Proposed auto safety package could impact OEMs, suppliers

By Mike Scott

Legal News

Proposed legislation that is expected to hit the floor of the U.S. House and Senate could add an array of safety requirements on automotive manufacturers and suppliers, according to one area lawyer who is an automotive legal expert.

Congress is in the process of likely imposing a set of new safety requirements related to electronics throttle control that could cost automotive OEMs (Original Equipment Manufacturers) and suppliers tens or hundreds of millions of dollars. The legislation is in response to the recent Toyota sudden unintended acceleration investigations, and the belief that Toyota and National Highway Traffic Safety Administration (NHTSA) failed to timely address safety concerns in certain models.

The four main provisions of the proposed Motor Vehicle Safety Act include strengthening vehicle electronics and safety standards, enhanced safety authorities, notably NHTSA, transparency and accountability and increased authority funding. Slightly different versions of proposed legislation have come out of U.S. House and Senate committees. It is widely expected that the full House and Senate will vote on the legislation within the next month.

"Congress has added seven or eight new requirements for automotive safety and this law would seemingly give NHTSA more authority in regulating the industry," said Brian Westenberg, a principal and automotive litigator with Miller Canfield in Troy. "It would require including tread or early warning data and that the NHTSA would have more power to recall vehicles under the Eminent Hazard Authority."

If the act is signed into law by President Barack Obama as expected, the investigatory process would take place over the next 12 months, Westenberg said. There could be some legal challenges in that it may not permit the appropriate amount of due process.

"There may emerge some legal issues because of due process concerns but once the law is passed it is something (the automotive industry) will have to live with," Westenberg said.

Some of the vehicle electronics and safety standards include establishing a stopping distance and brake override standard, a pedal placement standard, electronic systems and keyless ignition systems standards.

The act could increase the per-vehicle civil penalty from $5,000 to $25,000 and remove the overall cap on civil penalties for automakers that intentionally fail to report vehicle safety defects to NHTSA, or that intentionally provide misleading information about NHTSA.

The House Bill that has been passed on to the floor would give NHTSA greater control over vehicle recalls, allow for greater fines when a manufacturer is found negligent, improve public access to information on the NHTSA website and enable those petitioning NHTSA to seek judicial review if the complaint is rejected. It also gives NHTSA the authority to investigate and mandate standards for push-button start/stop as well as gas pedals which aren't able to be caught by floor mats.

In addition to help the NHTSA pay for added oversight and regulation costs, it is expected that the bill could double the association's budget while requiring the manufacturer to have significant time and financial burdens to ensure prompt response. The NHTSA's 2009 fiscal budget was approximately $120 million.

"I'm of the opinion that this legislation is a rush to judgment," Westenberg said. "Nothing could be further from the truth than OEMs aren't doing enough to promote safety. The collective safety record of automakers has never been better."

The general objectives of this proposed Motor Vehicle Safety Act are supported by some trade organizations, including the Motor and Equipment Manufacturers Association (MEMA), said Ann Wilson, a lawyer who serves as senior vice president of government affairs for MEMA in Washington, D.C.

Most of MEMA's members appear to be particularly interested in proposed changes to electronics and magnetic interference, Wilson said. But one major concern is about requiring too much transparency from OEMs and suppliers if there are no safety-related issues.

"Our members are concerned about how warranty data is handled and shared," Wilson said. "Warranties really are more about financial relationships than safety issues. We will oppose making data transparent if it is not related to safety."

MEMA is also concerned about potential criminal and civil penalties that could be enacted by the legislation, particularly for suppliers who would not survive if penalized under the current language.

"We're advising our clients to participate during the regulatory and rule-making process," Westenberg said. "That is what could help to shape the outcome. But ultimately we will have to live with any laws and NHTSA and the industry must work in cooperation."

Published: Mon, Jun 28, 2010

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