and a description of the procedure to be followed by the recipient of the notification in informing NHTSA whenever a manufacturer, distributor, or dealer fails to or is unable to remedy without charge such defect or failure to comply.[5]

Beyond that, there are no requirements involving specific efforts manufacturers must make to notify hard-to-locate owners.

 

Recall Completion Rates

NHTSA calculates a recall campaign’s completion rate by dividing the total population of affected vehicles by the number of vehicles that have been remedied.[6]  

According to NHTSA, on average only about 70 percent of vehicles subject to a recall are fixed within the 18-month period during which manufacturers provide recall completion data to the agency.[7] But a 2011 analysis performed by the Government Accounting Office found wide variations among manufacturers:

However, our analysis of NHTSA’s completion rate data for passenger vehicle recalls from 2000 through 2008 found considerable underlying variation in completion rates in several areas. Overall, we found that annual recall completion rates varied substantially by year—from about 55 percent to 75 percent—for all passenger vehicles with safety defect recalls, with an average across all years of about 65 percent. In addition, our analysis revealed that within any given year, some manufacturers have safety defect recall completion rates as low as 23 percent to 53 percent per year, whereas other manufacturers have completion rates between 90 percent and 96 percent.  Furthermore, some manufacturers have consistently higher or lower rates across the 9 years we included in our analysis.[8]

The recall completion rate for tires is less solid. According to the GAO report, the average recall completion rate for tires is 65 percent. Other experts have capped it much lower. For example, Donald Karol, the National Transportation Safety Board’s chief investigator, targeted the tire recall completion rate at 20 percent.[9]

(NHTSA and manufacturers may argue that some recalls are necessarily going to be less successful due to the age and type of the vehicle and vehicle owners’ perception of the severity of a safety defect can negatively impact the completion rate.  But, the GAO’s analysis of individual manufacturers’ recall completion rates shows that some manufacturers consistently do a better job than others.)

 

NHTSA’s Recall Enforcement

While the Code of Federal Regulations lays out clear-cut actions manufacturers must take when launching a recall, providing a remedy and keeping the agency informed of its actions, NHTSA conducts enforcement under no such detailed schema.

Part 577.10 empowers the Administrator to require a manufacturer to re-notify consumers of a safety recall, if, based on quarterly reports, the agency has decided that the completion rate is not adequate,  with the timing, form, and content of  the follow-up notification to be established by the agency, in consultation with the manufacturer.[10] NHTSA’s rough floor for determining if re-notification is required is 65 percent by the sixth quarter.[11] But NHTSA officials could not tell the GAO how frequently they required follow-up notifications.[12]

In addition, GAO auditors have found that the agency has no set procedure to determine the adequacy of a recall, is slow to analyze recall data to determine if defects are being repaired, and does not analyze its data to identify recall completion trend data.

Since there are no set targets for recall completion rates, there is little incentive for manufacturers to try to remedy defects for most of the population still in the fleet and in a timely manner. In the short term, NHTSA does not track repair rates to ensure recall effectiveness. While manufacturers file quarterly reports showing the number of vehicles remedied, and occasionally opens Recall Queries (RQ) – investigations to assess recall effectiveness – there is evidence that NHTSA does not appear to employ a systematic process to catch low repair rates in a timely fashion.

One glaring example involves U.S. Bus Corporation which had filed 21 defect and non-compliance reports to the agency between 2001 and 2007 and followed up with quarterly reports that indicated a very low rate of repair.[13] It took the agency years to notice that the New York school bus manufacturer was not actually making any repairs and take action against it – even though the defects were serious, and widespread. NHTSA did not take action until 2009.[14]

The 2011 GAO report, NHTSA Has Options to Improve the Safety Recall Defect Process criticized NHTSA for not using recall repair rate data to analyze trends and institute best recall practices:

“Based on our analysis of NHTSA data, without conducting a broader aggregate level analysis to look for outliers, patterns, or trends, the agency may be missing an opportunity to identify underlying factors that affect recall campaign completion rates.”[15]

It also revealed that NHTSA has no set procedures to determine if a manufacturer has adequately met its recall obligations. The agency told the GAO that “they evaluate the effectiveness of a recall campaign by comparing a specific recall campaign’s progress to similar campaigns based on factors such as the age of vehicles recalled and the number of vehicles recalled.”[16]  The agency said that “monitoring recalls on a campaign-by-campaign basis provides them with the flexibility necessary to capture the unique aspects of each recall campaign and that by focusing on communication and discussion with manufacturers, the agency can develop solutions to improve completion rates when a campaign is achieving a completion rate that is below its expectation.”[17]

 

Improving Tire Recalls

Even after high-profile tire recalls that claimed hundreds of lives and exposed the weaknesses in the system, there are no databases accessible to consumers or service professionals that can quickly identify a recalled tire. As we approach 2015 there is still no system to identify recalled tires even for professionals.  Yet, consumers often believe that the technicians servicing their tires know about recalls and would be able to alert them if one was on their vehicles.[18] [19]

Even if a recalled tire is part of a vehicle’s original equipment, it is the tiremaker who is responsible for the campaign.  However, tire manufacturers can only identify consumers by working with the automakers and their dealerships to find the first purchasers of the vehicle, based on the Vehicle Identification Number (VIN) and tire lot records.

If the tire were purchased as a replacement, the consumer – with assistance from the tire retailer – would have had to fill out the tire registration form and send it back to the manufacturer to create a record of ownership. Neither consumers nor tire dealers consistently register tires, even though the latter are responsible under federal regulations for providing tire registration cards to their customers.  Both NHTSA and the Rubber Manufacturers Association have estimated that only 10 percent of tires are properly registered, because the manufacturer may not provide the registration cards to retailers, retailers may not give the card to the consumer, or the consumer may not fill it out.[20]

If a tire is purchased used – as an estimated 30 million are annually – there are no registration requirements.

The Tire Identification Number (TIN), often called the DOT number, is usally an 11-symbol alphanumeric code required by the National Highway Traffic Safety Administration (NHTSA) molded on the sidewall that is most frequently mounted toward the inside of the vehicle. The agency created it in 1970 to function as a tire identifier in the event of a recall. The TIN is an inefficient and difficult method of identifying tires – inconveniently located on the inside of the mounted sidewall, hard to read, long and cumbersome. The consumer who wants to check to see if their tire is the subject of a recall must lie under the vehicle with a flashlight, a pad and a pen to capture the TIN, or take it to a dealer where the car can be put on a lift.

The only public repository of tire recall information is located on the NHTSA website. It does not allow users to search tire recalls by the TIN. Rather, a consumer would have to enter the tire’s make and model to see it has been recalled. Then, users have to retrieve the documents the manufacturer filed in support of the recall and find the one that specifies which TIN lots are being recalled. This process is time-consuming and challenging. At the service shop level, it is totally impractical.  Typically, tire service shops affiliated with a manufacturer learn about recalls directly from the tire maker. Electronic Recall Service Bulletins are issued at the beginning of the campaign and service shop personnel are briefed at the onset.  But as time passes, recollections fade.  And if tire technicians service a tire that appears similar or has a similar brand name, they would need to check the TIN against the recall documents to determine if that tire was part of a recall – an impractical process in the time-sensitive service business.  

Independent tire dealers who sell and service multiple brands often don’t receive any recall notification from manufacturers. They, like their customers, learn about recalls through the media.  So, for example, if a Firestone tire is serviced at a Goodyear dealership, those tire technicians would have no recall bulletins or any practical means of determining whether that Firestone tire was part of a recall.