Recall Developments

As we exit a record year for recalls and we enter the new year, one can ask what the vehicle manufacturers have done collectively to try and improve the national regulation of recalls and their performance of their recall obligations. The answer is not much so far.

Earlier this year, NHTSA and the auto makers tried making a splash by announcing a voluntary accord on recalls. They agreed with NHTSA to abide by four proactive safety principles.

  • “continue to emphasize and actively encourage processes that promote steady improvement in vehicle safety and quality within our respective organizations, across the industry, and with other stakeholders,”
  • “continue to incorporate advanced methods in data analytics into the analyses and examinations of Early Warning Reporting data to better identify potential risks earlier,”
  • “explore and employ new ways to increase safety recall participation rates by the public by working toward the aspirational goal of 100 percent participation,” and
  • “explore and employ ways to work collaboratively in order to mitigate those cyber threats that could present unreasonable safety risks.”

    Currency with high performance car

Overall, the accord signatories expressed their hope that “[b]y acknowledging the Principles above, automakers and NHTSA are committing to work together to develop a collaborative, data-driven, science-based process, consistent with the law, to advance these objects and thereby we are emphasizing our commitment to further enhancing the safety of roadway users.”

Groundbreaking, isn’t it? Not really.

What goals are concrete? None, since the goals are only aspirational. What penalties are imposed for non-compliance? None. What provisions were adopted to assure rapid remediation of defects? None. What was agreed to ensure manufacturers are fully responsible for costs resulting from remedying defects in the vehicles they provided? Nothing.

Most importantly for this publication, what does this change for a dealer? Nothing. A dealer must still be proactive on recall matters.

  • Ground new cars with an open recall.
  • On used vehicles, fix any open recalls you can. If it is not your brand, or if a fix or parts are not available, disclose that to the customer.

Do not assume that the disclosure of an open recall to a used vehicle customer protects your dealership from legal action by your franchisor if it imposes a stop sale on used cars of your brand with open recalls. Some manufacturers have advised dealers to stop the sale of some used vehicles with certain open recalls. The manufacturers threaten to shift the liability for damages for any accident allegedly caused by the unremedied defect to the dealer who sold the vehicle despite the stop sale pronouncement. While there are significant questions whether a manufacturer can shift that liability, a dealer that disregards the stop sale direction of a manufacturer runs the risk of legal action in the event of a lawsuit allegedly arising from a consumer injury claim because of the unremedied recall. A disclosure to the consumer will have no impact whatsoever on the litigation over rights between the manufacturer and dealer in that circumstance.

The dealership’s policy and practice in response to a stop sale directive on used vehicles by the franchisor is a business and legal decision each dealer must make on its own with advice from appropriate advisors. Do not assume that disclosure of open recall status to a buyer insulates the dealership from possible legal action by the franchisor if you sell a used vehicle with an open recall contrary to the franchisor’s stop sale directive.