Part III Navigating NHTSA: What Automotive Leaders Need to Know

In Part I of this series Before the Recall: Defect Determinations and NHTSA Investigations we provided an overview of the legal requirements for when manufacturers are required to file recalls, how manufacturers make defect and noncompliance determinations and how NHTSA investigates safety issues.

Part II of this Client Alert series examined the requirements for recall filings and owner notification letters.

In addition to notifying owners of affected vehicles or equipment regarding the presence of a defect or noncompliance, the National Traffic and Motor Vehicle Safety Act (“the Safety Act”) requires manufacturers to provide a remedy at no cost to owners. Unlike the requirement to notify owners of a defect or noncompliance, the requirement to provide a free remedy is time limited. Manufacturers are not required to provide a free remedy if the recall was filed with NHTSA more that 15 years after the vehicle or equipment was first sold. 

What is NHTSA’s role in determining the remedy?  

NHTSA does not approve recall remedies. The Safety Act gives manufacturers the choice of how they are going to remedy a defect or noncompliance. Manufacturers may choose to repair the vehicle, replace the vehicle with an identical or reasonably equivalent vehicle, or refund the purchase price of the vehicle less depreciation. The same choices are available to manufacturers conducting recalls involving equipment, but for equipment there is no allowance for depreciation. There are special rules that are specific to remedies for recalls involving tires.

If a manufacturer elects to remedy the defect or noncompliance by repairing the vehicle or equipment, the manufacturer is generally free to choose the specific repair as along as the repair does not substantially impair the use of the vehicle or equipment. While occasionally NHTSA may provide informal feedback regarding a remedy, it is unable to force a manufacturer to adopt a different remedy without holding a hearing on the adequacy of the remedy. Ultimately, NHTSA typically gives deference to the manufacturer’s chosen repair unless the repair does not address some aspect of the failure that led to the recall.

What happens if the repair is ineffective?  

If NHTSA believes that a repair does not adequately remedy a defect or noncompliance, it will open an investigation called a Recall Query. A Recall Query is triggered by complaints from owners who have had their vehicles or equipment repaired but are still experiencing the failure that led to the recall. NHTSA will also open a Recall Query if the agency does not believe that the repair sufficiently addresses the safety concern that led to the recall or continues to leave the vehicle substantially impaired. In most instances in which the failure is continuing after the vehicle or equipment has been repaired, NHTSA will allow the manufacturer to re-recall the vehicles or equipment for a different repair. 

If NHTSA determines that a recall remedy is ineffective or is not being completed in a reasonable time, it does not have the authority under the Safety Act to direct the manufacturer to implement a different repair. NHTSA’s authority to address inadequate repairs is limited to ordering the manufacturer to replace or repurchase the vehicles or equipment. The cases in which NHTSA has initiated proceedings to force a manufacturer to repurchase or replace vehicles or equipment involved lengthy periods in which the manufacturer made little to no effort to repair the vehicles or equipment that were subject to the recall.

NHTSA also has the authority to order a manufacturer to accelerate a remedy program by expanding the sources of replacement parts or number of authorized repair facilities if NHTSA decides that the remedy program is not likely to be completed within a reasonable time.  This authority is rarely used. 

NHTSA monitors recall completion rates by requiring manufacturers to file quarterly reports regarding the number of vehicles or pieces of equipment repaired out of the total recall population for eight quarters after the recall launches. Recall completion rates are influenced by a variety of factors for which NHTSA admits that the agency has incomplete data. Of the data that NHTSA does have available, completion rates are influenced by the age of the vehicle, the component with the defect or noncompliance and the identity of the manufacturer of the vehicle. 

Because of the degree to which recall completion rates are influenced by factors for which NHTSA does not have reliable data, it is difficult for NHTSA to identify a recall as underperforming. Completion rates for equipment recalls are generally much lower than for vehicle recalls because of the difficulty of contacting purchasers of the equipment. NHTSA does have the authority to order a manufacturer to send a second owner notification for recalls with low completion rates, however NHTSA seldom uses this authority.

Part IV of this Client Alert Series focuses on special considerations that might be applicable to suppliers. 

If you have questions about the recall process or how it applies to your business, please contact Tom Healy or another member of Honigman’s Regulatory Practice Group. Learn more about Honigman's Automotive Regulatory & Compliance Services here.