GM recalls put spotlight on industry's use of service bulletins

The 2005 Chevy Cobalt is among 1.6 million cars being recalled by GM for a faulty ignition switch.

Photo credit: REUTERS
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WASHINGTON (Bloomberg) -- General Motors took advantage of a regulatory gray area when it addressed its ignition switch defect almost a decade ago, leaving most car owners unaware that their vehicles may have been unsafe.

Rather than issue a recall, GM sent notices to its dealers in 2005 and 2006, telling them that certain models’ ignition switches could unexpectedly shut off, powering down their cars’ engines. According to those nonpublic bulletins, dealers were to tell drivers to remove unessential items from their key chains. Dealers were also provided with an insert to prevent keys from jostling.

Those technical-service bulletins are now haunting the largest U.S. automaker as it faces scrutiny from the National Highway Traffic Safety Administration, the Justice Department and Congress over why it didn’t recall models that it now ties to at least 12 deaths.

“Technical-service bulletins have been recall-avoidance devices -- there’s no question about that,” said Joan Claybrook, a consumer-safety advocate who was the head of NHTSA from 1977 to 1981.

Automakers routinely send the bulletins to alert service shops about known mechanical issues, from balky window switches to leaky hoses, and how to repair them. Most cover nonsafety matters. A problem can arise, safety experts say, when automakers use the documents in a bid to quietly fix problems and avoid a potentially far more expensive recall.

A 2012 law required NHTSA, which receives copies of these nonpublic communications, to make them searchable for the public by 2013. The agency’s regulation, issued last year, didn’t fulfill that mandate, according to the Center for Auto Safety in Washington.

‘Terrible things’

Claybrook is asking why NHTSA didn’t press the company to mount a recall.

NHTSA has said in statements that it didn’t receive enough information from GM to allow it to determine whether a recall was necessary. Agency officials weren’t available to answer questions Monday because the federal government was closed due to snow.

GM has apologized for delays announcing the recall. “I asked our team to redouble our efforts on our pending product reviews, bring them forward and resolve them quickly,” GM CEO Mary Barra said in a statement Monday.

“Something went wrong with our process in this instance, and terrible things happened.”

GM also will cooperate with all ongoing investigations to give a full explanation of the process, Barra said. Heather Rosenker, a GM spokeswoman, declined to comment beyond Barra’s remarks.

GM recalled 1.6 million Chevy Cobalts and other models in two waves starting in February. One of the key questions for investigators looking at why GM didn’t make the move earlier is whether top executives were ever presented with the option.

Those extenuating circumstances may not help the company avoid liability, said Allan Kam, one of NHTSA’s former senior enforcement attorneys, who worked for the agency for 25 years.

Safety act

“For a manufacturer that should have determined a safety- related defect exists, a technical-service bulletin is not an adequate substitute,” Kam said. “Most owners will never know about it.”

When an automaker encounters a safety-related defect that meets the legal definition of an unacceptable danger to drivers -- that is, if a part malfunctions in a way that could lead to injury or death -- it must follow the protocols laid out in the 1966 Motor Vehicle Safety Act. The company must notify NHTSA within five business days after it determines the possibility of a defect.

It must then notify every owner of an affected vehicle that the defect exists and that their repairs will be performed without cost to the driver. The warning letters’ envelopes must be marked with the words “SAFETY,” “RECALL,” and “NOTICE,” in large type.

Industry fixture

On the other hand, technical-service bulletins, a decades-old fixture of the auto industry, have long been hidden from the public eye. The 1966 safety act required automakers to report the bulletins to NHTSA. The agency has a small staff that scans them for potential defects, Kam said. If NHTSA investigators enter into a probe on an auto defect, they will review earlier bulletins on the matter.

The safety act holds the company liable if anyone there knew of a safety-related defect, Kam said. It doesn’t matter if engineers didn’t pass the word to higher-up executives if it’s obvious they should have. “A manufacturer can’t play ostrich and stick its head in the ground,” Kam said.

The pressure for an automaker to handle a defect with something short of a recall is strong, Kam said. Full recalls can cost as much as $1 billion, factoring in costs from the product-liability lawsuits that often arise after a company makes a safety issue public, he said.

GM’s penalty from NHTSA for not conducting a timely recall, by comparison, could be as much as $35 million. That would be the largest fine ever imposed by the regulator.

‘Satisfaction campaigns’

Given automakers’ financial incentive to avoid recalls, they often fight those they deem unnecessary, often for years, said Clarence Ditlow, executive director at the Center for Auto Safety. NHTSA, with an interest in getting any necessary repairs done quickly, is often in the position of negotiating with automakers over terms of needed recalls, Ditlow said.

Automakers often try to use technical-service bulletins, “satisfaction campaigns,” regional recalls and other kinds of steps that stop short of a formal recall, said Ditlow, whose group has been tracking recalls and defects since it was founded by Ralph Nader in 1970. NHTSA, added Ditlow, “should make them do recalls.”

In the case of the current recall, NHTSA investigators in 2007 looked into an accident the previous year in Wisconsin that left two women dead, and asked why a Cobalt’s air bags hadn’t deployed.

NHTSA citation

The agency report included GM’s technical-service bulletin from 2006 -- an amendment of a similar warning the maker sent in 2005 -- warning dealers of a situation in which drivers can “inadvertently turn off the ignition due to low ignition-key cylinder torque.”

Technical-service bulletins may fix 10 percent or fewer of affected vehicles, Ditlow said, citing his group’s research.

That is because the bulletins rely on customers coming into the dealer on their own, and often asking about a specific problem.

In the case of the GM ignition switch, in the nine years dealers were put on notice about the complaints and how to fix it, 474 repairs were done on the 1.4 million vehicles affected in the United States, according to a statement the company filed with NHTSA last month.

A safety recall done under the supervision of NHTSA and according to the Motor Vehicle Safety Act will usually ensure about 70 percent of affected vehicles are repaired, Ditlow said.

Early warnings

Safety advocates have pushed to make all technical-service bulletins published on the NHTSA website so owners and watchdog groups who suspect a defect can search for them. A surface transportation law passed in 2012 -- called Moving Ahead for Progress in the 21st Century -- included such a mandate that NHTSA hasn’t met.

The bulletins have provided warning signs well ahead of previous recalls, say auto-safety experts.

Years before Toyota Motor Corp. began one of the largest safety recalls of all time over unintended acceleration in 2010, a bulletin from Toyota to its dealers in 2002 described a throttle “surging” in Camrys, said Sean Kane, president of Safety Research and Strategies, a Rehoboth, Mass., company that works on auto-safety litigation.

Toyota disputed those claims in 2010, saying the word “surge” is industry jargon for slight speed adjustments of two miles per hour or less. The bulletin wasn’t secret because it had been published by private data-service providers and made available to NHTSA. Ed Lewis, a Toyota spokesman in Washington, declined to comment beyond the company’s previous statements.

Escape tale

Ford Motor Co.’s 2001-04 Ford Escape had a cruise-control cable that hung up and could cause the throttle to stick, said Ditlow. A recall in 2005 was followed by a technical-service bulletin that amended the way dealers were supposed to fix the defect.

After more crashes and fatalities, the center petitioned NHTSA to investigate why the original recall didn’t fix the defect. NHTSA opened a new investigation, and Ford recalled 485,000 of the SUVs in July 2012. Ford eventually agreed to pay a $17.35 million fine to settle allegations it failed to carry out a timely recall.

Technical-service bulletins are used to help dealers diagnose and repair customers’ vehicles, not to address safety issues, said Kelli Felker, a Ford spokeswoman. In the case of the Escape accelerator cable, the company “faced a complicated situation, compounded by a low report rate of issues and improper repairs.”

Of the settlement with NHTSA and the fine, the company agreed to avoid a lengthy dispute with the government, she said.

“We are absolutely committed to addressing potential vehicle issues and responding quickly for our customers,” Felker said.

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