The Neverending Story—Auto Recall Scandals: NMA E-Newsletter #420

One great thing about scandals is they usually have an end and become just another nugget of history. Three major automotive scandals (The Takata Airbag Scandal, VW Dieselgate, and the GM Ignition Switch Problem) seem to have legs and are a neverending story for various reasons. All three of these scandals have one element in common and that is company officials hid information and delayed action to a problem that directly affected consumers and company investors.

General Motors announced this month that they had settled a claim by the Securities and Exchange Commission (SEC). The automaker had been charged by the SEC for withholding information about its internal ignition switch investigation. The SEC contends the knowledge of the investigation was relevant to investors because the scandal could negatively affect finances. Under the settlement, GM will pay a $1 million civil penalty but does not have to admit or deny any wrongdoing.

The GM ignition switches were linked to 124 deaths and 275 injuries. GM paid out $594.5 million in 399 cases which averaged out to $1.5 million per claim. GM had received a total of 4000 claims. The automaker also had to recall nearly 2.6 million cars. In September 2015, the U.S. Justice Department announced that GM would pay a $900 million criminal fine, and agree to federal oversight for three years but had deferred prosecution. The criminal fine was for wire fraud but in reality GM senior management skirted federal requirements for reporting defects and recalling vehicles in a timely fashion.

Perhaps the General Motors Ignition Switch Scandal is now at the end of its story. Not the case for the Takata Corporation of Japan however.

In mid-January, thirteen automakers announced that between one to three million vehicles (various reports have different numbers) have been recalled in the Takata Airbag Scandal—this time for side airbags. The automakers include Audi, BMW, Daimler Vans, Ferrari, Jaguar Land Rover, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Subaru, Tesla, McLaren and Karma. This brings to a total of approximately 69 million vehicles with faulty airbag inflators. Undoubtedly, the Takata Airbag recall is the largest recall the world has ever seen.

Also in mid-January, the U.S. Justice Department announced that Takata has agreed to pay a $1 billion fine and admit wrongdoing. Three Takata executives also were charged with conspiracy. Takata shares are now in freefall as the company will likely file for bankruptcy according to auto industry analyists. Airbag recall efforts have been haphazard and rates of compliance have been abysmal. According to this November 2016 Reuters article, no matter what happens to Takata, automakers are ultimately responsible for replacing the airbags.

Another wrinkle in the airbag scandal…

The Swedish parts company Autoliv announced in December a small recall (114,000 vehicles) for airbags and seatbelts (267,000). Autoliv is the largest automotive-safety parts company in the world and supplies seat belts, steering wheels and airbags to every major manufacturer. Autoliv stepped in and filled the vacuum created by Takata but now with even a small airbag recall—can we now trust this company’s airbags?

The latest on the Volkswagen Dieselgate Scandal

This week, a U.S. judge approved a $1.2 billion settlement for U.S. franchise dealers. The 650 VW dealers will receive an average of $1.85 million paid out over an 18 month period.

Also, in mid-January, Volkswagen reached a final deal with the U.S. Justice Department. Volkswagen will pay criminal and civil fines totaling $4.3 billion, plead guilty to three felony charges and admit wrongdoing. Thirteen VW Managers have been indicted around the world. In the U.S., six current and former VW managers have been charged and only one arrested so far. The neverending story will continue for VW due to the seemingly unending lawsuits by:

  • U.S. Shareholders
  • Audi, Porsche and VW owners
  • 42 U.S. states, District of Columbia and Puerto Rico.
  • Various German states
  • the European Union

Auto industry watchers believe that when VW Dieselgate is all over, the company will have had to shell out close to $30 billion to make good on reparations.

Dieselgate Grows…

Also in January, automaker Fiat Chrysler was implicated in their own Dieselgate emissions scandal. Unfortunately for car owners, the neverending story continues…

Here are two websites that can help you find out if your vehicle is on a recall list:

Search Safety Issues (NHTSA website)

Consumer Reports

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