Beware of knee-jerk reactions to GM's recalls
The U.S. auto industry needs to be prepared for greater scrutiny, more government regulation and stronger enforcement. Consumers are demanding greater safety and more reliability and are less forgiving when mistakes are made.
Lately, U.S. oversight agencies have put automakers and dealers on a shorter leash. In March, the Department of Justice fined Toyota Motor Corp. $1.2 billion for concealing safety problems.
The Consumer Financial Protection Bureau is investigating auto lending practices aggressively and pushing to end dealerships' ability to set their own rate of pay for arranging auto loans.
And after General Motors recalled some older vehicles for faulty ignition switches linked to at least 13 deaths, the National Highway Traffic Safety Administration successfully pushed for other models with those switches to be recalled, too.
Last week, NHTSA began fining GM $7,000 a day until it satisfactorily answers questions from the agency about the defective switches.
Meanwhile, Congress likely will focus on reforms to U.S. laws and standards. There are calls for Congress to raise the maximum amount of civil penalties federal agencies can levy on automakers and to create a uniform federal standard on algorithms controlling how airbags deploy.
The first bill introduced would require automakers to make public the early-warning reports they file with NHTSA, and it would require the agency to disclose its inspection and investigative activities.
Drivers and their passengers deserve rules to protect them from death or injury in defective vehicles. The industry should not resist such rules, so long as they are applied fairly and sensibly, with genuine benefits for safety that justify the costs.
But rushing into legislative and regulatory changes doesn't make sense either. It's still unclear exactly why and how GM failed to recall the defective switches. It is also unclear why regulators did not act.
As the facts trickle in, Congress and the public will get a clearer picture of whether current law and regulations fell short. If they are found lacking, we will all have a better sense of potential fixes.
But for now, Congress and regulators must resist the temptation to do something -- anything -- to convince a concerned public that what GM did will not happen again.
It is better to wait for all the facts so that this year's solution does not become next year's problem.