Auto Safety: NHTSA Has Options to Improve the Safety Defect Recall Process
Published: 2011-06-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2010, auto manufacturers recalled more vehicles than any other year, according to the National Highway Traffic Safety Administration (NHTSA), the federal oversight authority for vehicle recalls. However, many recalled vehicles are never fixed, posing a risk to vehicle operators, other drivers, and pedestrians. After the recent recalls of Toyota vehicles, Congress raised questions about the auto safety defect recall process, including the sufficiency of NHTSA's oversight authorities and whether vehicle owners are being effectively motivated to comply with recalls. In response, GAO reviewed laws and documents and interviewed NHTSA and stakeholders about the (1) extent of NHTSA's role in the recall process, and how its authorities compare to selected federal and foreign agencies that oversee recalls; (2) benefits and challenges of the recall process for NHTSA and manufacturers; and (3) options for improving the recall process. GAO also conducted focus groups with vehicle owners to better understand their perspectives.
section_title: What GAO Found
paragraphs: NHTSA monitors manufacturers' recall campaigns and completion rates (the number of defective vehicles that are fixed) and provides information and guidance to the public. NHTSA is responsible for reviewing the planning and implementation of recall campaigns to ensure compliance with legal requirements. To this end, the agency is responsible for reviewing, among other things, the manufacturer's description of vehicles affected by a safety defect, actions the manufacturer plans to take to remedy those vehicles through a recall, and notification letters the manufacturer plans to send to the vehicles' owners. NHTSA also monitors the effectiveness of manufacturers' recall campaigns, based in large part on the data manufacturers are required to submit on completion rates. In addition, the agency provides information and guidance to the public on recalls, primarily through its Web site. NHTSA generally has similar authorities to those of selected federal and foreign agencies GAO reviewed that oversee recalls--the Consumer Product Safety Commission, the Food and Drug Administration, the U.S. Department of Agriculture, and agencies in Canada, Germany, Japan and the United Kingdom--although some differences exist in how they can implement their authorities. Auto industry stakeholders are generally satisfied with the recall process, but several challenges may affect recall completion rates, and thus, the number of defective vehicles that are removed from the road. Manufacturers cited NHTSA's role in the process as a key benefit, reporting clear requirements and open communication. Although franchised dealerships had some concerns related to manufacturers' communication and availability of repair parts, they were also generally satisfied with how manufacturers reimbursed them. Nevertheless, NHTSA faces challenges that may affect recall completion rates; for example, focus group participants reported that 1) they preferred notification letters with certain elements and may be more likely to comply if the letters included the vehicle identification number (VIN) and clarified the severity of the defect and 2) they were unfamiliar with NHTSA's primary means of communicating defect information to the public--its Web site. Furthermore, according to GAO's review, although recall completion rates vary considerably by certain factors, NHTSA has not consistently used the data it collects to identify which factors make some recalls more successful than others. Finally, NHTSA does not have authority to notify potential used car buyers of a defect. Based on these challenges, NHTSA has the following and other options for improving the recall process and, more importantly, recall completion rates. First, NHTSA could modify the way manufacturers must present information in safety defect notification letters and publicize information resources, like NHTSA's Web site, so that vehicle owners are better motivated and informed. Second, NHTSA may be able to use manufacturers' data to identify what factors make some recalls more or less successful than others to better target monitoring of recall campaigns and identify best practices. Finally, expanding NHTSA's recall authorities may help identify more defective vehicles and improve recall completion rates.
section_title: What GAO Recommends
paragraphs: GAO recommends that NHTSA (1) modify requirements for notification letters; (2) enhance and publicize its Web site (3) better use manufacturers' data; and (4) seek legislative authority to notify potential used car buyers of recalls. NHTSA agreed to consider GAO's recommendations.

section_title: Letter
paragraphs: From 2000 to 2009, manufacturers of motor vehicles and vehicle  equipment conducted almost 6,300 recalls to address safety issues ranging  from malfunctioning airbags to defective child safety seats. The vast  majority of products affected by these recalls were vehicles, such as cars,  sport utility vehicles, and pickup trucks. In 2010, a record 14.9 million  vehicles were recalled by manufacturers, according to the National  Highway Traffic Safety Administration (NHTSA), the federal agency that  oversees vehicle recalls. However, owners of vehicles subject to a recall  do not always get them fixed, posing a risk to owners, as well as to vehicle  passengers, other drivers, and pedestrians. According to NHTSA, on  average only about 70 percent of vehicles subject to a recall are fixed  within the 18-month period during which manufacturers provide recall  completion data to the agency. After the highly publicized recalls  regarding the sudden unintended acceleration of Toyota vehicles in 2009  and 2010, Congress expressed concerns about the auto recall process,  including whether NHTSA has the authorities it needs and whether vehicle  owners are being effectively motivated to get their vehicles remedied.
Congress has also expressed concern about federal oversight of recall  processes for other products. For example, in 2008, the Consumer Product  Safety Improvement Act was enacted, which gave the Consumer Product  Safety Commission (CPSC) enhanced authorities regarding safety  standards and recalls. Similarly, the Food and Drug Administration (FDA)  Food Safety Modernization Act was signed into law in January 2011 to  give FDA enhanced recall authority, allowing it to mandate a manufacturer   to recall an unsafe food product. In addition, Congress has raised  questions regarding how NHTSA’s authorities to regulate motor vehicle  safety compare with other countries, such as Canada and Japan.
In this context, this report addresses the following questions: (1) What is  the extent of NHTSA’s role in the auto safety defect recall process, and  how do its authorities compare with those of other selected federal and  foreign agencies with safety recall authority? (2) What are the benefits and  challenges of the auto safety defect recall process for NHTSA and the  manufacturers? (3) What options exist for improving NHTSA’s auto safety  defect recall process?
To describe the extent of NHTSA’s role and authorities in the auto safety  defect recall process, we reviewed applicable legislation, including the  National Traffic and Motor Vehicle Safety Act, as amended, relevant  federal regulations, and NHTSA’s guidance on the safety defect recall  process. In addition, we conducted interviews with NHTSA officials about  the agency’s role in the defect recall process and its recall authority. To  compare NHTSA’s authorities with those of other federal agencies, we  reviewed legislation and interviewed officials at selected federal agencies  that, similar to NHTSA, have product safety oversight responsibilities,  including CPSC, FDA, and the U.S. Department of Agriculture (USDA), to  determine what differences and similarities exist between the agencies’  recall authorities and those of NHTSA. To compare NHTSA’s authorities  with selected foreign agencies with safety recall authority, we interviewed  officials from agencies in four countries (Canada, Germany, Japan, and the  United Kingdom) about their authorities and involvement in the auto  safety recall processes of their countries. We selected these agencies  based on recommendations from NHTSA and industry officials with whom  we spoke and to reflect a range of safety recall processes and authorities.  We also interviewed auto industry organizations in the selected countries  to get their perspectives on the authorities of the selected foreign  agencies, as well as officials from the European Union (EU) to understand  how EU legislation may impact two countries in our review, Germany and  the United Kingdom (UK).
To examine the benefits and challenges in the auto safety defect recall  process, as well as potential options for improving the process, we  conducted and analyzed interviews with stakeholders in the auto safety  defect recall process, including NHTSA, auto manufacturers, third-party  data providers, franchised and used-car dealerships, rental car companies,  consumer groups, and industry organizations. In addition, to determine  vehicle owners’ awareness of recalls, their understanding of defect  notification letters, and their willingness to comply with defect notices, we  convened 10 focus groups in five cities—Chicago; Dallas; Richmond,  Virginia; Salina, Kansas; and Seattle, Washington. These cities were  selected to provide geographic variation and both rural and urban  environments. We also analyzed NHTSA data to determine the average  completion rate—that is, the number of defective vehicles that are  remedied—of auto safety defect recalls from 2000 through 2008 (the last  year for which a full six quarters of recall completion rate data is  available) and to examine what variations exist across completion rates.  See appendix I for more information about our scope and methodology.
We conducted this performance audit from June 2010 through June 2011 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
subsections: section_title: Background
paragraphs: The National Traffic and Motor Vehicle Safety Act of 1966 established  safety standards for motor vehicles. NHTSA was established by the  Highway Safety Act of 1970 to carry out safety activities, which range from  setting vehicle safety standards to working with states and local  communities to reduce drunken driving. In 2000, in response to the highly  publicized recall of Firestone tires due to serious safety defects, Members  of Congress expressed concern about NHTSA’s oversight of vehicle and  equipment safety. Subsequently, the Transportation Recall Enhancement,  Accountability and Documentation—TREAD—Act was signed into law,  which enhanced NHTSA’s authority to ensure that manufacturers provide  the agency with early notification of potential safety defects in motor  vehicles and equipment and that manufacturers quickly take actions to  remedy them.
NHTSA has two primary missions in its oversight of vehicle safety:    Oversight of auto and equipment manufacturers’ compliance with safety  standards established by the agency. NHTSA’s Office of Vehicle Safety  Compliance (OVSC) is responsible for ensuring that new vehicles or  equipment comply with Federal Motor Vehicle Safety Standards. By law,  manufacturers must provide certification indicating that their vehicles and  equipment meet these standards, a process also known as self- certification. OVSC also tests and inspects new vehicles to ensure that  they meet these standards. Auto manufacturers are also expected to  periodically inspect and test vehicles throughout their production period  to ensure they comply with safety standards.
Oversight of the identification and remedy of vehicle and equipment  defects that could pose an unreasonable safety risk—safety defects. The  agency’s Office of Defects Investigation (ODI) conducts investigations and  identifies possible safety defects in vehicles or equipment that create an  unreasonable safety risk and oversees manufacturer actions to remedy  them. ODI identifies and reviews a variety of information for trends that  could indicate the presence of a safety defect in a motor vehicle or piece  of equipment. These information sources include consumer complaints  submitted to the agency and information on fatalities, injuries, property  damage claims, and consumer complaints collected by manufacturer and  provided to the agency. Auto manufacturers also conduct their own  investigations of potential safety defects in their motor vehicles.
As part of its mission, NHTSA is responsible for overseeing two types of  recalls. Compliance recalls are initiated when vehicles or vehicle  equipment is determined to be noncompliant with applicable federal  vehicle safety standards, as identified by NHTSA or a manufacturer.  Compliance recalls have ranged from design issues with vehicle safety  belts to improper placement of warning labels for airbags. From 2000  through 2009, compliance recalls accounted for about 18 percent of  vehicle recalls. Safety defect recalls, which accounted for the remaining,  majority share of vehicle recalls, are initiated when a defect in a vehicle or  vehicle equipment creates an unreasonable safety risk, as determined by  NHTSA or a manufacturer. For example, the potential for a steering  column to break and suddenly cause partial or complete loss of vehicle  control could represent a safety defect and warrant a safety defect recall.
Although NHTSA also oversees compliance recalls, this report focuses on  NHTSA’s oversight of safety defect recalls, which as previously discussed  represent the majority of recalls overseen by the agency and are initiated  when a defect poses an unreasonable risk to safety. In addition, we have  limited our scope to safety defect recalls that have been initiated for  passenger vehicles, including cars, pickup trucks, sport utility vehicles,  large passenger vans, and minivans (NHTSA also oversees recalls for other  vehicles, such as motorcycles, recreational vehicles, and commercial  trucks). Finally, because the U.S. Department of Transportation Office of  Inspector General is examining NHTSA’s activities related to the  investigation of potential safety defects in motor vehicles and equipment,  we did not include safety defect investigations in our review.
The auto safety defect recall process for motor vehicles is a concerted  effort involving five stakeholders:    auto manufacturers—businesses that manufacturer, assemble, or import    NHTSA—the federal agency that oversees vehicle safety;  franchised dealerships—businesses that sell or lease an auto  manufacturer’s new vehicles;  third-party data providers—businesses that collect and interpret data for  clients and assist manufacturers in identifying postal addresses of vehicle  owners with a vehicle affected by a recall; and    vehicle owners—purchasers or lessors of a vehicle.
As depicted in figure 1, these stakeholders, in particular NHTSA and auto  manufacturers, engage in a number of steps during the safety defect recall  process.
According to NHTSA officials, since 2000 all safety defect recalls for  passenger vehicles have been conducted voluntarily by manufacturers.  Although some of these recalls were conducted based on NHTSA’s  investigations of safety defects—known as influenced recalls—most were  initiated by manufacturers without influence from agency investigations— known as voluntary, or “uninfluenced,” recalls (see fig. 2). For example, in  April 2011, a manufacturer expanded the scope of vehicles included in one  of the company’s safety defect recalls based, in part, on NHTSA’s own  investigation of the defect. Moreover, NHTSA also has the authority to  order a vehicle manufacturer to conduct a recall. According to NHTSA  officials, the agency has not ordered any vehicle recalls since prior to  2000, and since the agency was established, it has ordered seven recalls for  motor vehicles or equipment.
section_title: NHTSA Conducts Oversight of Safety Defect Recalls, and Other Selected Agencies Generally Share Similar Authorities
paragraphs: As part of its oversight role, NHTSA is responsible for reviewing auto  manufacturers’ planning and implementation of safety defect recalls to  ensure compliance with legal requirements. To this end, the agency is  responsible for reviewing, among other things, the manufacturer’s  description of vehicles affected by a safety defect, actions the  manufacturer plans take to remedy those vehicles through a recall, and  notification letters the manufacturer plans to send to owners of affected  vehicles. NHTSA also monitors the effectiveness of recall campaigns being  conducted by manufacturers based, in large part, on a manufacturer’s  quarterly reports showing the completion rate of a campaign. In addition,  the agency provides information and guidance to the public on recalls,  primarily through its Web site, www.safercar.gov. NHTSA and most other  selected federal agencies we reviewed generally share similar authorities  in recall processes, but the agencies’ authorities differ with regard to  penalizing manufacturers and ordering recalls. For example, in contrast to  NHTSA’s recall authority over motor vehicles, FDA’s recall authority over  some products includes a mandatory requirement for manufacturers to  recall a product regardless of any challenges a manufacturer may have to  the order. Foreign agencies we reviewed also generally had similar  authorities to NHTSA, with a few exceptions. For example, unlike NHTSA,  officials from the Federal Motor Transport Authority—Germany’s agency  that oversees vehicle safety—told us they can revoke the registration of  vehicles with an outstanding safety recall.
subsections: section_title: NHTSA Oversees the Planning and Implementation of Safety Defect Recalls
paragraphs: First, NHTSA is responsible for oversight of planning efforts by auto  manufacturers for safety defect recalls. Specifically, NHTSA reviews an  auto manufacturer’s required notification to the agency that describes a  safety defect and the manufacturer’s plan to remedy it through a recall.  The agency reviews several pieces of information that manufacturers must  include in these notifications, including the following:    a description of vehicles containing the safety defect, including the make,  model year, and date the vehicles were manufactured;  the number of vehicles potentially containing the defect and an estimate of  what percentage actually have the defect;   a chronology of principal events leading up to the manufacturer’s decision  that there is a safety defect in the vehicle; and   a description of the manufacturer’s plan to remedy the defect through a  recall campaign.
As stated earlier, though all recalls since 2000 have been either voluntary  recalls or influenced recalls, NHTSA can also order a manufacturer to  conduct a recall. Before NHTSA can order a recall, the agency must  provide the manufacturer with an opportunity to respond to NHTSA’s  initial decision. Prior to completion of the administrative process, the  manufacturer may conduct the recall voluntarily. According to NHTSA  officials, the agency tries to convince manufacturers to conduct influenced  recalls based on NHTSA’s investigations rather attempt to prove the case  for an ordered recall through court, which the officials said can take a long  time and require substantial agency resources. NHTSA officials also told  us that manufacturers generally conduct a recall voluntarily if the agency  informs the manufacturer that it has decided that one is necessary  because, according to the officials, a manufacturer does not want to risk  receiving negative publicity in an argument against the agency’s decision.  Similarly, some manufacturers told us that if NHTSA decides that a recall  to remedy a safety defect is necessary, it is usually in a manufacturer’s  best interest to conduct one even if the manufacturer believes it is not  necessary due to the risk of negative publicity and consumer opinion.
Second, NHTSA oversees a manufacturer’s implementation of a safety  defect recall. Among other things, this includes reviewing the  manufacturer’s letter to vehicle owners notifying them of the safety defect  and the manufacturer’s recall to remedy it. In particular, NHTSA reviews  each manufacturer’s draft recall notification letter and envelope to ensure  that it includes several pieces of required information about the safety  defect, meets the legal requirement to mail the initial notification via first  class postage, and adequately motivates owners to make their vehicles  available for remedy work. Among other information, a recall notification  letter must include the following items:    an opening statement that states “This notice was sent to you in  accordance with the requirements of the National Traffic and Motor  Vehicle Safety Act”;   a clear description of the safety defect and the malfunction that may result    an evaluation of the risk to vehicle safety related to the defect;    a description of what a vehicle owner can do to get the defect remedied;    a statement of precautions, if any, a vehicle owner should take to reduce  the risk that the malfunction will occur before the defect is remedied;   a statement indicating that remedy work is free of any cost to the vehicle  owners, unless the manufacturer is exempt from providing it free of cost;  and   on the envelope of the notification letter, inclusion of the words  “SAFETY,” “RECALL,” and “NOTICE” in all capital letters and in a font size  that is larger than that used in the address information.
NHTSA is also responsible for receiving manufacturer notifications to  franchised dealers that perform recall remedy work, which must include  information about the safety defect involved in the recall, how to remedy  it, and an estimate of when they can expect to be able to conduct the  remedy work. According to NHTSA officials, the agency may review these  notifications and provide feedback to manufacturers.
section_title: NHTSA Monitors Recall Campaign Completion Rates
paragraphs: NHTSA evaluates the effectiveness of safety defect recalls based on  several considerations, including a recall campaign’s completion rate,  which, is calculated by dividing the total population of affected vehicles by  the number of vehicles that have been remedied. To determine the  completion rate for a recall campaign, NHTSA uses data submitted by the  manufacturers. Specifically, manufacturers are required to submit  completion rate data to NHTSA through reports to the agency every  quarter for six consecutive quarters (18 months) after the start of a recall  campaign. These reports must show the total number of vehicles  recalled, the number of vehicles inspected and remedied, and the number  of vehicles determined by the manufacturer to be unreachable for  inspection due to reasons such as theft, scrapping, or export to foreign  countries. NHTSA assesses these reports against agency guidelines, or  thresholds (see table 1) and considers other factors such as the severity of  the defect and the amount of time since and the effectiveness of the  manufacturer’s last notification to vehicle owners. According to NHTSA,  the agency generally uses an internal guideline on completion rates to  assess whether renotification is warranted. When the completion rate is  considered low, the agency may require a follow-up notification. NHTSA  officials could not tell us how frequently they required follow-up  notifications.
According to NHTSA officials we spoke with, after the 18-month period in  which these quarterly reports are generally required, the agency can  require the manufacturer to continue sending reports on the completion  rate. Several manufacturers also told us that they often continue to  monitor recall campaigns and send follow-up notifications beyond the first  18 months of a recall campaign whether NHTSA requires it or not.
While the factors just described provide some guidance to the agency  regarding a campaign’s effectiveness, agency officials told us that a variety  of factors can also impact a campaign and are taken into account during  the agency’s review of recall campaigns. For example, agency officials told  us that vehicle owners’ perception of the severity of a safety defect may  impact the completion rate of a campaign. In addition, the officials said  that factors such as the age and type of vehicles in a campaign could  impact completion. NHTSA officials also told us that the completion rate  of recalls with older vehicles tends to be lower because owners of older  vehicles are less likely to make their vehicles available for recall remedy  work. Though factors such as these can impact the completion rate of a  recall campaign, agency officials told us that they do not analyze trends in  completion rate data of recall campaigns.
section_title: NHTSA Provides Guidance and Information to Public
paragraphs: NHTSA also provides the public with guidance and information on safety  recalls, primarily through its Web site, www.safercar.gov. On the Web site,  NHTSA maintains a database in which the public can search for safety  recalls by entering year, make, and model of a vehicle. The agency’s Web  site also provides basic guidance on what to do in the event of a safety  recall. For example, the Web site offers guidance to vehicle owners about  what to do if they do not receive a recall notification letter but believe that  their vehicle may be affected by a recall. In addition, NHTSA officials told  us they occasionally issue press releases and consumer advisories on  safety recalls; in one case, they issued consumer advisories for a recall on  faulty cruise control systems in one manufacturer’s vehicles that could  cause vehicles to catch fire.
section_title: NHTSA and Other Federal and Foreign Agencies Share Similar Recall Authorities, but a Few Differences Exist
paragraphs: As table 2 shows, NHTSA and most other selected federal agencies we  reviewed are generally authorized to order a recall, but differences exist in  their ability to implement this authority, which we will describe in this  section.
All of the agencies can impose penalties for some or all of the selected  products; however, there is some variation in the penalties. For example,  NHTSA can currently impose fines on manufacturers up to $17.350 million  for violations of requirements relating to the recall process for safety  defects. In 2010, the agency twice imposed the maximum penalty of  $16.375 million each from Toyota for failing to timely notify the agency of  defects involving accelerator pedals. CPSC can impose a similar maximum  fine of $15 million, while FDA can impose maximum fines that range from  $500,000 for food products to $1 million for medical devices; however,  the agency does not have authority to impose monetary fines for violations  related to the recall process for human drugs. USDA can impose a  maximum fine of $7,500 for egg products; USDA officials told us they can  also impose administrative penalties. For example, the officials told us  that USDA can withhold the “USDA Inspected and Passed” mark of  inspection, effectively shutting down a manufacturer’s operations. Once a  product is in commerce, USDA may detain the product and petition a U.S.  court to seize it.
In addition, we found that while three of the four agencies have the  authority to order a recall, only one—FDA—has mandatory recall  authority, which sets a mandatory requirement for a manufacturer to  conduct a recall based on an agency’s determination of a safety defect  regardless of any challenge the manufacturer may have to the recall order.  Specifically, though NHTSA and CPSC have authority to order  manufacturers of selected products that they regulate to conduct a recall,  manufacturers can challenge either agency’s order in court and during this  challenge can refrain from conducting a recall campaign and continue to  sell the potentially unsafe product pending the outcome of the challenge.  Unlike NHTSA and CPSC, FDA has mandatory recall authority, meaning  manufacturers whose products are subject to this authority face a  mandatory requirement to conduct a recall and refrain from distributing  their product to retailers, regardless of any challenge the manufacturer  may make to the order. In addition, CPSC’s authority applies to retailers of  products affected by a recall order, which includes a requirement for  retailers to refrain from selling the affected product. Moreover, CPSC has  authority to issue public health and safety findings in order to warn the  public about products that the agency determines pose a safety risk.  CPSC officials added that in some cases this authority has proven  sufficient in convincing manufacturers to conduct recalls voluntarily.  FDA’s mandatory recall authority applies to some, but not all, products  regulated by the agency and included in our review. Specifically, although  FDA has mandatory recall authority over food products and medical  devices, it does not have mandatory recall authority over human drugs.
USDA is the only agency we reviewed that does not have the authority to  order a manufacturer to conduct a recall, or require the manufacturer to  replace or refund the cost of an unsafe product. USDA officials told us,  however, that they do not consider this a challenge in addressing unsafe  products regulated by the agency because the agency has the authority to  detain products deemed unsafe by the agency for 20 days if a  manufacturer does not do so voluntarily. FDA and CPSC also have  authority to detain some of the products that they regulate.
NHTSA’s authorities in the auto safety recall process are also generally  similar to those of agencies with auto safety recall authority in Canada,  Germany, Japan, and the UK (see table 3), with some exceptions. For  example, officials from all of the agencies we reviewed told us their  agency can establish requirements for safety recall campaigns. Moreover,  officials from all but one of the selected foreign agencies we reviewed told  us manufacturers must notify them of safety defects. Similarly, officials  from all but one of the foreign agencies we spoke with told us they have  authority to impose penalties, such as fines, if manufacturers do not  comply with laws or regulations.
However, the authorities of the foreign agencies we spoke with differed to  some extent. For example, unlike NHTSA or the other foreign agencies,  Germany’s Federal Motor Transport Authority has the authority to revoke  the registration of a vehicle for owners who have not complied with an auto  safety recall notice. Specifically, the officials we spoke with from the  Federal Motor Transport Authority said that if the risk of the safety defect is  determined to pose a threat to persons other than the vehicle owner, then  they can revoke the registration on that vehicle until the recall remedy is  completed, unlike in the United States, where NHTSA has no such authority.  According to the officials, in 2010, Germany revoked owners’ registration  due to outstanding safety recalls more than 1,000 times, and in general the  agency regularly uses this authority. In addition, among the agencies we  reviewed, only Transport Canada, Canada’s agency that oversees auto  safety, does not have the authority to order a manufacturer to conduct a  recall. Officials from Transport Canada we spoke with added, however, that  the agency can prosecute a manufacturer on criminal charges if the  manufacturer does not notify vehicle owners after identifying a safety  defect. Moreover, officials from the Ministry of Land, Infrastructure,  Transport and Tourism (MLIT)—Japan’s agency that oversees auto safety— told us that while auto manufacturers are required to notify the agency  about safety recalls, they are not required to notify it about safety defects.
section_title: Auto Industry Stakeholders Are Generally Satisfied with the Recall Process for Safety Defects, but Several Challenges May Affect Recall Completion Rates
paragraphs: Although industry stakeholders were generally satisfied with the recall  process for safety defects, certain challenges may affect the completion  rate of recalls. For example, about half of the auto manufacturers we  spoke with told us that NHTSA’s regulatory requirements were clear in  conveying what was expected of them in the recall process. Likewise,  many manufacturers said NHTSA fostered open communication, allowing  for two-way interaction that aided in prompt resolution of problems when  they arose. Franchised dealerships were generally pleased with how  manufacturers reimbursed them during the recall process for safety  defects, although some expressed concerns, such as sometimes learning  about safety defect recalls at the same time as the public and not always  having the parts available for repair when recalls are announced. In  addition, we found five challenges that may affect the completion rate of  safety recalls:  identifying and notifying vehicle owners of auto safety defects,   motivating vehicle owners to comply with notification letters,    providing better information to vehicle owners and the public,    using existing data to improve completion rates of recall campaigns, and  lacking the authority to require manufacturers to notify used-car  dealerships of recalls and to require used-car dealerships to notify  potential buyers of the existing defect.
subsections: section_title: Manufacturers Reported Clear Requirements and Open Communication as Benefits of NHTSA’s Role in the Recall Process for Safety Defects
paragraphs: Manufacturers we spoke with were generally satisfied with the recall  process for safety defects and stated that NHTSA’s role in this process is a  key benefit. Many manufacturers reported that the process is working well  because the regulatory requirements are clear and, as a result, they know  exactly what is expected of them in the process and by when. For  example, some manufacturers stated that requirements for the auto safety  defect recall process were well-defined and, because of this, there is little  confusion about what manufacturers needed to do after a recall decision is  made. Some manufacturers also reported that a benefit of the safety defect  recall process is the open and cooperative communications between  NHTSA and the manufacturers. For example, some manufacturers pointed  out that they and NHTSA have established clear points of contact for  addressing issues during recall campaigns. These channels of  communication made it easier and less time consuming to resolve issues  when they arose. Likewise, manufacturers told us they were generally  pleased with how promptly NHTSA approved their defect notification  letters—sometimes within 1 to 2 days—which facilitates their ability to  implement recalls for safety defects in a timely manner.
Other benefits were cited, as well. Most manufacturers we spoke with  stated that the requirement to use first-class mail to notify vehicle owners  of safety defects was appropriate and effective because, for example,  postal mail is a recognizable form of communication to most vehicle  owners, allows uniform delivery of the same message to all affected  vehicle owners, and allows the manufacturer to track the receipt of  notification letters. Additionally, one manufacturer we spoke with noted  that the National Traffic and Motor Vehicle Safety Act had been around for  decades, and questions and concerns had already been litigated—resulting  in a well-understood law.
section_title: Franchised Dealerships Reported Reimbursement for Recall Remedy Work as a Benefit of the Recall Process for Safety Defects but Expressed a Few Concerns
paragraphs: Franchised dealerships we spoke with generally told us they were satisfied  with how manufacturers reimburse them for remedying vehicles with  safety defect recalls. Moreover, several franchised dealerships told us that  service work related to recalls is profitable for dealerships. One of these  dealerships added that this served as an incentive to the dealer to seek out  and repair used vehicles in their inventory that may have an outstanding  recall.
However, the franchised dealerships we interviewed also expressed a few  concerns. First, some dealerships told us that manufacturers do not notify  them as promptly as they would like about recalls; as a result, they learn  about some recalls at the same time as the general public through the  media. Consequently, the dealership may have inquiries from customers  about bringing their cars in for repair before the dealer knows about the  recall. Second, dealerships expressed concern that parts are not always  readily available when recalls are announced, which they said can be an  inconvenience to customers who come to the dealership expecting to  immediately have the remedy work completed. Two manufacturers told us  that the delay in supplying dealerships with parts has, in part, resulted  from many parts suppliers going bankrupt or out of business during the  recent economic crisis and that they are working to address the problem.
section_title: Five Key Challenges May Affect Recall Completion Rates
subsections: section_title: Identifying and Notifying Vehicle Owners of Auto Safety Defects
paragraphs: Some manufacturers told us that notifying vehicle owners about safety  defects can be difficult for a few reasons. For example, one manufacturer  said the process was challenging because not all vehicle owners keep their  address information up-to-date with state motor vehicle registration  offices. In addition, several other manufacturers told us that identifying  the current mailing addresses for older vehicles is especially difficult  because these vehicles often have multiple changes of ownership and,  thus, mailing addresses, which compounds the problem. NHTSA and  several manufacturers told us that the completion rates for recall  campaigns with older vehicles were generally lower than the rates for  campaigns with newer model vehicles, although NHTSA officials stated  they have not conducted any formal analyses to confirm this. Third-party  data providers that manufacturers use to collect owner information  confirmed the challenges associated with identifying current vehicle  owner addresses. For example, one of the third-party data providers we  spoke with stated that mailing addresses for owners of newer vehicles are  more current and become less reliable as vehicle ownership changes  hands. In addition, they highlighted several other challenges to obtaining  up-to-date information, including state privacy laws—some of which  require the signature of the vehicle owner before a state motor vehicle  agency can release contact information.
Focus group participants and some manufacturers we spoke with also  indicated that new or additional methods of communicating recall  information to consumers—in addition to the postal mail notifications  currently in use—could help increase recall completion rates. For  example, some focus group participants indicated that they would be more  likely to respond to defect notices if they received notice of the defect by  phone or through e-mail, in addition to the standard first-class mailing, and  some focus group participants recommended the use of multiple contact  methods.
section_title: Motivating Vehicle Owners to Comply with Notification Letters
paragraphs: Our focus groups with vehicle owners demonstrated that NHTSA and  manufacturers may face difficulties in motivating vehicle owners to  comply with recall notification letters. Although manufacturers are  responsible for drafting notification letters and notifying vehicle owners of  a defect, NHTSA is responsible for approving the letters’ contents. As  stated earlier, NHTSA is responsible for ensuring that the letters contain  certain items that (1) inform owners of defects in a clear and  understandable manner and (2) effectively motivate owners to have their  vehicles remedied. However, our focus group participants revealed that  though some of them would comply with a recall notice in any  circumstance, the willingness of others to comply depends on vehicle  owners’ perceptions of three primary factors:  the severity of the defect—how urgent vehicle owners perceive the recall  to be; the convenience of the defect remedy—the time projected to fix the  defect, as well as whether the dealership provides an alternate mode of  transportation during service; and the cost of the recall remedy—the perception of how much it will cost the  vehicle owner to have the defect remedied (by law, a recall remedy is free  of cost to vehicle owners who purchased the vehicle within 10 years of the  defect being identified and, according to NHTSA, is generally provided  free in all cases).
Moreover, while NHTSA has no ability to control many aspects of a recall  campaign, such as the severity of the defect, the agency can control how  these and other issues are presented in the defect notification letters,  which may affect whether vehicle owners are motivated to comply. Focus  group participants responded that they preferred letters that included  certain elements. As a result, including these elements in a defect letter  may positively affect whether and how quickly they respond to a recall.  The focus groups we convened reviewed three defect notification letters  from three separate manufacturers and indicated they would prefer the  following elements in a defect letter, which may lead to higher rates of  responding to a defect notice:    a clear explanation of the severity of the defect, including an explanation  that does not use jargon, which can be confusing. For example, instead of  using the acronym “ABS,” focus group participants would prefer the words  “anti-lock brake system.” the word “urgent” to indicate the seriousness of the defect.   a question-answer format because, as one participant described, it spells  out the issue, provides an immediate answer, and allows recipients to pick  and choose the parts that are most necessary to read.   an apology from the manufacturer.  the owner’s vehicle identification number (VIN) information. As one  participant explained, including a VIN in the body of the defect  notification letter clarifies whether this recall applies to the owner’s  vehicle. readable font size.   an indication of whether there is any cost involved with the recall remedy.
In addition, we asked focus group participants to review three defect  notification envelopes to gauge their perceptions of the envelope style and  format and the likelihood that they would be willing to open each  envelope. Though the focus groups reached less consensus on what style  and format of envelope they would be most likely to open, participants did  reveal that they preferred envelopes that included the word “urgent,” and  some preferred envelopes that did not have technical or confusing  language. For example, one participant stated that she liked the envelope  that said “urgent air bag safety” because it described the issue in concise  terms. In addition, several focus group participants liked the use of  color—red shadowing, for example—to indicate the envelope’s  importance, and were more in favor of envelopes without VIN information  on the envelope itself.
section_title: Providing Better Information to Vehicle Owners and the Public
paragraphs: Our focus groups revealed that many vehicle owners may not be familiar  with the Web site www.safercar.gov—NHTSA’s primary means of  communicating defect information to the public. While the Web site is  meant to provide vehicle owners and the public with valuable safety defect  information, discussions with focus group participants revealed that few  knew that the Web site existed or ever used the Web site to learn of  recalls. For example, none of the almost 90 participants said they were  familiar with www.safercar.gov and more noted that they use Google  when they search for information related to safety defects.
Among other things, www.safercar.gov allows vehicle owners and the  public:  to set up an RSS—Really Simple Syndication—feed that provides recall  information via a computer or mobile device, updated daily, on safety- related recalls for vehicles, among other things. to subscribe to NHTSA’s Recall Notification E-mail System and elect to  receive a weekly e-mail that summarizes the vehicle recalls for the past 7  days or to select up to five vehicles by make, model, and year about which  to receive recall notifications. to search a recall database for vehicle recalls by make, model, year, and  component, among other things.
However, the information NHTSA provides on its Web site could be more  useful. In particular, a centralized database (developed by NHTSA or  another party) that allows consumers to search for recall information by  VIN would allow vehicle owners to determine if their specific vehicle is  affected by a recall. Several used and franchised car dealerships we spoke  with noted that having a database to search for recalls by VIN would allow  those who may not have been informed of recalls through a notification  letter to determine whether the vehicles they possess have outstanding  safety recalls. Although NHTSA has not developed a centralized VIN  database, most of the manufacturers we interviewed allow their customers  to access VIN-specific recall information for their vehicles in a few ways.  Some manufacturers, for example, provided their customers and the  public with online access to VIN-specific recall information, but only if  their customers registered on the manufacturer’s Web site first. Other  manufacturers, however, allowed their customers access to this  information online without requiring customer registration. Seven of the  manufacturers that provide online VIN-specific recall information told us it  would be beneficial to have a centralized NHTSA Web page that provides  links to online VIN information. Manufacturers that did not provide online  access to VIN recall information allowed their customers to call the  manufacturers’ toll-free customer service number or sign up for e-mail  notifications to obtain VIN recall information on their vehicles.
NHTSA officials we spoke with agreed that additional efforts could be  made to improve the awareness of www.safercar.gov and told us that the  agency is currently redesigning its Web site to consolidate information so  that consumers can more easily find information on vehicle 5-Star Safety  Ratings and auto safety recall information. According to agency officials,  upgrading the Web site to include VIN information would be helpful for  vehicle owners but would require significant resources to implement.  However, the agency is in the process of purchasing software to facilitate  a VIN-based search engine on its Web site.
section_title: Using Data to Improve Completion Rates of Recall Campaigns
paragraphs: NHTSA is not consistently using the data it collects from manufacturers to  improve the completion rates of recall campaigns. As previously  discussed, according to NHTSA officials, on average about 70 percent of  all vehicles subject to a recall are fixed within the 18-month period during  which manufacturers provide recall completion data to the agency.  However, our analysis of NHTSA’s completion rate data for passenger  vehicle recalls from 2000 through 2008 found considerable underlying  variation in completion rates in several areas. Overall, we found that  annual recall completion rates varied substantially by year—from about 55  percent to 75 percent—for all passenger vehicles with safety defect  recalls, with an average across all years of about 65 percent. In addition,  our analysis revealed that within any given year, some manufacturers have  safety defect recall completion rates as low as 23 percent to 53 percent per  year, whereas other manufacturers have completion rates between 90  percent and 96 percent (see fig. 3). Furthermore, some manufacturers  have consistently higher or lower rates across the 9 years we included in  our analysis.
Similarly, completion rates for safety defect recalls involving  components—items such as brakes and fuel systems—varied from 46  percent to as high as about 80 percent (see fig. 4). In particular, recall  completion rates involving air bags and vehicle speed control (e.g., cruise  control) systems resulted in some of the lowest completion rates across all  components at 60 percent and 46 percent, respectively.
We found less variation across vehicle types; from 2000 through 2008, the  average recall completion rate was 67 percent for passenger cars, 72  percent for sport utility vehicles and passenger vans, and 65 percent for  pickup trucks.
Using the data that NHTSA collects to conduct a broader aggregate-level  analysis across all campaigns may help NHTSA determine some of the  factors that are associated with higher or lower rates of compliance. As  mentioned previously, NHTSA monitors recall campaign completion rates  by collecting data on a quarterly basis, including the date a vehicle owner  is notified of a recall, the number of vehicles involved, the number of  vehicles remedied, and the number of vehicles that are unreachable (e.g.,  stolen, scrapped, unable to notify owner, and so forth). In particular,  NHTSA officials told us they evaluate the effectiveness of a recall  campaign by comparing a specific recall campaign’s progress to similar  campaigns based on factors such as the age of vehicles recalled and the  number of vehicles recalled. However, the agency does not currently use  the data it collects to conduct a higher-level analysis across all campaigns  to systematically look for potential factors related to higher or lower recall  completion rates that might be helpful in identifying successful recall  campaigns because conducting such analyses is resource intensive. Based  on our analysis of NHTSA data, without conducting a broader aggregate- level analysis to look for outliers, patterns, or trends, the agency may be  missing an opportunity to identify underlying factors that affect recall  campaign completion rates.
NHTSA officials told us that although their goal for each recall campaign is  a 100 percent completion rate, there are a number of factors affecting  completion rates that are outside of NHTSA’s control—such as whether  vehicle owners read recall notices or their perception of the severity of a  defect. In addition, NHTSA officials explained that monitoring recalls on a  campaign-by-campaign basis provides them with the flexibility necessary  to capture the unique aspects of each recall campaign and that by focusing  on communication and discussion with manufacturers, the agency can  develop solutions to improve completion rates when a campaign is  achieving a completion rate that is below its expectation. While we agree  that completion rates are affected by a number of factors, including a  vehicle owner’s perception of defect severity, conducting additional  analyses could help the agency determine some of the factors that are  associated with higher or lower rates of compliance.
section_title: Limited Authorities
paragraphs: Under federal law, NHTSA can order a manufacturer to give notification of  a defect or noncompliance with motor vehicle safety standards to the  owners, purchasers, and franchised dealers, as well as order the  manufacturer to remedy the defect. However, NHTSA cannot require  used-car dealers (or franchised dealerships that sell used vehicles) to  notify potential buyers of an outstanding safety defect or require that they  get the defect remedied prior to sale. Used-car dealerships we spoke with  told us that when they become aware of a vehicle defect, they either  remedy the defect before the sale of the vehicle or notify potential buyers  of the safety defect because it is a good business practice. Nevertheless, in  some instances, a used-car dealer may not be aware that an outstanding  safety defect exists in a vehicle. In particular, a used-vehicle dealer  association with over 20,000 members told us that because used dealers do  not have a franchise agreement with the manufacturers, they do not  receive the defect notices that manufacturers send to franchised dealers.  Moreover, used-car dealers we spoke with told us that generally they do  not receive defect notices from manufacturers, except in certain cases,  such as when a used dealer purchases previously leased vehicles directly  from a manufacturer.
The rental car companies we spoke with each told us that, unlike used-car  dealerships, they generally receive defect notification letters regarding  affected vehicles in their fleets, and although they are not required to  remedy a defect, they have developed a system for dealing with recalls.  One company described a two-tiered system to address safety defects in  which vehicles are placed on a “soft-hold”—meaning that the cars can still  be rented but will be put in the queue for service—if the defect is not a  safety issue. If the defect is a safety issue, these vehicles will be placed on  a “hard-hold”—meaning that the cars will be taken out of service  immediately and will not be rented until the repair has been made. Each of  the rental car companies described a similar system that they used to  address recall safety issues.
The stakeholders we interviewed had mixed views on whether used- vehicle dealerships and rental car companies should be required to notify  potential buyers of outstanding safety recalls prior to sale. Several  manufacturers we spoke with indicated that it was reasonable to require  used-car dealerships to notify the potential buyer of a defect prior to sale.  A number of the manufacturers also supported requiring dealerships to get  used vehicles with safety defects remedied before selling them to the  public. However, the used-vehicle dealer industry association and used- vehicle dealerships we spoke with cited a few difficulties in doing so.  First, as previously discussed, used-vehicle dealers do not receive the  defect notification letters that manufacturers send to franchised dealers,  and as a result, they are generally not notified of a safety defect. Second,  there is no single source of information on safety recalls—such as a  centralized VIN database—that can be accessed to determine if a car in a  dealership’s possession has an outstanding recall. Instead, according to  the used-car dealerships we spoke with, they must go through ad-hoc  channels to find out about a defect—often by purchasing vehicle history  reports such as CarFax (which may not always have up-to-date and  accurate information, according to the dealerships) to determine, vehicle  by vehicle, whether cars on their lots are subject to outstanding recalls.  Since NHTSA cannot require that used-car dealers receive notification of  defects, in some cases the used-car dealers may be unable to notify  potential buyers of outstanding defects. With over 35 million used cars  sold by used and franchised dealerships in the United States in 2009 alone,  this could pose a significant risk to the safety of millions of vehicle drivers  and may have a negative impact on recall completion rates.
In addition, although NHTSA has the authority to order a recall, the agency  does not have “imminent hazard” authority. As initially proposed in the  111th Congress, imminent hazard authority would permit NHTSA to order  manufacturers to stop further production, sale, or distribution of vehicles  containing a defect found to present an imminent hazard to public safety  that may result in death or serious bodily harm. According to NHTSA,  imminent hazard authority would allow the agency to bypass the lengthy,  resource-intensive court process currently needed to prove that a safety  defect exists before ordering a recall. NHTSA officials told us that if they  were to obtain imminent hazard authority, they could more expeditiously  enforce a recall when severe safety defects are present.
section_title: Options Exist to Improve NHTSA’s Safety Defect Recall Process
paragraphs: Based on our interviews with industry stakeholders, our interviews with  focus group participants, foreign agencies, and NHTSA, and legislation  proposed in the 111th Congress, we have identified several recurring  options or changes that could address some of the challenges to the safety  recall process. Most of the options have both advantages and  disadvantages that will require careful consideration before they are  adopted.
subsections: section_title: Adopting Additional Defect Notification Methods
paragraphs: Notifying vehicle owners of a recall through other methods in addition to  postal mail may increase recall completion rates. As we previously  described, participants in the focus groups indicated that they might be  more encouraged to respond to a recall notice if they were notified of a  recall by methods other than postal mail. In fact, other federal agencies  and some manufacturers use other notification techniques to notify  consumers of a defect:    FDA and USDA issue press releases about recalls since the owners of  many products they regulate are not identifiable through a registration  process. However, the level of publicity that press releases receive in the  media (for example, on television and in newspapers) is subject to  discretion of the media outlets, which one manufacturer noted can be  inconsistent and unpredictable.
A few manufacturers we spoke with encourage dealerships to  communicate with vehicle owners through phone calls and e-mails to  notify the vehicle owner of a recall and encourage them to bring the  vehicle in for service.
Finally, a few manufacturers have begun or are currently pursuing the use  of telematic systems (such as GM’s OnStar technology) to alert vehicle  owners to recalls in real time by calling or sending messages directly to  vehicles notifying owners of outstanding recalls.
However, according to some manufacturers we interviewed, there are  disadvantages to using e-mail and phone calls as ways of communicating  recall information to consumers. First, several manufacturers noted that  vehicle owners change e-mail addresses and phone numbers frequently. In  addition, they noted that there is no requirement that a vehicle owner must  register a phone number or an e-mail address with a state motor vehicle  agency, unlike postal mailing addresses—which are tied to vehicle  registration.
section_title: Modifying Safety Defect Notification Letters
paragraphs: NHTSA may have opportunities to improve recall completion rates by  modifying the requirements for manufacturers’ safety defect notification  letters. Responses from our focus group participants indicated they would  prefer defect notices to include additional information, which would likely  lead to higher rates of consumer responses to these notices. Specifically,  as we previously noted, focus group participants reported that notification  letters they reviewed did not always convey a clear description of the  defect or the severity of the defect. Such confusion could affect their  willingness to take their vehicles in for service and, ultimately, reduce the  recall completion rates for certain recall campaigns. In addition, focus  group participants indicated they may be more likely to respond to a  notification letter identifying that the defect affected their vehicle  specifically and that explained that vehicle owners could have their  vehicles repaired at no charge.
Though some information is already required by law and regulations,  NHTSA has the ability to add requirements to the defect notification  letters, as previously described. Rental car companies we spoke with also  stated that a better indication of the severity of the recall would help them  determine how to treat recalled vehicles in their fleets and reduce  confusion. For example, the rental car companies told us that  understanding the urgency of a safety recall is especially important  because rental car companies must use the defect notification letters they  receive to make decisions about whether to continue to rent vehicles to  consumers before the car is repaired or ground an entire fleet of vehicles,  which could result in a significant loss in revenue. NHTSA officials told us  that the agency has recommended to the rental car companies that they  should not rent recalled vehicles until the defect has been repaired.
In addition, NHTSA officials we spoke with told us that they review and  approve each defect owner notification letter to make sure it meets the  current requirements but have not developed a standard template for  notification letters because each recall is different. In addition, NHTSA  officials told us that although they are working toward increasing recall  campaign completion rates, they believe that adding content to the  notification letters could be distracting and that the fundamental  information needed to convey the defect, the actions the owner should  take, and the remedy program is covered by the current requirements.  While we agree that adding lengthy and complex information to the  notification letters is unnecessary, our focus groups have shown that a  more clear description of the severity of a defect without the use of jargon  and the addition of content such as the owner’s VIN may encourage  vehicle owners to comply with defect notifications.
section_title: Publicizing Existing Resources and Making VINs Available to Vehicle Owners and the Public
paragraphs: As previously described, our focus groups with vehicle owners indicated  that the public may not be aware of NHTSA’s Web site, the primary  method of communicating information on recalls to consumers. In  addition, a few industry associations told us that it would be useful to  provide vehicle owners with the ability to search more easily for recall  information using their VINs. As such, NHTSA has an opportunity to make  vehicle owners and the public more aware of its Web site and to include  more useful information. In order to so, NHTSA could develop public  service announcements and additional press releases or collaborate with  auto manufacturers to develop methods of informing vehicle owners about  available resources. NHTSA officials we spoke with agreed that additional  efforts could be made to improve the awareness of www.safercar.gov and  told us that the agency is currently redesigning its Web site to consolidate  information so that consumers can more easily find information on vehicle  5-Star Safety Ratings and auto safety recall information. In addition,  legislation from the 111th Congress contained provisions that would have  required NHTSA to improve public accessibility to information on its  vehicle safety websites.
NHTSA officials told us they are interested in finding additional ways to  improve vehicle owners’ access to specific information about recalls, and  to that end, they are in the process of purchasing software to facilitate a  VIN-based search engine on its Web site. However, the agency noted that  developing a centralized VIN database would require significant additional  resources to fully implement. In addition, agency officials told us that VIN  searches can present problems because vehicle owners may not enter VIN  information correctly into a Web site. NHTSA officials are currently  exploring ways to address this issue.
section_title: Developing National Standards and Guidance for Vehicle Owners and Operators
paragraphs: Representatives of the rental car industry stated that developing guidance  for vehicle owners on how to categorize the severity of a recall and  whether to operate a vehicle once that determination has been made could  help ensure that recalls are handled consistently and remove confusion  from the process. Currently all vehicle owners, including rental  companies, must decide whether to continue to operate vehicles subject to  a recall based on the information provided by the manufacturer in the  recall notice. The law does not require the manufacturer to advise whether  the vehicle should continue to be operated until the defect or  noncompliance is remedied. All of the rental car companies we spoke  with, as well as some of the focus group participants we interviewed,  stated that some defect notification letters are confusing and do not  provide a clear description of the severity of the defect. In addition, the  rental car companies noted that notification letters rarely provide  guidance as to whether the vehicle can continue to be operated. Rental car  company and industry representatives suggested that clear national  standards—as determined by NHTSA and the manufacturers—for how to  categorize the nature of a defect (including the potential for harm) and  whether the vehicle can continue to be operated would be helpful to  consumers and rental car companies. In particular, the American Car  Rental Association (ACRA) has proposed that NHTSA issue separate  bulletins for when a vehicle can be operated pending completion of a  recall or when a vehicle needs to be grounded until the vehicle can be  serviced. NHTSA officials stated that while they had not reviewed ACRA’s  proposal, they are opposed to publishing classifications of defects, ranking  them, or otherwise suggesting to vehicle owners that certain safety defects  are more serious than others. Moreover, NHTSA officials told us that  suggesting that some defects are more risky may have dangerous  consequences—namely, that many safety defects, all of which involve an  unreasonable risk, will be ignored. This could result in fewer consumers  remedying their vehicles due to the fact that NHTSA has categorized the  recall as “less serious,” and therefore, consumers may perceive the safety  risk to be decreased.
section_title: Using Data More Effectively
paragraphs: Although NHTSA uses manufacturer data to track the average annual  recall completion rate for all vehicle recall campaigns, NHTSA does not  currently use its data to conduct aggregate analyses of completion rates  across factors such as manufacturer, component, and vehicle type or by  analyzing completion rates based on the characteristics of the defect  notification letters, such as the format of the letter mailed to vehicle  owners. Conducting these types of trend analyses could help NHTSA  identify risk factors that might be associated with lower recall completion  rates. As discussed earlier in this report, our analysis has shown that  completion rates vary considerably across manufacturers and components  and, to some extent, vehicle types. Additionally, NHTSA officials told us  that other factors may also affect completion rates, including the  perception of the severity of the defect and the age of a vehicle at the time  of the recall. NHTSA has the opportunity to analyze its data in ways that  capture the underlying complexities and variation in the risk factors  associated with lower completion rates. With that information NHTSA  could target new recall campaigns that include such risk factors and take  additional steps to monitor those campaigns.
NHTSA officials told us they are interested in improving the completion  rates of their recalls. For example, NHTSA officials explained that they  contacted a child safety seat manufacturer that had experienced higher  rates of recall completion compared with other child safety seat  manufacturers, in order to learn how that manufacturer was achieving a  relatively higher completion rate. While this method—isolating outliers in  the data, then following up with a particular manufacturer to investigate— is not a routine monitoring activity that NHTSA performs, such an  approach could be used more systematically when noticing differences in  recall rates in other areas identified in the data. NHTSA officials told us  they were currently re-evaluating how they used their data and would  consider ways that additional data analysis could help increase recall  completion rates.
section_title: Enhancing NHTSA’s Recall Authorities
paragraphs: Legislation proposed in the 111th Congress, if enacted, would have  modified the authority NHTSA has to recall vehicles. The proposed bills  would have addressed some of the challenges in the recall process  discussed previously in this report, such as NHTSA’s authority over used- car sales and the possibility of allowing NHTSA to declare a vehicle an  “imminent hazard.” S. 3302 proposed a provision that would have  protected potential buyers of used cars by requiring that a used-car dealer  not sell or lease a used passenger vehicle until (1) the dealer clearly and  conspicuously notified the purchaser or lessee, in writing, of any  notifications of a defect or noncompliance that have not been remedied;  and (2) the purchaser or lessee acknowledged, in writing, the receipt of  such notifications. Requiring manufacturers to notify all dealerships that  sell used cars about recalls and requiring such dealerships to notify  potential buyers of a defect could result in increased awareness of recalls,  particularly among the group of vehicle owners that, according to  manufacturers and third-party vendors, are the hardest to identify through  postal mail—namely second and third owners of a vehicle. However, an  industry association and the used-car dealerships we spoke to noted that it  is challenging to identify vehicles with outstanding recalls due to the lack  of VIN data available to the public and because used-car dealerships are  not required to be notified of a safety defect through the use of first-class  mail. NHTSA officials agreed that notifying used-car dealers of recalls is a  challenge, but the agency has not sought this authority.  NHTSA officials  indicated that in May 2011, however, the agency identified several policy  proposals to Congress on vehicle safety issues. One of these proposals is  to prohibit, with certain exceptions, used-car dealers and rental companies  from selling or leasing a vehicle subject to a recall prior to the repair  having been made.
S. 3302 also included a provision to enhance NHTSA’s authorities to  include an “imminent hazard” provision, which would have provided  NHTSA with the authority to ensure that vehicles with safety defects  posing a substantial likelihood of death or serious injury are recalled faster  than they currently can be by giving NHTSA authority to forbid further  sales of a vehicle model until the defect has been addressed. However, a  number of manufacturers we interviewed stated that NHTSA’s current  authority is adequate; they feel the current system is generally cooperative  and most passenger vehicle recalls are initiated voluntarily by  manufacturers. NHTSA officials stated that imminent hazard authority  would give them an additional tool to remove unsafe vehicles from the  road by significantly decreasing the time and resources needed currently  to order a recall through the judicial system.
section_title: Conclusions
paragraphs: NHTSA’s oversight of the passenger vehicle recall process—one of the  most important safety missions it performs—is generally considered to be  balanced and effective by the auto manufacturers and other auto industry  stakeholders we interviewed. However, our work has shown that NHTSA  could do more to monitor the completion rates of recall campaigns and  encourage vehicle owners to remedy their vehicles, which could result in  removing more unsafe cars from the road. Most of these opportunities are  within the scope of NHTSA’s current authorities and would require  minimal investment of staff and other resources. For example, our focus  groups indicated that clearer communication about the severity of the  defect, as well as the addition of an owner’s VIN in the defect notification  letter, may reduce confusion about the defect and encourage more owners  to comply with the recalls. In addition, even though our analysis of NHTSA  data on recall completion rates revealed considerable underlying variation  in completion rates by manufacturers and defective components, NHTSA  does not currently use the data it collects to conduct analyses of  completion rates across recall campaigns. By doing so, the agency has an  opportunity to determine the trends that may be associated with lower  rates of completion and target such campaigns for additional monitoring  or other actions.
NHTSA also currently lacks the authority to require manufacturers to  notify used-car dealerships—which sold 11 million cars in 2009—of recalls  or require these dealerships to notify potential buyers of an outstanding  recall. As a result, many consumers may be unknowingly putting their lives  at risk by purchasing a defective vehicle. Used-car dealerships we  interviewed indicated that they may be willing to notify potential buyers of  outstanding recalls; however, the lack of a public VIN database for  identifying the specific cars that have been recalled makes such  notifications difficult. Although additional resources may be necessary for  NHTSA to implement such a database, working with manufacturers, many  of whom have already developed VIN search functions, could reduce  NHTSA’s burden. An expansion of the information provided on NHTSA’s  Web site to include a VIN search capability, as well as publicizing existing  and new resources, may help vehicle owners and other vehicle purveyors,  such as used-car dealerships, identify outstanding recalls, improve recall  completion rates, and increase safety for pedestrians and the motoring  public.
section_title: Recommendations for Executive Action
paragraphs: In order to encourage vehicle owners to comply with safety recalls,  provide vehicle owners with specific information about whether their  vehicle is involved in a recall, and identify factors that affect recall  completion rates, among other things, we recommend that the Secretary of  Transportation direct the Administrator of NHTSA to take the following  four actions:    Modify the requirements for defect notification letters to include  additional information such as (1) the word “urgent” in large type to obtain  readers’ attention, and (2) the VIN of the recalled vehicle so it is clear that  the letter pertains to the owner’s current vehicle.
Create a VIN search function on www.safercar.gov and publicize the Web  site to vehicle owners and the public.
Develop a plan to use the data it collects on recall campaigns to analyze  particular patterns or trends that may characterize successful recalls and  determine whether these represent best practices that could be used in  other recall campaigns.
Seek legislative authority to ensure that potential buyers of used cars are  notified of any outstanding recalls prior to sale.
section_title: Agency Comments
paragraphs: We provided a draft of this report to the Department of Transportation  (DOT), as well as CPSC, the Department of Health and Human Services  (HHS), and USDA for review and comment. DOT agreed to consider our  recommendations and both DOT and USDA provided technical comments,  which we have incorporated, as appropriate. CPSC and HHS did not  provide comments on this report.
We are sending copies of this report to the Departments of Transportation,  Agriculture, Health and Human Services, the Consumer Product Safety  Commission, and other interested parties. In addition, the report is  available at no charge on the GAO Web site at http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at (202) 512-2834 or flemings@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: This report focuses on the National Highway Traffic Safety  Administration’s (NHTSA) oversight of safety defect recalls, which  represent the majority of recalls overseen by the agency and are initiated  when a defect poses an unreasonable risk to safety. In addition, we have  limited our scope to safety defect recalls that have been initiated for  passenger vehicles, such as cars, pickup trucks, sport utility vehicles, and  minivans (NHTSA also oversees recalls for other vehicles, such as  motorcycles, buses, recreational vehicles, and commercial trucks).  Moreover, because the U.S. Department of Transportation Office of  Inspector General is examining NHTSA’s activities related to the  investigation of potential safety defects in motor vehicles and equipment,  we did not include safety defect investigations in our review. Our report  addresses the following questions: (1) What is the extent of NHTSA’s role  in the auto safety defect recall process, and how do its authorities  compare with those of other selected federal and foreign agencies with  safety recall authority? (2) What are the benefits and challenges of the  auto safety defect recall process for NHTSA and the manufacturers? (3)  What options exist for improving NHTSA’s auto safety defect recall  process?
To describe the extent of NHTSA’s role and authorities in the auto safety  defect recall process, we reviewed applicable legislation, including the  National Traffic and Motor Vehicle Safety Act, as amended; relevant  federal regulations; and NHTSA’s guidance on the safety defect recall  process. In addition, we conducted interviews with NHTSA officials about  the agency’s role in the defect recall process and its recall authority. To  compare NHTSA’s authorities with those of other federal agencies, we  reviewed legislation and interviewed officials at selected federal agencies  that, similar to NHTSA, have product safety oversight responsibilities,  including the Consumer Product Safety Commission (CPSC), U.S. Food  and Drug Administration (FDA), and U.S. Department of Agriculture  (USDA) to determine what differences and similarities exist between the  agencies’ recall authorities and those of NHTSA. We selected these  agencies based on discussions with NHTSA and previous GAO reviews of  federal agencies with safety recall authority. To compare NHTSA’s  authorities with selected foreign agencies with safety recall authority, we  interviewed officials from agencies in four countries (Canada, Germany,  Japan, and the United Kingdom) about their authorities and involvement in  the auto safety recall processes of their countries (see table 4). We  selected these agencies based on recommendations from NHTSA and  industry officials with whom we spoke and to reflect a range of safety  recall processes and authorities. We also interviewed representatives of  auto industry organizations from the selected countries to get their  perspectives on the authorities of the selected foreign agencies, including  the Canadian Vehicle Manufacturers’ Association, the European  Automobile Manufacturers Associations, the German Association of the  Automotive Industry, the Society of Motor Manufacturers and Traders  Limited (a United Kingdom-based auto industry organization), and the  Japan Automobile Manufacturers Association. To gain a further  understanding of the authorities of the agencies we reviewed in the  European Union (EU)—specifically, those in Germany and the United  Kingdom—we interviewed officials from the European Commission  regarding the impact on member states of EU directives related to the  vehicle recall process.
To examine the benefits and challenges in the auto safety defect recall  process, as well as potential options for improving the process, we  conducted and analyzed interviews with stakeholders in the auto safety  defect recall process, including NHTSA, auto manufacturers, third-party  data providers (Experian and R.L. Polk and Company), franchised and  used-car dealerships, rental car companies, consumer groups (Consumers  Union, Public Citizen, and the Center for Auto Safety), and industry  organizations. We identified stakeholders based on our review of pertinent  legislation, regulations, and NHTSA’s guidance documents on the recall  process for safety defects, as well as from interviews with officials and  stakeholders in the recall process. We interviewed 14 auto manufacturers  (see table 5) that together accounted for the majority of U.S. car and light  truck sales in 2009, including those that each had greater than 10 percent  market share (e.g., Ford, GM, Honda, and Toyota) and those with smaller  market share (e.g., BMW, Daimler, and Hyundai). We also interviewed  two organizations representing auto manufacturers that operate in the  United States—the Auto Alliance and the Association of Global  Automakers (Global Automakers), formerly known as the Association of  International Automobile Manufacturers (AIAM)—to get their perspective  on the safety defect recalls.
To understand the perspective of franchised dealerships and used-car  dealerships, we interviewed seven franchised dealerships and two used- car dealerships (see table 6), as well as an industry organization  representing franchised dealerships, the National Automobile Dealers  Association, and an industry organization representing used vehicle  dealerships, the National Independent Automobile Dealers Association.  The six franchised dealerships were selected to ensure coverage of  multiple vehicle makes. The two used-car dealers we interviewed were  selected based on recommendations from the National Independent  Automobile Dealers Association.
In addition, we interviewed three rental car companies—Avis Budget  Group, Incorporated, The Hertz Corporation, and Enterprise Holdings— that had nationwide operations in the United States, and an industry  organization representing rental car companies, the American Car Rental  Association.
To calculate recall completion rates—that is, the percentage of defective  vehicles that are remedied—of safety defect recalls for passenger vehicles  and to examine what variations exist across completion rates, we obtained  data on vehicle recalls from NHTSA’s Artemis system. The Artemis  system is a central repository of data on motor vehicles and motor vehicle  equipment defects. NHTSA provided us with data for recalls that were  initiated from January 2000 through December 2010. We limited our  analysis to safety defect recalls currently being conducted. In addition, we  limited our analysis to recalls initiated through 2008 because final  completion rates are typically measured at 18 months, or 6 quarters, after a  recall campaign begins. Including recall data from 2009 or 2010 would  have biased the completion rates for those years downward; that is, they  would have had lower rates of completion than earlier year recalls  because the data do not extend over a full 18-month period.
Because many of the recalls conducted from 2000 through 2008 were for  nonpassenger vehicles—commercial vehicles, recreational vehicles,  watercraft, and trailers, among others—we eliminated all recalls that were  not passenger vehicles. We examined each vehicle make and model  combination and coded them into three categories consisting of (1)  passenger cars, (2) pickups, and (3) SUVs and vans. For example, a  Chrysler 300 was coded as a passenger car, a Dodge 1500 as a pickup, and  a Land Rover Discovery as an SUV. In addition, because there were  hundreds of manufacturers (including those for nonpassenger vehicles) in  the database—each with their own set of makes and models—we  excluded all but the top 21 automobile manufacturers by market share.  However, the top 21 manufacturers represent about 99 percent of all  automobiles sold in the United States. Therefore, the data set we used to  calculate the recall completion rates from 2000 through 2008 included a  total of about 1,028 vehicle safety defect recalls after excluding  nonpassenger vehicles from the database and some recall records that  contained missing or anomalous data affecting nearly 125 million vehicles.
In order to make sure that our universe of passenger vehicle recalls was  reasonable, we compared the number of affected vehicles associated with  the 1,028 recalls we retained with the total number of affected vehicles  from a report provided to us by NHTSA. Table 7 shows that, while we  analyzed only about 25 percent of the recalls reported by NHTSA from  2000 through 2008, the 1,028 recalls we did analyze include 88 percent of  all affected vehicles recalled for safety defects from 2000 through 2008.
To analyze completion rates for defective components by year, NHTSA  provided us with a list of 387 components used by NHTSA to classify the  defective component associated with each recall. We recoded these  components into 19 main categories. (See table 8.). For the most part, this  was a straightforward process, as the component names were grouped  into similar hierarchical items such as “Suspension: Front,” “Suspension:  Front: Shock Absorber,” “Suspension: Front: Control Arm,” and so forth.  All but a few of the components fit into logical, clear categories like  steering, suspension, or engine and cooling. However, we had to use our  judgment in a few cases, including “traction control”—which we placed in  the “steering” category.
In order to calculate the completion rate across manufacturers, vehicle  types, and components, we adopted the formula used by NHTSA. That is,  for each recall, we divided the number of involved vehicles reported by the  manufacturer (minus those exported, stolen, scrapped, or “other”) by the  sum of number of vehicles corrected, the number of vehicles inspected  only and not needing correction, and the number of vehicles returned to  inventory.
In order to assess the reliability of the data we analyzed, we reviewed  NHTSA’s documentation of the Artemis system, interviewed NHTSA  officials familiar with the data, and conducted electronic tests of the data,  looking for missing values, outliers, or other anomalies. We did find some  recall campaign records that contained missing, duplicative, or incomplete  data. We had to delete 22 records from the data before we performed our  analysis because there were no reported quarterly values for recall  completion. Because three additional records contained duplicate  reporting quarters, we deleted those duplicate quarters and were able to  retain them for our analysis. We deleted a fourth recall record that had  anomalous data that could not be explained. Because another recall  record had an anomalous first quarter value for affected vehicles that was  clearly a data entry error, we deleted that quarter’s value. One final record  showed a completion record of slightly more than 100 percent. We capped  that record at 100 percent and retained it for our analysis. We determined  by the number of affected vehicles for these questionable records that our  changes and deletions have no material effect on our analysis and that the  data, as analyzed and corrected, were sufficiently reliable for our  purposes.
To determine vehicle owners’ perspectives about safety defect recalls, we  conducted 10 focus group sessions with a total of 89 vehicle owners at five  locations. These sessions involved structured small-group discussions  designed to gain more in-depth information about specific issues that  cannot easily be obtained from another method, such as a survey or  individual interviews. Consistent with typical focus group methodologies,  our design included multiple groups with varying characteristics but some  similarity on one or two homogeneous characteristics. Each group  involved 7 to 10 participants. Our overall objective in using a focus group  approach was to obtain views, insights, and feelings of vehicle owners  regarding their awareness of recalls, understanding of defect notification  letters, and willingness to comply with defect notices. By including vehicle  owners with recent recall experience and those without recent recall  experience, we intended to gather a range of perspectives regarding  vehicle owners’ awareness of recalls, their understanding of defect  notification letters, and their willingness to comply with defect notices.
We conducted 10 separate focus group sessions—5 sessions with vehicle  owners that had experienced a recall in the past 3 years and 5 sessions  with vehicle owners that had not experienced a recall within the past 3  years. We selected five cities in which to conduct focus groups to provide  population and geographic dispersion—Chicago; Dallas; Richmond,  Virginia; Salina, Kansas; and Seattle. In addition, we used the USDA’s  Economic Research Service Rural-Urban Continuum Codes to select a  city—Salina, Kansas—that represented a smaller, more isolated  community in order to ensure we included the perspectives of vehicle  owners in geographically distant or isolated communities. Additionally,  we used criteria in selecting participants that ensured a mix of income,  gender, and educational level, and that accounted for the race and  ethnicity of the area in which the focus groups were located.
Discussions were structured, guided by a moderator who used a  standardized list of questions to encourage participants to share their  thoughts and experiences, as well as to react to various pieces of  communications. Specifically, question topics included perceived  responsibility for communicating the recall, expectations for how they  should be communicated with during a recall, factors that would affect  their decision to bring their recalled vehicle in for service, and suggestions  for improving communications of auto safety recalls. During the sessions,  we assured participants of the anonymity of their responses, promising  that their names would not be used. We also conducted two pretest focus  groups at GAO and made some revisions to the focus group guide prior to  beginning our travel for the sessions.
Each of the 10 focus groups was recorded and transcriptions were  created, which served as the record for each group. Those transcripts  were then evaluated using content analysis to develop our findings. The  analysis was conducted in two steps. In the first step, two analysts  independently developed a code book and then worked together to resolve  any discrepancies. In the second step, each transcript was coded by an  analyst and then those codes were verified by a second analyst. Any  coding discrepancies were resolved by both analysts agreeing on what the  codes should be. Because we found no differences between the recall and  nonrecall groups, a document was created that compiled totals for each  question, which was used for the findings that were reported.
Methodologically, focus groups are not designed to (1) demonstrate the  extent of a problem or to generalize results to a larger population, (2)  develop a consensus to arrive at an agreed-upon plan or make decisions  about what actions to take, or (3) provide statistically representative  samples or reliable quantitative estimates. Instead, they are intended to  generate in-depth information about the reasons for the focus group  participants’ attitudes on specific topics and to offer insights into their  concerns about and support for an issue. The projectability of the  information produced by our focus groups is limited for several reasons.  First, the information includes only the responses from the vehicle owners  from the 10 selected groups. Second, while the composition of the groups  was designed to ensure a range of age and education levels, the groups  were not randomly sampled. Third, participants were asked questions  about their experiences or expectations, and other vehicle owners not in  the focus groups may have had other experiences or expectations.  Because of these limitations, we did not rely entirely on focus groups, but  rather used several different methods to corroborate and support our  conclusions.
We conducted this performance audit from June 2010 through June 2011 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: Defect Notification Letters and Envelopes Used in Focus Groups
paragraphs: For the purposes of the focus groups, identifying information such as  manufacturer names, owner addresses, and vehicle identification numbers  were redacted. We distributed copies of three defect notification letters  and three envelopes, as shown in the following pages:  Defect Notification Letter, Sample A (Original Included Three  Pages)   (Page 1 of 3)  (Page 2 of 3)  (Page 3 of 3)
Defect Notification Letter, Sample B (Original Included One Page)
Defect Notification Letter, Sample C (Original Included One Page  in Landscape Format)
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Ray Sendejas (Assistant Director),  Jennifer Clayborne, H. Brandon Haller, Terence Lam, James Leonard,  Grant Mallie, Josh Ormond, Steve Rabinowitz, Amy Rosewarne, Kelly  Rubin, Tina Won Sherman, Susan Michal-Smith, Andrew Stavisky, Crystal  Wesco, Chad Williams, and Susan Zimmerman made key contributions to  this report.