By Mike Spector
The National Highway Traffic Safety Administration fined Honda
Motor Co. $70 million for failing for more than a decade to report
deaths, injuries and certain warranty claims, the highest penalties
ever levied against an auto maker by the agency.
The fines are the most since General Motors Co. agreed to pay
$35 million to settle an investigation into failing to alert
regulators to a deadly ignition-switch problem.
The U.S.'s chief auto regulator slapped Honda with two $35
million civil fines for violating federal legal requirements to
alert the NHTSA to potential safety problems in vehicles. The first
was for failing to submit early warning reports detailing 1,729
injuries and death and injury claims to the NHTSA for 11 years
between 2003 and 2014. The second was for Honda's failure to report
certain warranty claims and other claims under so-called customer
satisfaction campaigns during the same period.
"One thing we cannot tolerate, and will not tolerate, is an auto
maker failing to report to us any safety issues," said
Transportation Secretary Anthony Foxx during a briefing
Thursday.
Honda and other auto makers have been dealing with fallout from
defective Takata Corp. air bags prone to explosions that are
currently linked to five deaths world-wide. The auto maker
acknowledged that eight Takata-related claims or notices weren't
included in early warning reporting to regulators, including one
death and seven injuries. But Honda said they were disclosed to
NHTSA through other means.
Honda signed a consent order related to the fines on Dec. 29 and
will have 60 days from then to provide further details on the 1,729
incidents it didn't previously report. Regulators declined to
specify the exact kinds of incidents Honda failed to report, saying
they would collect additional information from Honda.
Regulators have also alerted the Justice Department about
Honda's failures. Mr. Foxx on Thursday said the Justice Department
would have to decide whether to pursue any criminal action against
Honda. A Justice Department representative couldn't immediately be
reached.
"We have resolved this matter and will move forward to build on
the important actions Honda has already taken to address our past
shortcomings in early warning reporting," said Rick Schostek,
executive vice president of Honda North America Inc., in a
statement. "We continue to fully cooperate with NHTSA to achieve
greater transparency and to further enhance our reporting
practices."
Honda told regulators it didn't report the deaths and injuries
because employees failed to enter dates that claims and notices
were received into a database used to collect
early-warning-reporting information, according to the consent order
the company signed. The auto maker also blamed coding problems that
prevented its computer system from reporting incidents. In
addition, Honda said it interpreted a regulation to exclude certain
third-party documents related to injuries and deaths.
Honda acknowledges its reporting systems contained "systemic
failures" that led to the reporting failures, according to the
consent order. Honda said no employees have been fired as a result
of the failure to tell regulators about safety issues.
Under the consent order Honda signed, the Japanese auto maker
will be forced to complete two audits from third parties of the
company's compliance with regulatory reporting obligations. Honda
will also have to train personnel on an annual basis and develop
written procedures for complying with early-warning-reporting
requirements, which mandate that auto makers submit quarterly
reports to regulators flagging deaths, injuries and customer
complaints with vehicles, among other things.
The penalties represent the latest black mark for auto makers
struggling to respond to increased scrutiny from regulators,
lawmakers and law-enforcement officials amid an unprecedented spate
of vehicle recalls. Auto manufacturers recalled a record of nearly
64 million vehicles in the U.S. in 2014.
The NHTSA, too, has been under scrutiny and received criticism
from lawmakers over failing to spot widespread safety problems at
big car makers. NHTSA officials have countered that the agency is
understaffed and relies on legally-required reporting on safety
issues from auto makers to help spot problems.
The penalty against Honda is the NHTSA's first fine levied since
Mark Rosekind, a scientist with expertise in human fatigue who has
been a member of the National Transportation Safety Board, took
over running the agency in December.
Mr. Rosekind on Thursday acknowledged that highway fatalities
have declined nearly 25% over the past decade, but pledged to ramp
up the NHTSA's scrutiny of auto makers in 2015.
GM paid a $35 million civil fine in May after acknowledging it
failed to report to regulators problems with a faulty ignition
switch now linked to at least 42 deaths. And almost all auto makers
are grappling with how to respond to problems with defective Takata
air bags.
Sen. Edward Markey (D., Mass.) and Sen. Richard Blumenthal (D.,
Conn.), outspoken critics of how auto makers have handled safety
issues, on Thursday said the Honda fine is "a warning signal to
auto companies that they should take their safety reporting system
into the shop for a tuneup."
The senators and Obama administration officials, including
Messrs. Foxx and Rosekind, support raising the maximum fine the
NHTSA can levy against an auto maker for failing to abide by legal
reporting requirements for possible safety problems. Messrs. Fox
and Rosekind on Thursday reiterated their desire to increase the
cap to $300 million from $35 million.
Auto-safety advocates have long favored raising the current $35
million cap on such fines, arguing they are too small for
manufacturers such as GM, which reported more than $155 billion in
sales in 2014.
Write to Mike Spector at mike.spector@wsj.com
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