By William K. Black
Kilkenny, Ireland: November 8, 2014
Clarence Ditlow and Ralph Nader wrote a column in the New York Times on October 29, 2014 that should be reread in light of the November 6, 2014 NYT article’s subsequent revelations about the Takata’s cover up of sometimes lethal defects in its airbags – a cover up that reportedly continued for over a decade.
“Congress gave the Department of Transportation authority to regulate the auto industry through the National Highway Traffic Safety Administration — including subpoena authority to find defects. But it used this authority so infrequently after the ’70s that its acting administrator, David J. Friedman, told Congress this year that he didn’t even know it had the power. The N.H.T.S.A. also failed to require companies to disclose death-claim records in civil lawsuits over the Toyota accelerations, G.M. ignition switches and Takata airbags.
In order to prevent the risk of death or serious injury, Congress empowered the agency to oblige auto companies to use alternate suppliers and independent repair shops to manufacture parts and make repairs to expedite a recall fix. Yet the N.H.T.S.A. has never used this authority — even though it took General Motors from February to October to get enough parts to dealers to repair all the recalled ignition switches.
Only after a lengthy delay was the agency prodded, in 2009, into opening an investigation into whether the first two Honda recalls of Takata airbags were adequate. Although the agency asked tough questions, it quickly closed the investigation after Takata hired a former senior N.H.T.S.A. official to represent the company. The agency’s attitude, in short, was: Don’t bother us with the facts.
More facts did come out when BMW, Honda, Nissan and Toyota recalled millions of Takata airbags from 2010 to 2013. Still, the N.H.T.S.A. opened no investigations and ordered no recalls on the airbags. Honda also failed to disclose death and injury claims on Takata airbags, as required by law. Even now — after reports of a third death in the United States associated with the airbags — the N.H.T.S.A. refuses to order a national recall, as Senators Richard Blumenthal of Connecticut and Edward Markey of Massachusetts have urged.”
The later NYT story about the cover up should be read in its entirety, but this passage explains the Gresham’s dynamic that led Takata to ship defective airbags. A Gresham’s dynamic (“bad ethics drives good ethics out of the markets”) is produced when markets provide a competitive advantage to those that cheat.
“And as automakers drove down costs using ‘just-in-time’ production — which require parts to arrive at assembly plants only as they are required — Takata was under pressure to meet intense delivery schedules, they said. Workers were often told that if a client like Honda or Toyota was required to stop production at their plants because of a late Takata shipment, the parts supplier would be fined tens of thousands of dollars for every minute of lost production.
‘That put a lot of pressure and incentive on us to never miss a shipment,’ said one of the former managers. ‘I’d argue, ‘what if my daughter bought the car with the bad airbag?’ But the plant would tell us, ‘Just ship it.’”
What President Obama Should Do
President Obama should take two actions that are substantively required by his oath of office and would have the collateral advantage of beginning to rescue his Presidency. First, replace the head of NHTSA with a regulator who will immediately demonstrate promptly and unambiguously that the agency is not captured by the automobile industry. Second, the Department of Justice (DOJ) should convene a grand jury to investigate and, where warranted, indict the Takata officials responsible for the defects and the cover up for a series of crimes including several counts of homicide. DOJ should actively insist state prosecutors who may be better able to bring such homicide prosecutions.
Obama’s failure to ensure that the laws of the land are faithfully executed against powerful corporations is one of his most obvious and inexcusable failures. Obama’s failures in this regard include refusing to appoint effective regulatory leaders and prosecutors. If he refuses to act even in the case of NHTSA and Takata, then we’ll know he’s learned nothing from his Party’s electoral debacle. What does Obama stand for when it comes to protecting the lives of Americans and prosecuting those who profit by putting our lives, and our children’s lives, at danger?
This should be an easy issue for Obama. Takata is not politically powerful in the United States and Obama owes nothing to the head of NHTSA, who has repeatedly failed and embarrassed the administration. If Obama cannot be roused to fix the glaring and easily fixed problems that beset his administration because he has chosen so many pathetically weak anti-regulatory leaders he should announce his (official) retirement. The actions I have suggested do not require Obama to get any congressional approvals. He can put a new acting head of NHTSA in place by requesting a resignation of the current head and DOJ can act without any congressional involvement.