Carmakers flag problems, but U.S. seeks bigger fines

WASHINGTON Thu Mar 22, 2012 4:08pm EDT

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WASHINGTON (Reuters) - Automakers are quicker since the 2010 Toyota safety crisis to report defects and recalls to U.S. regulators, but the Obama administration believes that substantially higher fines are still needed as a check against future disclosure lapses.

David Strickland, the government's top auto safety official as administrator of the National Highway Traffic Safety Administration (NHTSA), said on Thursday the current maximum fine of $17 million per case is inadequate.

He said it will not deter businesses with deep pockets from withholding safety information from regulators deliberately or inadvertently.

"We feel it's high time the penalties are reflective of the size of the industry," Strickland told a House Energy and Commerce subcommittee hearing.

A provision in transportation legislation approved by the Senate last week would increase civil penalties for the first time in more than a decade to a maximum of $250 million.

A competing House bill does not include the proposal, which automakers call excessive in an era of increased vehicle safety with motorists traveling more than three million miles on U.S. roads annually.

Business friendly Republicans who run the House consider the proposed increase over prescriptive and potentially detrimental to an industry returning to profitability after a historic downturn. They also view it as another impediment to any compromise with the Senate on stalled highway legislation.

Republican Rep. Marsha Blackburn, vice-chairman of the commerce, manufacturing and trade subcommittee, said "more mandates" were not the answer, adding it would be "very difficult" to find support among Republicans for higher fines.

"We need to think about the best ways to incentivize safety that makes sense and works for everyone," she said.

U.S. law gives auto manufacturers five business days to notify NHTSA of any defects in cars, trucks or motorcycles sold in the United States.

In its most notable case, NHTSA fined Toyota $32 million in 2010 for twice failing to promptly notify the agency of defects involving accelerator pedals.

The problems were central to recalls of millions of Toyota and Lexus cars and trucks that year and in 2009 for problems related to sudden acceleration.

Most recently, BMW agreed to a $3 million NHTSA fine in February relating investigations of 2010 recalls involving more than 330,000 vehicles.

Since the Toyota case, U.S. auto regulators have become more aggressive in launching safety investigations and have gotten tougher with automakers about their recall and disclosure practices.

Strickland said after the hearing that car companies have gotten better about admitting problems promptly. But he noted the impact of the Toyota crisis on the rest of the industry is not enough to ensure long-term compliance.

Mitch Bainwol, president and chief executive of the Alliance of Automobile Manufacturers trade group representing General Motors, Ford Motor and other major companies, said increasing fines is not the right approach.

"There are plenty of incentives to do the right thing," Bainwol said.

European countries with advanced auto manufacturing can fine car companies over recalls but Japanese authorities do not have that authority.

(Reporting By John Crawley)

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