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Monday, March 18, 2024
March 18, 2024

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Honda may face $35M fine for underreporting claims

The Columbian
Published:

WASHINGTON — Honda Motor said it failed to report more than 1,700 claims of injury or death involving its cars to U.S. regulators, a violation that would be one of the biggest in history and could lead to a fine of $35 million.

In a synopsis of an internal review filed with the National Highway Traffic Safety Administration, Honda on Monday blamed the underreporting on “inadvertent data entry or computer programming errors” that spanned 11 years. NHTSA hasn’t made the audit documents public yet as it continues an investigation.

“The audit identifies difficult facts where we did not meet our obligations,” Rick Schostek, executive vice president of Honda North America, told reporters on a conference call. There will be retraining and staffing changes, he said.

The number of injury-claim omissions exceeded the 1,144 reports Honda filed over the period and primarily came to light because investigations into Takata Corp. air-bag recalls cast doubt on the diligence of automakers to tell the government about potential product defects. In some cases, Honda didn’t share with NHTSA information from police reports.

NHTSA is reviewing Honda’s report as part of an investigation into the company’s failure to report air-bag 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.

Honda President Takanobu Ito said Tuesday the automaker didn’t share the same understanding as authorities of its obligations under U.S. law. He said local management made many mistakes filing early-warning reports, which NHTSA relies on to help spot potential defects.

Japan’s government is forming groups to oversee air-bag recalls tied to Takata and probe Honda’s U.S. reporting errors, Transport Minister Akihiro Ohta said Tokyo, where both the companies are based.

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

Automakers face fines of $7,000 per violation per day for not abiding by the Transportation Recall Enhancement, Accountability and Documentation Act, which requires 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 exceed the law’s $35 million maximum civil penalty.

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 SpA for failing to file information on alleged defects and three deaths.

Schostek told a Senate committee last week that Honda failed to comply with the Tread Act. In addition to coding errors, Honda used an overly narrow interpretation of “written notice,” he said Monday. Information from third parties, such as from police reports or private investigators hired by the company, wasn’t considered subject to the law, he said.

Honda has corrected the programming errors and will voluntarily include written and oral claims of injuries and death in future early-warning reports, he said.

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“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.”

Honda rose 1.4 percent to 3,741.50 yen at the close in Tokyo trading. The stock has declined 14 percent this year, compared with the 8.2 percent gain for Japan’s benchmark Topix index.

Takata has plunged about 52 percent amid an air bag crisis affecting almost 8 million cars in the U.S. and 2.5 million in Japan. Its safety devices are vulnerable to consistently humid conditions that may compromise the air-bag inflators, breaking up metal components and propelling shards at passengers when deploying.

Honda has linked two U.S. deaths in its cars to the air bags and is investigating two more. Honda is one of 10 automakers involved in the U.S. air-bag recalls.

In a letter to Takata Chairman and Chief Executive Officer Shigehisa Takada, Democratic Senators Jay Rockefeller of West Virginia and Bill Nelson of Florida said they were unsatisfied with the company’s responses during a Nov. 20 hearing.

Takata’s senior vice president of global quality assurance, Hiroshi Shimizu, wasn’t able to answer questions at the hearing about the chemical compounds used in the company’s air bags, whether employees raised concern about the safety of those compounds or questions about the current production and testing of replacement air bags, the senators said. They asked for detailed answers to 24 separate questions.

Takata also has a Dec. 1 deadline to respond to 36 questions from NHTSA as part of that agency’s investigation into the air-bag crisis.

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