Honda fined record $70 million in safety investigation

Federal Safety regulators fined Honda Motor Co. $70 million – the maximum allowed – for failing to report deaths and injuries involving its vehicles in a timely matter.

The National Highway Traffic Safety Administration fine, which has two components, is the largest ever levied on an automaker by the safety agency. Honda must pay $35 million for the unreported death and injury claims and an equal amount for failing to report warranty and service claims that might point to defects.

“We cannot tolerate an automaker failing to report to us any safety issues,” U.S. Transportation Secretary Anthony Foxx said Thursday. “If we don’t know about these problems, we are missing a crucial piece in the recall process.”

Late last year, Honda acknowledged failing to tell the NHTSA about 1,729 incidents involving injuries or deaths in its automobiles. The data should have been submitted as so-called early warning reports. Safety regulators use such reports to ferret out dangerous defects.

NHTSA is stepping up its enforcement actions after coming under fire from Congress for not detecting safety defects quickly enough, including GM’s deadly ignition switches.

The Honda fine “signals a new resolve by NHTSA and DOT to hold automakers strictly accountable for reporting failures,” said Carl Tobias, a professor at the University of Richmond school of law. “Cars are simply too dangerous to have reporting errors like Honda allowed.”

General Motors was hit with a $35-million fine in May, after it was revealed that the company knew about the fatal ignition switch failures for more than a decade before reporting them to the federal agency. Last year, NHTSA also fined South Korean automaker Hyundai $17.4 million for failing to issue a recall in a timely manner and Italian automaker Ferrari $3.5 million for failing to report incidents that included three fatalities.

The increased attention on auto safety contributed to the record recall of 60 million vehicles in the U.S. last year, about double the previous record set in 2004.

Honda blamed the lapse on data entry and computer coding errors, as well as a “narrow interpretation” of what incidents required a report to regulators.

Foxx said Honda’s explanation for failing to report safety claims was not a factor in the NHTSA fine – the largest allowed by federal law.

“Good intentions don’t help the automaker in a situation like this,” Foxx said. “We need the industry to be vigilant and do everything they can to ensure that we are getting timely information.”

Honda said it began investigating the errant reports, stretching from July 2003 to June 2014, after a Honda employee noticed reporting discrepancies. The company then hired a third-party firm to audit the data.

While regulators have discussed the case with the Department of Justice in advance of a possible criminal investigation, Foxx declined to say whether an investigation has been launched.

Toyota last year paid a $1.2-billion Department of Justice fine after admitting it misled regulators and consumers about safety defects. General Motors is the target of a similar inquiry into why it failed to report defective ignition switches now linked to 42 deaths even though it knew about the problem for at least a decade.

A Honda executive said the company had addressed the problem.

“We have resolved this matter and will move forward to build on the important actions Honda has already taken to address our past shortcomings in early warning reporting,” said Rick Schostek, executive vice president, Honda North America Inc.

Honda’s U.S. subsidiary also signed a consent order that gives NHTSA increased oversight over what it reports, and mandates third-party audits to ensure that all required reporting is completed now and into the future, according to NHTSA Administrator Mark Rosekind.

Regulators believe that some of Honda’s unreported cases likely involve defective Takata Corp. air bags that can deploy with too much force and send metal shrapnel into the passenger cabin. They are linked to multiple deaths and are responsible for recalls of more than 20 million vehicles globally.

The vehicles affected include those made by Honda — Takata’s biggest customer — as well as Nissan, Subaru, Ford, Chrysler, BMW, Mitsubishi and Mazda.

Transportation Department officials have asked Congress to raise the NHTSA fine limit to $300 million.

“We need to increase that cap and only Congress has the ability to do that,” said Rosekind. Raising the limit tells the “industry to obey the law or pay a steep price.”

Others agreed.

“Congress has held numerous hearings, and keeps blasting the agency, but has failed to give the administration the authority it needs to levy fines sufficient to motivate companies like Honda to comply with the law,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety. “Congress has been negligent, and should have passed legislation by now.”

Safety advocates also are pushing for a criminal investigation.

“$70 million is too small a price to pay,” said Clarence Ditlow, executive director of the Center for Auto Safety. “How many deadly defects are concealed in the 1,729 death and injury claims not reported by Honda?”

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