Honda Fined $70 Million For Underreporting Auto Problems: Slap On The Wrist Or Serious Fine?

January 12, 2015

Back in November, we told you that Honda had failed to report more than 1,700 death and injury claims to U.S. regulators, and as a result, the Japanese automaker was facing fines of $35 million -- the maximum that the National Highway Traffic Safety Administration could impose.

NHTSA has now ruled on the matter, and Honda is going to shell out twice that sum: $70 million.

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How is that possible? As is often the case in legal matters, it all comes down to a technicality. Or in this case, two of them. NHTSA sums up the situation nicely:

"The first civil penalty is a result of Honda's failure to report 1,729 death and injury claims to NHTSA between 2003 and 2014. The second civil penalty is due to the manufacturer's failure to report certain warranty claims and claims under customer satisfaction campaigns throughout the same time period."

And that's not all. Honda has also been ordered to

  • Develop a comprehensive, written policy for complying with U.S. laws about early warning reports;
  • Conduct annual training sessions for employees tasked with recording and filing those reports;
  • Submit to two third-party audits to verify compliance with the above.

And of course, Honda has to provide NHTSA with extensive details about the 1,729 incidents it failed to report to see if the agency can spot any patterns of safety flaws (like in, say, its airbags).

OUR TAKE

Some have applauded Honda for owning up to its shortcomings. To many of us, that seems generous. If Honda hadn't been caught, would those 1,729 missing incident reports ever have come to light? Honda is simply agreeing to do what it was obligated to do in the first place. (Honda isn't the only automaker to find itself in this position, but it's the most recent.)

If anyone deserves applause, it's NHTSA for getting aggressive with penalties. In 2014, the agency levied over $125 million in fines against a range of automakers and dealers, including a $35 million fine for GM, a $17.35 million fine for Hyundai, and a $3.5 million fine for Ferrari.

The problem is, as the auto market continues heating up and competition becomes much stiffer, automakers may be tempted to cut corners. No, $70 million fines aren't a drop in anyone's bucket, but with annual company profits reaching into the billions, a few million could be a small price to pay for staying ahead. Pending legislation would increase the cap on NHTSA's penalties to $300 million -- let's hope that lawmakers give it a good, long look.

If you've got time this Monday, you can download an audit of Honda's reporting activities by clicking here.

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