Major automakers and auto dealers told a Senate panel Tuesday that they remain opposed to legislation that would prohibit rental car companies from renting or selling vehicles that are subject to a federal safety recall.
Representatives from the National Automobile Dealers Association and the Alliance of Automobile Manufacturers told the U.S. Senate Subcommittee on Consumer Protection, Product Safety, and Insurance that they oppose the latest bill -- which enjoys bipartisan support in the Senate -- requiring rental car companies to restrict all recalled vehicles from being rented before they are repaired.
The legislation, the Raechel and Jacqueline Houck Safe Rental Car Act of 2013, was named after two women, ages 24 and 20, who were killed in 2004 when a recalled Chrysler PT Cruiser they had rented from Enterprise caught fire and hit a truck. The rental car company had received a safety recall notice about 30 days before the accident.
Eventually, Enterprise admitted liability, but it wasn’t until May 2012 that the rental car company said it would stop renting unrepaired recalled vehicles.
Avis Budget Group, Hertz Global Holdings Inc., Dollar/Thrifty and the American Car Rental Association later agreed to support the legislation.
Mitch Bainwol, CEO of the Alliance of Automobile Manufacturers, said in written testimony that grounding defective vehicles is warranted and appropriate for recalls that direct owners to stop driving cars, “but a broad, federal mandate grounding all vehicles regardless of the nature of the recall triggers potential negative impacts that consumer notifications would not.”
Bainwol said the bill would “pit” businesses against consumers when a vehicle is recalled.
“To minimize out of service time, rental car companies will demand [and have demanded] ‘front of the line’ access to parts and service, which may force ordinary consumers -- moms and dads driving their family vehicles -- to the back of the line for recall repairs,” Bainwol said.
These businesses should not be allowed to “jump the line ahead of individuals that rely on their vehicles every day,” he said.
Bainwol also said the bill would increase costs by giving rental car companies the chance to seek “loss of use” damages from manufacturers.
“Once you federalize a voluntary agreement, you’ve introduced absolutely a ‘loss of use’ liability that by definition produces an economic incentive to treat Enterprise over other customers,” Bainwol said at today’s hearing.
Auto dealers and manufacturers agree that consumers shouldn’t be kept in the dark regarding unrepaired recalled vehicles by a rental car business.
“Fix the car, achieve the safety objective that we all share, and give notification … as we do to every other consumer that buys a car,” Bainwol said at the hearing. “The gap in the process right now is that when you rent the car there is no notification because the car companies receive the notification, not the rental company customer.”
Other opponents of the law agreed with Bainwol that it shouldn’t treat all major and minor recalls the same.
“We agree that recalls, which require immediate repairs to systems such as steering, fuel delivery, accelerator controls, or other crucial components, should not be rented to the public until the defect is remedied,” NADA President Peter Welch said in written testimony.
“On the other hand, many recalls are due to defects or non-compliance with technical federal motor vehicle standards which, depending on the circumstances, may not render a vehicle unsafe to operate until a recall fix has been completed.”
For instance, Welch cited a July 2012 recall that was issued for certain vehicles equipped with a front sunroof glass panel that was susceptible to breakage in extremely cold weather.
“While this recall could be of concern to a motorist in Minnesota in January, it is unlikely to cause harm to anyone in a warm climate,” Welch said.
Car companies and dealers argue that light vehicles should not be taken out of service for minor problems that do not pose much of a risk to safety. But safety advocates and regulators say that all recalls should be taken seriously enough to ground affected cars.
“We are interested to learn whether the National Highway Traffic Safety Administration would permit automakers to allow a dealer to take an interim measure to alter a vehicle in a manner that ‘eliminates’ a noticed safety risk,” Welch said. “In those recalls where no interim eliminating measure is specified by the manufacturer, the vehicle would have to be put out of service. Moreover, there is no provision in the bill to make a dealer whole for this loss of use.”
At the hearing today, NHTSA Administrator David Strickland said: “There is one standard for safety that the NHTSA follows and enforces, we deal with unreasonable risk to safety, we don’t gradate them… and the notion that there should be some gradation of unreasonable risk is ... frankly dangerous.
“You can’t say that these risks are small or large -- they are all potentially dangerous and could kill someone and they have to be addressed equally,” Strickland said.
Rosemary Shahan, president of Consumers for Auto Reliability and Safety, said all this bill “does is extend the existing system to rental car companies, including car dealers. That’s all it does. It doesn’t overhaul the existing safety recall system. Basically, what they’re [dealers and manufacturers] doing is complaining about the existing safety recall system … [and] this is not the bill to have that debate.”
Dealers also fear the law would force large rental companies to compete unfairly with franchised new-car dealers to secure parts and repairs subject to a recall.
“The friction point would revolve around the priority of access to recall parts,” Welch said. “The bill would create a tug-of-war between large rental companies who have the economic power to demand they receive recall parts first, and franchised new-car dealers who will try to keep recall parts in stock so that they can fix vehicles for members of the public who have received recall notices sent by automakers.”
The bill, pending since it was introduced last summer, was reintroduced earlier this month by Sens. Charles Schumer, D-N.Y.; Lisa Murkowski, R-Ala.; Barbara Boxer, D-Calif.; and Claire McCaskill, D-Mo.
The law would require vehicles under a safety recall to be grounded within 24 hours after the rental company receives a safety recall notice. Rental companies with more than 5,000 vehicles in their stock will have 48 hours to idle vehicles subject to a recall.
The legislation says vehicles may be not rented or sold until the vehicles are fixed. However, rental companies would be allowed to sell junked or recalled vehicles for parts or scrap.
The bill would also give NHTSA the authority to investigate and police how rental car companies handle safety recalls.
