By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends much of her time in Asia and is currently researching a book about textile artisans. She also writes regularly about legal, political economy, and regulatory topics for various consulting clients and publications, as well as scribbles occasional travel pieces for The National.
Florida’s Senator Bill Nelson released some figures yesterday about the woeful status of the recall of vehicles fitted with Takata’s lethal airbags. This is only yet another reminder of how corporations dodge responsibility for preventing foreseeable harms their defective products can cause– a problem that’s not a new one, and that seems to be getting worse, rather than better.
Nelson is the ranking Democrat on the Senate Commerce Committee that’s charged with regulating this area. According to his press release, Two-thirds of defective Takata airbags still not repaired:
Two thirds of the roughly 2.3 million vehicles in Florida with potentially deadly Takata airbags have not yet been repaired, according to new figures released today by U.S. Sen. Bill Nelson (D-FL).
The numbers provided to Nelson by the independent monitor appointed to oversee Takata’s handling of the recall show that approximately 30.4 million of the 46.2 million recalled inflators nationwide have not yet been repaired as of mid-May.
Takita: Quick Recap
This whole story history is a reminder that it’s not just too big to fail banks– and those who inhabit their their C-suites– that successfully manage to sidestep punishments that fit their crimes. Beginning in about 2000 Takata executives knew some ammonium nitrate-based inflators included in their products didn’t meet automakers’ standards, and were aware of the safety dangers they posed, according to this January 2017 Department of Justice (DoJ) press release, Takata Corporation Agrees to Plead Guilty and Pay $1 Billion in Criminal Penalties for Airbag Scheme. Nonetheless, they sold products they knew could kill people.
And those products did kill people– to date, at least 11, as well as being linked to more than 180 injuries in the US, according to this WSJ account, Auto Makers Settle Takata Air-Bag Claims for $553 Million. Now, despite Takata entering into a settlement with the DoJ, and four automakers last month agreeing to a half billion dollar settlement of some private claims, more than 30 million cars continue to ply US highways with this problem unfixed.
This is not a new problem– Japanese automakers began their first recall of Takata airbags in 2013, and some US automakers followed in 2014, according to a 2014 New York Times piece, Now the Air Bags Are Faulty, Too. Nor does a fix require inventing some brand new gee whiz technology.
Allow me to quote from an Open Letter to Attorney General Lynch: Prosecution or Guilty Pleas for Corporate Crime, which lawyer and consumer advocate Ralph Nader wrote to then-Attorney General Loretta Lynch in January of this year, as the DoJ put the finishing touches on the settlement. Nader relied on comments made by Clarence Ditlow, an engineer and lawyer who headed the Center for Auto Safety for many decades, who died in 2016. From the Open Letter:
On Takata, Mr. Ditlow said this: “Up through the year 2000, almost every airbag inflator made worldwide, including by Takata, used sodium azide as a propellant. Very stable. If it broke down it just simply degraded and there were no adverse effects. If you had to replace it, you had to replace it. But, what Takata did in the beginning of 2001 was to change the propellant to ammonium nitrate, an incredibly powerful explosive. It’s what Terry McVeigh used to bring down the government office building in Oklahoma City. It’s what a lot of terrorists in the Mideast are using in the improvised explosive devises. And so, yet this propellant that Takata used, it was known to degrade, known to explode, they put it into the airbag inflator to save, once again, a few pennies per inflator. And so, they knew immediately, once these inflators were put into production that they were failing, they were exploding, and when they exploded they sent the shrapnel of the housing into the occupant compartment. And, if you’re behind the steering wheel and you had no other choice at that time, you are very likely to be killed or seriously injured.”
Unsafe at Any Speed
Now, auto safety has long been a big problem in the US. As many older readers might recall, Nader first burst onto the national political scene with publication of his book, Unsafe at Any Speed: The Designed-In Dangers of the American Automobile, in 1965. I don’t have my copy of the book to hand, so I’m relying on my memory and permit me to quote from this New York Times account, 50 Years Ago, ‘Unsafe at Any Speed’ Shook the Auto World:
But most of the book focused on a long list of neglected safety issues ranging from brake performance to drivers’ being impaled by noncollapsible steering wheels and poor crash protection. The sharp-edged theme was that there was a “gap between existing design and attainable safety” and the auto industry was ignoring “moral imperatives” to make people safer.
The book became a best seller, and in 1966, Nader was invited to testify before a Senate subcommittee on automotive safety. Later that year, Congress passed 1966 National Traffic and Motor Vehicle Safety Act. This legislation established the auto recall system, and created the Department of Transportation, as well as various precursor agencies that in 1970 became the National Highway Traffic Safety Administration (NHTSA), as part of the 1970 Highway Safety Act).
Now, these reforms were certainly a significant step forward– much better than what went before. Yet they also bequeathed two problems that certainly contributed to the current Takata impasse.
First, as originally designed, the 1966 auto safety legal framework eschewed criminal penalties for culpable auto companies and their executives, and instead relied heavily on civil liability. Consumer advocates have spent the last 50 + years trying to fix that, with little success, and it’s extremely unlikely that the current Congress is going to change anything in this regard. While the 2000 Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act, established a limited basis for holding auto executives criminally liable for failing to disclose a safety defect, this has been sorely inadequate as either a deterrent, or a means to promote rapid correction of problems. Under TREAD, prosecutors must satisfy a far more stringent standard than the looser ones they can be used under regulatory statutes that establish the basis for criminal liability in other industries. Auto executives benefit from a generous safe harbour provision that allows an executive considerable leeway to fix the original safety violation.
I should point out that several automakers began recalling vehicles in the US with defective airbags in 2014. So, the combination of a weak statutory basis for automaker liability and the Department of Justice’s adherence to the Holder doctrine (followed by the Yates memorandum– which translated into plain English means that the DoJ generally pursued civil rather than criminal actions against corporations and their executives– meant that prosecutors were not exactly zealous in pursuing corporate transgressions.
Regular readers are well-aware that DoJ policy led to a failure to pursue any too big to fail banks– or anyone in their C-suites– for legally culpable activity that led to the great financial crisis. I’ve discussed this issue here, The Obamamometer’s Toxic Legacy: The Rule of Lawlessness, among other places. The takeaway for this post is it’s not just bankers that got away with minuscule monetary penalties, relative to damage caused– mere slaps on the wrist– but other companies as well.
I don’t want to belabor this point, so allow me to return to discussing the second relevant defect in the creaky vintage-1966 auto recall system: the failure to update procedures. Now, alert readers will probably say that these characteristics are not bugs but features, and with that assessment I would have to agree. For starters, many recalls are ‘voluntary’– undertaken by the company after it becomes aware of a safety defect– while others are triggered by an NHTSA investigation. The system requires companies to repair the defect free of charge, and one might imagine that companies might not be rushing to inform consumers that they’re eligible for a recall. Yet get this: Guess how companies inform customers of problems? They use first-class mail! Wow, I guess this is another strong argument for keeping the US Postal Service going (not as strong as would be creating a Postal Savings Bank, but I digress).
The laughably antiquated system makes monitoring the status of a recall difficult, not to mention informing consumers of potentially lethal defects and that they should and can be fixed– at no cost to the consumer (other than lost time and their lack of access to the vehicle while the repair is being undertaken). Some have suggested that it might be high time to make use of technologies that might allow a manufacturer to access a vehicle’s electronic system to inform consumers of recalls (I leave aside for the time being surveillance concerns such a system might raise).
Permit me another aside, at the age of 83, believe it or not, Nader’s still plugging away to promote greater auto safety, and in that Open Letter quoted above, called for Lynch:
To bring justice to the victims of the Takata and VW criminal actions, I ask that you not just fine the companies and agree to deferred prosecution agreements, or a guilty plea against some subsidiary of the company – but bring the full weight of the criminal law – against both the parent company and responsible executives.
The recent trend of settling major corporate crime cases with deferred or non prosecution agreements has undermined the criminal justice system and sent a message that we live in a society with a two tier system of justice – deferred and non prosecutions for the powerful, guilty pleas and jail for the powerless.
So what we have here is not a straightforward case of regulatory crapification, but of a system that’s been defective from the start, and that Congress with the connivance of multiple administrations has failed to improve or modernize.
I’m old enough to remember the Pinto debacle unfolding, in the mid-1970s. Younger readers may find it difficult to believe that at one time, Japanese autos were considered to be flimsy, low-quality products, that didn’t meet the standard of American products.
Sometime in 1968, then Ford-CEO Lee Iacocca made a decision to get into the economy car market, and set an aggressive timetable to launch the Pinto. Somewhere during this expedited the development cycle, the company discovered a flaw in the design of the car’s fuel tanks– which could be punctured by a low-impact crash from the rear, causing catastrophic fires. The engineers produced several solutions, according to The Top Automotive Engineering Failures: The Ford Pinto Fuel Tanks.)
But there was great pressure to meet the aggressive timetable. So the car was launched in 1970, with the defect unremedied. After which, Pintos involved in low-speed rear-end collisions started to explode. The NHTSA first began to investigate the defect in 1974, but it wasn’t until Mother Jones published an article in 1977 that the problem became more widely known. And in what later became a cause célèbre, it became a nightmare for the company and its reputation, when it became known that a cost-benefit analysis had concluded that the benefit – preventing the increased number of deaths the company estimated would occur if it left the design unchanged – wasn’t worth the marginal extra cost – $11 per car – to correct the problem by providing additional protection for the vulnerable fuel tanks, as is discussed further in Case: The Ford Pinto.
As a teenager growing up in Newton, New Jersey– a place I like to say was located 60 miles and 60 years away from midtown Manhattan– I first became aware of the types of arguments that later morphed into that scourge known as neoliberalism by reading an Atlantic article (IIRC– this was, after all, roughly 40 years ago) that discussed the rising use of cost-benefit analysis. Although perhaps to their credit, most of my classmates couldn’t have cared less about cost-benefit analysis was– let alone define it– virtually everyone was aware of the Pinto problem. The car was quite popular in my home town,and as teenagers are so prone to do, we often joked inappropriately about the dangers we were exposing ourselves to whenever one stepped into the back seat of a Pinto.
I want to draw a few points from Case: The Ford Pinto. By the time Ford was obliged to recall the Pinto in 1978, the car had accounted for many fire-related deaths: Ford estimates this at 23, while others have claimed as many as 500. (Other estimates also fall in that range.) The company’s own engineers admitted in sworn testimony that 95 percent of the fatalities would not have occurred if Ford had located the fuel tank over the axle (as it had done in other models it produced). The company’s never admitted the car was unsafe compared to others in its class and of that period, nor does it highlight that successful lobbying by it and others in the industry was responsible for delaying for seven years the adoption of any NHTSA crash standard– until 1976.
According to the article:
“Ford made an extremely irresponsible decision,” concludes auto safety expert Byron Bloch, “when they placed such a weak tank in such a ridiculous location in such a soft rear end.”
Pinto v. Takata Summed Up
So, all I can say here is, plus ça change…
There seem to be several similarities here: a deliberate decision to put profits over people, regulatory failure, company denial, a belated response once the problem became public.
But in one regard, the Takata situation is substantially worse.
For, despite all the delay and obfuscation that led up to it, once the Pinto recall finally began, it was completed in a year.
Let’s contrast that to the airbag debacle. US recalls began in 2014. Yet as Autoblog.com reported yesterday in Most of 46 million recalled Takata inflators in US not fixed:
Automakers have recalled 46 million Takata air bag inflators in 29 million US vehicles. By 2019, automakers will recall 64 million to 69 million US inflators in 42 million total vehicles, NHTSA said in December.
That’s not a typo: 2019. Yes, 2019.
So, I say to Takata, the automakers, NHTSA, DoJ, and any other regulator or other concerned party involved in this sorry mess:
Why don’t you fix this? Now. Not in 2019. No more excuses.