Analysis: Auto safety proposals dim in political upheaval

WASHINGTON Mon Oct 18, 2010 2:29pm EDT

Eddie and Rhonda Smith testify before a hearing on the ''Response By Toyota and NHTSA (National Highway Traffic Safety Administration) to Incidents of ''sudden unintended acceleration'' on Capitol Hill, February 23, 2010. REUTERS/Kevin Lamarque

Eddie and Rhonda Smith testify before a hearing on the ''Response By Toyota and NHTSA (National Highway Traffic Safety Administration) to Incidents of ''sudden unintended acceleration'' on Capitol Hill, February 23, 2010.

Credit: Reuters/Kevin Lamarque

WASHINGTON (Reuters) - Automakers are counting on political upheaval in Washington to bury proposed changes in safety regulation born out of congressional scrutiny of Toyota Motor Corp (TM.N) (7203.T).

Car companies have raised enough questions about what they view as burdensome new regulation to slow safety bills pushed by Democrats.

Now they hope expected gains by more business-friendly Republicans in the November 2 congressional elections, and the fading memory of unintended acceleration in some Toyota and Lexus models, will effectively kill sweeping proposals. These include exponentially higher fines and new government recall powers.

"This was a tempting target when it was Toyota," said a person familiar with legislative discussions that continue, but without the politically charged momentum generated by multiple congressional investigations of runaway Toyota and Lexus vehicles.

"The recommended solutions affect the entire industry. That has to be taken into consideration. I think people realize this industry is still fragile," the person said.

Removing uncertainty about regulatory changes would be welcomed by investors, especially those gearing up for the General Motors Co GM.UL initial public offering next month and a similar sale planned by Chrysler LLC for 2011. Chrysler is under management control of Italy's Fiat SpA FIA.MI.

Automakers say some provisions in the legislation would jack up costs, potentially add confusion in production, and ultimately slow sales.

Safety advocates say new standards are needed for an industry they believe can otherwise prevail over under-resourced regulators and avoid tough penalties.

"There is no excuse for delaying this," said Jackie Gillan, vice president of Advocates for Highway and Auto Safety, a coalition of health and safety organizations and insurance companies.

FINES, LIABILITY, RECALLS

Manufacturers do not oppose proposals requiring brake override technology to mitigate unintended acceleration, the issue behind Toyota's safety crisis this year.

But they do recoil at efforts to exponentially raise maximum safety fines, boost personal liability for corporate executives in safety cases, and give new powers and resources to regulators to force recalls.

Carmakers would be most relieved to see inaction on a provision that would allow consumers to legally challenge regulatory denials of their petitions to investigate alleged defects.

Democrats led by House Energy and Commerce Committee Chairman Henry Waxman and Senate Commerce Committee Chairman John Rockefeller pushed for safety changes and stronger government oversight following hearings on unintended acceleration in Toyota vehicles in February and March.

"I hope that we can pass the legislation in this Congress. We need to ensure that (the National Highway Traffic Safety Administration) has the resources and authorities it needs to keep our roads safe," Waxman said in a recent emailed statement to Reuters.

Toyota recalled more than 6.5 million vehicles in the United States in late 2009 and early this year for unintended acceleration. The automaker and the government blamed loose floor mats that could jam the accelerator and gas pedals that would not spring back as designed.

The NHTSA is leading an investigation of whether software-driven electronic throttles also played a role. While Toyota says its throttle system is sound, a report on NHTSA's review is due later this fall.

Complaints to the NHTSA allege that dozens of highway deaths are linked to Toyotas' unintended acceleration.

Congress will return for a short session after the election, with likely priorities including expiring tax cuts, military spending and the extension of jobless benefits.

Democratic staffers still intend to try to reconcile differences in House and Senate auto safety proposals. But there is little to no expectation that a stand-alone bill will emerge -- especially if Republicans were to achieve the sizable election gains polls indicate.

Some congressional and industry insiders believe that Democrats could abandon separate legislation and attach safety provisions to a must-pass bill. Lawmakers took a similar step this summer on aviation safety.

But a more likely path, these people say, is deferring any new safety rules until Congress is ready to put together another long-term highway and transit construction spending bill. That process could begin in 2011, but Republicans would likely have a much more influential say about the scope of any changes.

(Editing by Gerald E. McCormick)