AutoNation retreats on used-car recall policy

AutoNation Inc.'s pledge not to sell vehicles -- new or used -- with an open recall lasted only about 16 months.

The country's largest new-vehicle retailer resumed selling used vehicles with open recalls on Monday, Nov. 28, after AutoNation CEO Mike Jackson concluded that Donald Trump's victory in the presidential election meant the end for legislative efforts to require used vehicles subject to recall to be repaired before they are sold. Federal law prohibits retailing new vehicles with open recalls.

"If parts are available, we repair them," Jackson told Automotive News. "If the parts are not available, we'll either auction or retail it. In both cases, we use full disclosure if we retail or auction it without having made a repair. It's been a very difficult journey, but with the Trump administration there's no way that that issue is going to be addressed from a regulatory point of view."

AutoNation's decision is a striking reversal of a pledge it extensively touted. Jackson in effect is throwing up his hands on a policy he had hoped would bring widespread change to the industry.

In September 2015, AutoNation announced that six weeks earlier it had stopped selling any vehicle at retail or wholesale with an open recall. The company talked up the pledge widely, even including it in advertising messages. Jackson said then that any sale of an unrepaired vehicle "is not a responsible solution. You're just kicking the can to somebody else."

He hoped other major auto retailers would follow his group's lead.

But they did not, and the Takata airbag crisis worsened. By the end of 2015, AutoNation had reversed one key element of its policy and allowed some recalled vehicles to go to wholesale auction if the lack of replacement parts meant those vehicles would be grounded for six months or more.

Those auctioned vehicles included prominent window stickers declaring that they had an open recall.

Though at odds with the National Automobile Dealers Association on the issue, AutoNation executives were still holding out hope for industrywide change leading up to the election. If Hillary Clinton had won the election, there was a "very good chance" that legislation blocking the sale of used vehicles with open recalls would have passed during the lame-duck session, said Jackson. Jackson supported Clinton in the election.

After the election, AutoNation assessed the Takata airbag recall. Parts are still largely "nowhere in sight," Jackson said. AutoNation had 6,000 vehicles on sales hold in November, the overwhelming majority because of the Takata recall.

Holding them for repair has been costly for the company, and AutoNation will be able to erase much of that expense with its decision to again retail the vehicles.

Other factors in AutoNation's decision to reverse its policy include the company's realization of what happens to the open-recall vehicles that it sends to auction with disclosure. "The disclosure was immediately removed in most cases, so what have you really got?" Jackson said.

At least the retail buyers of those vehicles would be certain to learn of the open recall if AutoNation sold the vehicles itself, and then the consumer could make an informed choice, he said.

The Takata recall is far from over, Jackson said. Repairing the affected cars will continue into 2018.

"The scale of the issue became astronomical," Jackson said. "If things were ever going to change, Takata would be the rallying cry to say we can't go on like this anymore."

Jackson called AutoNation's no-sale policy a good-faith effort but ultimately a learning experience.

"I'm not big enough to change how the recall system works. I try. Valiant effort," he said. "Conclusion: It is the way it is. Learnings: We still identify repairs or disclose. We're at a better place than we were when we started, but it's not everything we hoped it would be."