August 1, 2014 at 1:00 am

Senate bill targets auto execs lax about recalls

Sen. Claire McCaskill, D-Mo., holds up a document as she questions General Motors CEO Mary Barra on Capitol Hill in Washington in April. (Pablo Martinez Monsivais / AP)

Washington— A U.S. senator who led hearings into General Motors Co.’s delayed recall linked to at least 13 deaths introduced legislation Friday that would allow for up to life in prison for auto executives who delay callbacks for defects that result in fatalities.

It’s the toughest measure yet proposed in the wake of GM’s recall crisis, and reflects the anger and frustration of some in Congress, which has held four hearings on the matter.

Sen. Claire McCaskill, D-Mo., who heads a Senate Commerce panel, introduced the Motor Vehicle and Highway Safety Enhancement Act, a six-year highway reauthorization that would make significant auto safety changes. The bill “gives federal prosecutors greater discretion to bring criminal prosecutions for auto safety violations and increases the possible penalties, including up to life in prison for violations that result in death,” her office said.

The bill would do away with the current $35 million maximum fine on automakers for delaying recalls, and would hike the maximum per-vehicle fine from $5,000 to $25,000. Congress doubled the fines to $35 million in 2012.

It also would double funding for the National Highway Traffic Safety Administration over six years. Sen. Jay Rockefeller, D-W.Va., also has proposed hiking funding for NHTSA, while a bill introduced by Sen. Richard Blumental, D-Conn., would subject auto executives to up to five years in prison for failing to report recalls.

The U.S. Attorney’s Office in New York, aided by a federal grand jury, is conducting a criminal investigation into GM’s delay in recalling 2.6 million Chevrolet Cobalts, Saturn Ions and other cars linked to at least 13 deaths and 54 crashes; the cars have defective ignition switches that can inadvertently turn off the engine and prevent air bags from inflating in a crash. The Securities and Exchange Commission and 45 state attorneys general also are investigating GM’s conduct.

McCaskill’s bill would allow for up to 15 years imprisonment in the event of serious injuries, and would allow for forfeiture of auto company assets in the event of a conviction.

“With millions of Americans behind the wheel every day, and more than 33,000 killed on our roads each year, we’ve got to do more to keep our cars and the roads we drive them on safe,” McCaskill said. “Painful recent examples at Toyota and GM have shown us we also must make it easier to hold accountable those who jeopardize consumers’ safety. For too long, auto safety resources have remained virtually stagnant while cars and the safety challenges they present have become more complex.”

Toyota Motor Corp. in March paid a $1.2 billion fine for its delayed recalls linked to at least four deaths after it was charged with wire fraud in New York but no executives were charged criminally. The Justice Department announced a deferred prosecution agreement with Toyota after it admitted it misled U.S. consumers by concealing and making deceptive statements about safety. At the end of three years of oversight, prosecutors will move dismiss the charge if Toyota abides by the agreement.

The proposed new fines would mean that GM — which paid a record $35 million fine in May for delaying its recall of the cars with defective ignition switches — could have faced up to $55 billion in fines for delaying its recall of the 2.2 million vehicles that were sold in the U.S. But a fine like that would likely bankrupt a company like GM, and NHTSA would have wide discretion.

The Obama administration has proposed hiking fines to up to $300 million for automakers delaying recalls, while an auto safety overhaul bill from U.S. Rep Henry Waxman, D-Calif., would hike fines to $200 million. Transportation Secretary Anthony Foxx has said fines now aren’t a deterrent and merely a “rounding error” for automakers.

McCaskill’s bill isn’t likely to be considered this year but may come up when Congress must again pass highway funding legislation when the latest stopgap measure expires in May.

Rep. Fred Upton, R-St. Joseph, has been considering introducing auto safety legislation. “We’re still waiting for some answers from NHTSA,” Upton said in an interview. “We’ve got no preconceived notion. Our objective is what can we do that would have prevented (the GM delayed recall)?”

Upton said he hasn’t made any decisions on when he plans to hold a hearing on NHTSA and is waiting for some written answers from GM, but doesn’t plan to call GM CEO Mary Barra before Congress again.

GM spokeswoman Heather Rosenker said, “Our work is well under way to place our customers’ safety at the center of all that we do. We will carefully review Senator McCaskill’s bill.”

The Alliance of Automobile Manufacturers didn’t immediately comment on the legislation.

NHTSA has about an $800 million annual budget; most of the funds go to states in highway grants. The bill would boost highway safety grants by 5 percent annually over six years.

NHTSA’s Office of Defects Investigation has about 50 employees and a $10 million budget.

In an interview this week, McCaskill said she was planning a hearing about NHTSA in September. The hearing will examine ways to modernize and better equip regulators “to ensure the tragedies and failures associated with the GM recall are not repeated,” her office said.

Her bill would also include a measure that would make law a deal reached between rental companies and auto safety advocates to ensure that recalled rental cars are fixed.

McCaskill has held two hearings examining GM’s response to the defective ignition switches that have been linked to at least 13 deaths after air bags failed to deploy.