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Auto Safety Legislation Fails, Congress Goes on Vacation

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On: Wed, Dec 29, 2010 at 10:33AM | By: Chris Weiss


 Auto Safety Legislation Fails, Congress Goes on Vacation

The auto safety legislation package created as a response to recent recall problems, specifically those by Toyota, failed to make it out of Congress before the holiday break. The legislation was the most comprehensive auto safety reform seen in years, but it sunk due to opposition.

In the wake of Toyota's unprecedented recalls, which affected more than 8.5 million vehicles globally, and subsequent findings by the government that Toyota was negligent in reporting the safety issues behind the recalls, Congress drafted a comprehensive reform package that would increase fine amounts and increase the NHTSA's authority over recalls. The legislation included 23 provisions altogether, most notable of which was the more than tenfold increase on the maximum fine that the NHTSA is able to levy on an automaker. That maximum fine amount would increase to $200 million under the legislation. Currently it is $16.4 million.

Toyota received its first $16.4 million fine last winter when the NHTSA determined that it delayed reporting the pedal issue that resulted in unintended acceleration woes. Toyota chose to pay that fine rather than contest, deciding that the fine was better than the ongoing bad publicity that would ensue had it contested. Just last week, Toyota was hit with another $32.4 million in fines for its actions in two other recalls. The agreement between Toyota and the Department of Transportation was announced last Monday.

To the average driver, a near $50 million worth of fines in a year would appear devastating. However, Toyota posted a profit of $2.25 billion for last fiscal year and had some of its strongest sales of that year in the first three months of 2010, the same time that Congress was holding hearings on its recall actions. So despite experiencing the biggest automaker fine in U.S. history (which was previously only $1 million)--on three separate accounts--that $50 million isn't eat that far into Toyota's profits. Given that Toyota's actions were found to be reprehensible enough for three maximum or near-maximum fines, one would expect that Toyota's bottom line would be suffering a little more. And $600 million would certainly have been a more effective gut punch.

Other aspects of the legislation would enable the NHTSA to fine auto executives $5,000 per day (up to $5 million) for false reporting and enable the NHTSA to stop sales on vehicles and issue its own immediate recalls if there was "an imminent hazard of death or serious injury."

Thanks to the tangled, ineffective web of politics none of that will be happening this year. Possibly ever.

As former presidential candidate and proponent of the legislation Ralph Nader told the LA Times: "It is a once-in-20-year opportunity. A bill like this is not going to come by again."




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