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Carmakers Fight Air Bag Recall That May Cost $10 Billion

An airbag warning label is displayed on a sun visor of a Toyota Motor Corp. vehicle. (Tomohiro Ohsumi/Bloomberg News)

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Carmakers are lobbying against an extraordinary push by U.S. regulators to force a recall of as many as 52 million air bag inflators.

Companies like General Motors Co. and Ford Motor Co. said in letters to the National Highway Traffic Safety Administration released Dec. 20 that there’s no proof that the parts made by ARC Automotive Inc. are defective despite reports that some inflators have exploded in a crash, injuring or killing passengers. NHTSA is calling for a broad recall over ARC’s objections, a move that may cost carmakers up to $10 billion.

Despite the objection from ARC and multiple automakers, NHTSA continues to march ahead with the steps required for it to take unilateral action. The comment period ended Dec. 18 and the agency will make a final decision on whether the parts are defective as early as next year, according to a person familiar with its thinking. That would be the last step before a mandatory recall, although ARC could challenge the decision in court.

GM said in comments posted online by NHTSA it disagrees with the agency’s initial decision that the ARC air bags are defective, which it said “falls far short of the agency’s technical and procedural standards, especially in major defects enforcement cases.”

GM said it has already “voluntarily recalled over 1 million ARC air bag inflators.” The company said NHTSA’s recall could extend to “as much as 15% of the over 300 million registered motor vehicles in the United States,” and that the agency had failed to demonstrate that this “is legally required or would advance public safety.”

Ford also said “serious concerns” about the scope of the recall, which would impact more than 2 million vehicles the firm manufactured between 2005 and 2017, the Dearborn, Mich., company said: “Within those millions of Ford vehicles, there have been zero reported ruptures of ARC inflators in the field.”

ARC’s air bags are used in cars in made by GM, Ford, Stellantis NV, Tesla Inc., Volkswagen AG, Hyundai Motor Co., BMW, Kia Corp., Maserati, Mercedes-Benz Group AG, Porsche and Toyota Motor Corp.

It’s extremely unusual for regulators to force a recall since most manufacturers usually agree to fix defective parts. In this case, NHTSA is eager to avoid a repeat of the Takata air bags saga more than a decade ago. Those fixes took years to complete and wound up becoming the biggest auto recall in U.S. history.

GM attributed $1.1 billion in costs to Takata-related repairs in the fourth quarter of 2020, while Ford’s costs were $600 million in that period. Those estimates came out to be about $200 per repair, said Michael Brooks, executive director of the Washington-based Center for Auto Safety, which advocates for stringent auto regulation.

Billions to Fix

“I would guess that we’re looking at around $10 billion for replacement of 50 million air bags” with ARC inflators, Brooks said.

Knoxville, Tenn.-based ARC didn’t reply to requests for comment. The company has been cooperating with NHTSA’s investigation since 2015 and it said in its response posted online Dec. 20 that “strongly disagrees” with the need for a massive recall.

ARC said NHTSA was not basing its current position on objective technical or engineering conclusions despite “an eight-year investigation involving numerous vehicle manufacturers and suppliers; dozens of information requests,” meetings with suppliers, or field recovery and tests.

Rosemary Shahan, president of the Sacramento, Calif.-based Consumers for Auto Reliability and Safety group, said an aggressive stance against ARC’s parts is appropriate “because it appears clear they are defective and pose an unreasonable risk to safety — the legal standard for triggering a safety recall.”

The agency said in May it had identified at least seven cases of ruptured air bags that led to injuries, including two deaths, dating from 2009 to as recently as this past March. Regulators believe welding performed in the manufacturing of ARC inflators may have left debris inside the part. During a crash, gas produced by ignition is supposed to fill up the bag. But when the channel is clogged, it can cause excess pressure to build up inside the inflator and potentially spray metal fragments.

Brooks expects the agency to force a recall unless there’s a negotiation or settlement in the next few weeks.

NHTSA is often criticized by consumer safety groups as being too cozy with auto companies and moving too slowly to regulate them before faulty parts cause fatalities, especially when companies offer to fix problems with over-the-air software updates instead of a recall.

NHTSA declined to comment on the prior criticisms and the ARC case.

Takata Precedent

Mark Rosekind, who oversaw the Takata crisis as head of NHTSA during the Obama administration, said the current investigation looks like “déjà vu all over again.” More than 100 million defective air bag inflators made by the now-defunct Takata cost billions of dollars and forced that company into bankruptcy.

“Unless ARC can bring something new or different, the precedent is pretty straightforward,” Rosekind said.

NHTSA emphasized the parallels to Takata at a public hearing in Washington in October. Takata’s recall started in 2008, limited to air bags in about 4,000 Hondas. It was expanded at least 20 times over the next several years. Agency officials said they anticipate the number of defective ARC inflators will grow in a similar pattern.

Stephen Gold, vice president of product integrity for ARC Automotive, has dismissed the comparisons to Takata.

The “alleged defect” in ARC’s air bag inflators is “unlike the propellant issue in Takata” air bags because it doesn’t get worse with prolonged exposure to high heat and humidity, he said at the hearing.

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