Honda admits under-reporting serious U.S. accidents since 2003

Company cites data errors, 'overly narrow interpretation' of TREAD Act

UPDATED: 11/24/14 9:15 pm ET - adds background

WASHINGTON -- American Honda failed to tell U.S. safety regulators about more than 1,700 claims of deaths or injuries linked to possible safety defects in its vehicles since 2003, when the U.S. law requiring the reports took effect, the automaker said today.

The 1,729 incidents involve a wide variety of possible safety defects, including eight incidents linked to defective Takata airbag inflators.

The reporting errors were caused by a series of data entry and computer programming errors, plus an “overly narrow interpretation” of the Transportation Recall Enhancement, Accountability and Documentation Act, Honda said.

The TREAD Act, the 2000 legislation that overhauled auto recall procedures after the Ford-Firestone tire crisis, requires automakers to submit quarterly reports to the National Highway Traffic Safety Administration listing all known incidents of deaths or injuries that may be linked to safety defects in its vehicles.

Honda's violation is one of the biggest in history and could lead to a fine of $35 million.

NHTSA is reviewing Honda’s report as part of an investigation into the company’s failure to report airbag related deaths and injuries in a timely manner, said Kevin Vincent, the agency’s chief counsel. There’s no timetable for an agency decision, he said in a statement.

“We received Honda’s response to our Special Order and will immediately begin reviewing the documents as part of our ongoing investigation,” Vincent said.

Honda said eight of the 1,729 cases involved Takata airbag inflator ruptures and that NHTSA knew of those incidents.

“I think absolutely they are going to get a $35 million fine,” Joan Claybrook, a former NHTSA administrator who now advocates for consumer safety, told Bloomberg. “It’s quite shocking Honda would behave this way. They’ve put their company reputation at risk.”

Automakers face fines of $7,000 per violation per day for not abiding by the TREAD Act, which requires the companies to tell regulators about customer injuries, lawsuits, warranty claims and complaints. If Honda’s admitted lapses -- spanning from July 1, 2003, to June 30, 2014 -- average at least three days each, the automaker would actually exceed the law’s $35 million maximum civil penalty.

“It is certainly possible that Honda’s cooperation and proactive efforts, and agreement to institute certain changes, will mitigate the magnitude of this fine,” said Neil Steinkamp, a managing director at Stout Risius Ross who studies warranty and recall issues. “More importantly, this is likely to serve as a significant warning to other automakers.”

Ferrari fine

The largest fine NHTSA has levied for lack of compliance with its “early-warning reporting” system was a $3.5 million penalty last month against Ferrari S.p.A. for failing to file information on alleged defects and three deaths.

Honda's findings come from a third-party audit into its death and injury reporting practices that the company commissioned in September when it learned of possible shortcomings in how it reports such claims to regulators.

Honda disclosed the audit last month after it was accused by the Center for Auto Safety, a watchdog group, of failing to report at least two incidents of death or injury linked to ruptures of Takata airbag inflators.

“The audit identifies difficult facts about where we did not meet our obligations. At Honda we acknowledge this problem as our management responsibility,” Rick Schostek, executive vice president of Honda North America, said in a conference call with reporters.

Honda gave the audit findings to NHTSA today as part of its response to a special order from the agency into Honda’s compliance with death and injury reporting rules of the TREAD Act.

Among the more than 1,700 unreported incidents were eight involving ruptured Takata airbag inflators, including seven reported injuries and one death linked to the part.

However, NHTSA knew about the eight ruptures from its own records or from notices provided by Honda, Schostek said. He said that NHTSA has not had a chance to review Honda’s findings, as they were provided to the agency today.

Suspect inflators

The suspect Takata inflators, which may explode in a crash and spray occupants with shrapnellike shards of metal, have been linked to five deaths globally and dozens of injuries and prompted more than 8 million vehicles to be recalled since 2013, the majority of them Honda vehicles.

The defect is the focus of an ongoing NHTSA probe that is separate from the response Honda provided the agency today. NHTSA also issued special orders directing Honda and Takata to provide documents about the defect as part of that probe. Those responses are due later this month.

Honda says it has started to fix its death and injury reporting shortcomings. It has already fixed computer coding problems that led to the reporting failures, and will now include both written and oral claims of death and injuries in its quarterly reports to regulators, also known as Early Warning Reports, among other changes.

The company says it will also make organizational and staff changes in the departments that handle Early Warning Reports.

Bloomberg contributed to this report.

You can reach Ryan Beene at autonews@crain.com

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