Honda Should Face Criminal Investigation For Failing To Report Defect Complaints

| by Will Hagle

2014 was a disastrous year for auto safety, with more than 60 million vehicles recalled by multiple companies for various potentially fatal defects. General Motors accounted for nearly half of the total recalls throughout the year — calling for the return of 27 million vehicles with faulty ignition switches. That defect has been linked to 42 deaths and 58 injuries, but the real numbers are likely higher.

Defective airbags made by Japanese supplier Takata were linked to at least five deaths in 2014, leading to a global recall of more than 20 million vehicles. The U.S. National Highway Traffic Safety Administration responded with more than $126 million in civil penalty fines in 2014, more than the sum of all previous fines throughout the branch’s 43-year existence. 

Honda, the automotive company that happens to be Takata’s largest customer and a 1.2 percent owner in its shares, is the latest company to face a penalty issued by the U.S. government for failing to report complaints about the potentially deadly defects. The Obama administration issued Honda two $35 million fines, making the $70 million total the largest ever civil penalty filed against an automotive company (and also the legal limit as determined by Congress). The first penalty is intended to account for an 11-year span beginning in 2003 during which Honda neglected to report 1,729 death and injury complaints to the National Highway Traffic Safety Administration. The second penalty was issued in response to the company’s failure to report “customer satisfaction campaigns” and warranty claims during that same time frame. 

Although Honda is certainly deserving of the steep fine for attempting to bypass U.S. safety regulators, the federal government’s response is yet another example of the Obama administration’s approach of charging corporations for breaking the law rather than criminally prosecuting them. Even Honda North America Inc. executive vice president Rick Schostek seemed nonchalant in his statement regarding the fine. “We have resolved this matter and will move forward to build on the important actions Honda has already taken to address our past shortcomings in early warning reporting,” Schostek said. 

While Schostek may just be the messenger, someone or some group of people at Honda is responsible for failing to report the death and injury claims. The company’s official stance is that the failure stems from “errors related to data entry, computer coding, regulatory interpretation, and other errors in warranty and property damage claims reporting.” But the law that they violated was clearly established in 2000 under the Clinton-backed Transportation Recall Enhancement, Accountability and Documentation Act. That piece of legislation — a reaction to the Firestone tire scandal — criminalized any intentional attempt to cover up death and injury reports and established an “early warning” system. 

Yet U.S. Transportation Secretary Anthony Foxx seems comfortable that the fines will bring justice to the corruption that took place. “These fines reflect the tough stance we will take against those who violate the law and fail to do their part in the mission to keep Americans safe on the road,” Foxx said. A $70 million fine, however, is far from a “tough stance” against a company listed as #20 on Forbes “Most Valuable Brands” list that brings in billions of dollars in revenue each year. It's unclear if Honda's failure to report was, in fact, intentional, but that's something that should be investigated further. 

Foxx has also acknowledged that the case has been passed along to the Justice Department, but this administration has a poor track record in terms of criminally prosecuting corporations. The fact that no one was charged for any of the illicit actions that led to the 2008 financial crisis is evidence enough. The increasing amount of automobile recalls and defect-related deaths and injuries should be a sign that another crisis was allowed to occur due to a corporation acting with little to no regard for federal regulations. It’s not fair to say that Honda made a calculated effort to cover up its automotive defects without reporting to them government, but it’s not fair to let them off with a fine and no criminal investigation either.