Years later, deadly airbag recalls still prove a lofty challenge

Automotive recalls—from faulty ignition switches to gamed emission standards—frequently dominate headlines. A persistent problem, faced by automakers and the government alike, is making sure that consumers are not just notified, that they actually take the time and effort to repair the problem.

That challenge is exemplified in the ongoing saga of the deadly Takata airbag scandal, which continues to perplex and frighten many in the auto industry.

For years, Takata had supplied airbags to automakers, but in 2013, several of those automakers issued large-scale product recalls after it became apparent that malfunctioning airbags had injured and killed a number of people. Instead of properly inflating to cushion the victim and prevent injury, the supposed safety feature tore apart its steel inflator housing and sprayed metal shards at high velocity toward victims.

More than 50 million airbag inflators in 37 million vehicles are under recall by 19 manufacturers, numbers that are anticipated to continue to grow in a process that may play out for another 10 to 15 years, experts say. Recalled Takata inflators have resulted in the deaths of 15 people and have maimed and injured more than 200 people in the United States alone.

To date, more than 21 million defective airbags have been repaired.

The government’s role in recalling the lethal airbags extends back several years. Under a May 2015 Consent Order, the NHTSA required Takata to craft a customer outreach plan that could help original equipment manufacturers (OEMs) in their effort to bolster recall completions.

The NHTSA also cracked the whip on vehicle manufacturers, demanding that they step up their game regarding efforts to alert consumers and replace faulty airbags. They were required to submit plans detailing innovative ways to improve recall completion rates. The agency also appointed an Independent Monitor to oversee that process and develop other strategies for increasing completion rates.

The NHTSA would later reach an agreement with 18 automakers to improve upon their use and deployment of consumer data, sharing best practices for improving recall completion rates and develop new ways (using new and emerging technologies) to notify consumers of recalls.

These and other efforts sought to improve consumer awareness. A new, two-year pilot program in Maryland, paid for by the NHTSA, for example, seeks to tie recall notices to auto registrations.

At a March 20 hearing of the Senate Commerce Committee, Chairman Jerry Moran (R. Kan.) pointed out that 10 years have passed since the initial recall of some Takata airbag inflators.

“As vehicles age, the threat increases,” he warned. “We have also learned that Takata misled both the government and the vehicle manufacturers.” As a result, Takata agreed to a record $200 million civil penalty and a $1 billion criminal penalty.

Moran said he is encouraged by coordination and data-sharing between the NHTSA, the automakers, and other stakeholders, “but clearly the results are mixed, and there is much work left to be done.”

Commerce Committee Ranking Member Bill Nelson Opening (D-Fla.) asked all 19 automakers affected by the Takata recalls to update his committee on their most recent recall completion rates and steps they’re taking to improve them.

“The responses show that there is still a wide, and concerning, variance in the pace of these recalls,” he said.

For example, among the five automakers with the highest number of vehicles recalled due to Takata airbags: Honda has repaired 70 percent of these recalled vehicles nationwide as of early March; Fiat Chrysler’s completion rate is 41 percent; and, Toyota is at approximately 61 percent.

Ford, on the other hand, has only fixed about 22 percent of vehicles under recall.  “Ford’s completion rate is so low because [the] NHTSA allowed the automaker to delay repairs on more than one million recalled vehicles,” Nelson explained.

BMW, the automaker with the fifth highest number of recalled Takata airbags, did not provide its most recent completion rates.

“Overall, these recall completion rates are disappointing and remain a cause for real concern,” Nelson said. “Unfortunately, [the] NHTSA still seems to be playing a game of regulatory whack-a-mole and twiddling its thumbs when it comes to actually enforcing the coordinated recall approach and benchmarks for automakers. All this is happening while drivers across the country, who wonder about the safety of their vehicles, are left in limbo. We need to pick up the pace on these recalls before anyone else loses a loved one.”

At the center of recall scrutiny is Heidi King, deputy administrator for the NHTSA.

“Manufacturers have made progress in reaching consumers and persuading them to bring their vehicles in for a free repair, but progress is uneven and overall completion rates are not where we want them to be,” she admitted. “The challenge is unprecedented, but there are positive signs.”

The NHTSA and the Independent Monitor established under the Consent Order have “successfully encouraged vehicle manufacturers to adopt innovative outreach best practices—including texting, social media, and door-to-door canvassing—that have proven effective with some consumers who were unresponsive to traditional outreach efforts.”

“The Department of Justice has a Plea Agreement with Takata, and we needed to work out go-forward terms with the DoJ. We did so, and I am happy to report that the $850 million penalty owed by Takata to the DoJ will be paid upon closing of the transaction.”
Joe Perkins, Chief Financial Officer, Key Safety Systems

The NHTSA’s Coordinated Remedy Order also targeted replacement inflators to those consumers with the highest risk, so that inflators that pose the greatest danger get repaired first.

“Prioritizing repairs does mean some vehicle owners might have to wait for replacement airbags,” King said. “That is deeply frustrating. But it also means that parts are available immediately to fix vehicles that pose a greater risk.”

John Buretta is the independent monitor appointed to oversee Takata’s parent company, TK Holdings, and the Coordinated Remedy Program.

“The words ‘grenade’ and ‘ticking time bomb’ accurately convey the lethal potential of these defective inflators,” he said.

One particular challenge, Buretta said, is that most affected vehicles are older models. More than 97 percent of the vehicles presently under recall are over five years old, and nearly 75 percent of the vehicles are more than ten years old.

“Older vehicles change hands more through private sales and auctions,” Buretta explained. “Older vehicles’ owners are less likely to have a relationship with a local dealer and more likely to use an independent repair facility for maintenance and repairs. Identifying the correct contact information for current owners of these older vehicles also takes greater effort.”

Priorities for the recall program are: improving consumer outreach; engaging dealerships; engaging other third parties such as independent repair facilities and outreach vendors; and employing salvage recovery services to retrieve scrapped or salvaged inflators.

Data and experience in these recalls, Buretta said, confirms that manufacturers have greater success when they send frequent outreach in a variety of mediums, including not only mail but also e-mail, telephone, text message, and social media, and that repeated reminders are crucial to convey the urgency of the safety risk.

Outreach efforts have been taken to new levels, including an unprecedented door-to-door canvassing effort, with teams of canvassers literally knocking on the front doors of vehicle owners’ homes.

“Knocking on doors has also provided invaluable information about the vehicle’s current location, such as whether the vehicle has been sold and is no longer at that address,” Buretta said.

Honda has adopted canvassing nationwide for all unrepaired high-risk vehicles. Additional vehicle manufacturers, including Ford, Fiat Chrysler, and Mazda, are now piloting door-to-door canvassing and already seeing success.

Another effort spearheaded by the Independent Monitor is the launch of the “AirbagRecall.com” Website. It provides information about the Takata recalls, allows vehicle owners to check whether they have an open Takata recall by simply entering their license plate or VIN on the Website, and provides a phone number and a click-to-call option to a local dealer to immediately schedule a repair. A mobile app has also been launched, with the capability to scan a license plate for open recalls by simply pointing a smartphone camera at the plate.

For many businesses, outstanding recall notices can derail a merger or acquisition. In the case of Key Safety Systems, Takata’s recalls are part of the business plan.

The 100-year-old, Michigan-based company manufactures and sells “safety-critical automotive components to vehicle manufacturers worldwide.” Since 2016, it is attempting to acquire most of the operating business of Takata.

After months of review, the OEMs, Takata, and a steering committee nominated by Takata selected Key Safety as the chosen purchaser.

“This transaction enables us to expand our investment in our core business and contribute to the supply of critical safety components for new vehicle production and recall kits,” Joe Perkins, senior vice president and chief financial officer for Key Safety Systems, said at the Senate hearing.

Recent progress has been made in the acquisition effort. In February, the U.S. Bankruptcy Court in Delaware entered a confirmation order granting approval of the transaction. Bankruptcy proceedings in Canada and Japan have also been addressed.

“Beyond the approval of these courts, the Key Safety-Takata transaction requires review from several other government bodies and satisfaction of remaining key conditions to close,” Perkins said. “The Department of Justice has a Plea Agreement with Takata, and we needed to work out go-forward terms with the DoJ. We did so, and I am happy to report that the $850 million penalty owed by Takata to the DoJ will be paid upon closing of the transaction.”

Because Key Safety is ultimately foreign-owned, the parties submitted a joint voluntary notice to the Committee on Foreign Investment in the United States (CFIUS). That body, which reviews cross-border business deals for national security hazards, has been far more active than usual under the Trump Administration.

“I can report that Takata and Key Safety are working closely with CFIUS, and we are hopeful that it will clear the transaction which will enable us to close in April 2018,” Perkins said.

Key Safety plans to produce “critical airbag modules and recall kits” and help enable OEMs to fulfill the pending Takata airbag recalls and continue their global production. The deal is also anticipated to provide more than $130 million to Takata victims, which is in addition to the $125 million paid as part of the Justice Dept. Plea Agreement.

Rick Schostek, executive vice president of Honda North America, explained a problem that stymies efforts to purge the supply chain of faulty airbags.

One fatality, he said, involved the rupture of a Takata inflator that was not part of the original equipment installed in the factory and was not installed by one of his dealers. Instead, it was repaired independently, with the inflator sourced from a salvaged vehicle.

This revelation sparked a nationwide search of salvage yards to find and purchase recalled inflators that has successfully removed over 119,000 inflators that can no longer be installed as replacement parts in the vehicles of unknowing customers.

Legislation, and enforcement of it, may also help the cause. The Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act of 2000 made it illegal to sell a used automotive part that has been the subject of a recall and not been fixed.

The FAST Act signed by President Obama in late 2015, increased the maximum fine levied by the NHTSA for a single violation of selling recalled equipment to $21,000 with the amount in civil penalties for a related series of violations increased to $105 million.

Honda has created a ground-level outreach team of 550 employees “who are physically knocking on the doors of customers, already more than 600,000 times, in an effort to assist them with scheduling and completing recall repairs,” Schostek said. “In total, we now have more than 400 people in our customer contact center working on the Takata recalls, and 135 of those agents are dedicated to tracking down vehicles with Alpha inflators.”

Based on all of these efforts, from a population of almost 1.1 million vehicles with the higher-risk Alpha inflators, only about 62,000 remain on the road to be tracked down and repaired, he said. This represents a completion rate of 94 percent.

Schostek added that the single most effective measure that automakers and the government could have at their disposal is to tie the annual state vehicle registration process to a requirement that safety recalls be addressed before that registration can be completed.

“This would be particularly important for vehicles that were recalled prior to the purchase of a vehicle by a subsequent owner who may not even be aware of the presence of an unrepaired safety defect,” he said. Toward this end, the NHTSA has already begun funding state pilot programs that use registration renewals to improve recall rates.

Last week, the auto industry announced the establishment of a new batch look-up tool that will make it much easier and faster to look up affected vehicles to support efforts to reach hard-to-find vehicle owners about an outstanding safety recall. Currently, anyone checking vehicles for a safety recall must look up one VIN at a time, “which is inefficient and cumbersome,” Schostek said.

The new tool can look up large batches of up to 10,000 VINS at a time. It will be offered completely free of charge to DMVs, insurance companies, salvage yards, repair shops, new and used car dealers, and others who have touch points with vehicle owners.