Obama administration wants $300M max fine for recall violations

April 30, 2014
The Obama administration is reportedly calling for maximum fines of $300 million if automakers do not comply with recall regulations.

Transportation Secretary Anthony Foxx argues that the current fines, capped at $35 million, represent no more than a “rounding error” for large automakers. Raising the maximum fine would serve as a stronger deterrent, giving the National Highway Traffic Safety Administration additional enforcement leverage if companies fail to quickly identify safety issues and issue timely recalls.

The fine hike is included in a broader transportation reauthorization bill that primarily serves to fund maintenance for highways, bridges and other infrastructure.

Aside from the nearly ten-fold increase in NHTSA penalties, the bill also outlines tighter regulations for recall obligations under bankruptcy proceedings, including liquidation bankruptcies, and allow the agency to force rental car companies and dealers to keep defective vehicles parked until they are fixed.

The Obama administration already attempted to increase the recall noncompliance fines from $17 million to $250 million in 2012, however industry pressure eventually shrunk the proposed increase down to $35 million.

“The proposed increases [to $250 million] are so out of proportion either to the current penalty structure or the penalty structure for other manufacturers under the Consumer Product Safety Act as to appear unfairly punitive,” an alliance of 12 companies, including General Motors, opined at the time in a letter to officials.

In light of the General Motors ignition-switch recall, it is unclear if automakers will publicly join forces to resist the second proposal for increased fees.

The Justice Department wields a bigger stick when recall violations are particularly egregious and run afoul of other federal laws. Three of Toyota’s unintended acceleration recalls each fetched the maximum $17 million penalty at the time, however the DoJ eventually squeezed the Japanese company for a $1.2 billion settlement to avoid criminal charges for wire fraud.

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