5

1 fectuated, except such period shall not exceed sixty days

2 from the date a defect is declared unless the Secretary ex

3 tends such period by a notice published in the Federal Reg

4 ister showing good cause for that extension.".

Senator STEVENSON. Our first witness this morning is Mr. Douglas Toms and his associates from the National Highway Traffic Safety Administration.

Senator COTTON. Mr. Chairman, may I interrupt to make a brief comment?

Senator STEVENSON. By all means.

Senator COTTON. I think you may have covered this, but I merely wanted the record to show that in the 91st Congress the Senate passed legislation providing that the cost of remedying safety defects be borne by the manufacturers. However that provision was deleted in the conference between the House and Senate. The statement of the managers on the part of the House noted the following, concerning the deletion of this provision: "Although the conferees agree to elimination of amendments Numbered 7 and 11, they all agree that they expect the practice of the manufacturers of remedying without charge failures to comply with motor vehicle safety standards and those defects in motor vehicles and motor vehicle equipment relating to motor vehicle safety to be continued."

You may have covered that, Mr. Chairman, but I wanted to make that statement.

STATEMENT OF HON. DOUGLAS W. TOMS, ADMINISTRATOR, NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION, DEPARTMENT OF TRANSPORTATION; ACCOMPANIED BY ROBERT CARTER, ASSOCIATE ADMINISTRATOR; ANDREW DETRICK, DIRECTOR, OFFICE OF DEFECTS INVESTIGATION; AND LARRY SCHNEIDER, CHIEF COUNSEL

Mr. Toмs. Chairman Stevenson, Senator Cotton, members of the staff, I appreciate the opportunity to testify today concerning S. 355, a bill introduced by Chairman Magnuson and Senators Mondale and Nelson.

Accompanying me today are Robert Carter, our Associate Administrator for Motor Vehicle Programs, on my left; and Andrew Detrick, the Chief of our Defects Investigation Office; and Larry Schneider, our Chief Counsel.

S. 355, would amend the National Traffic and Motor Vehicle Safety Act of 1966, by changing the obligations of motor vehicle and equipment manufacturers with respect to vehicles and vehicle equipment

containing safety defects or failing to comply with safety standards issued under the act. Currently, section 113 of the act requires that when a vehicle or item of vehicle equipment is determined to contain a safety defect or to fail to comply, the manufacturer must give notification of the defect or noncompliance, by certified mail, to the vehicle or equipment owner.

This bill would require the manufacturer not only to give notification, but also, with one exception, to offer to remedy the defect or noncompliance without charge to the owner. The exception would be that no offer would be required if the manufacturer could establish to the satisfaction of the Secretary of Transportation, that making such offer would not serve the purposes of the act or the public interest. This committee has long endeavored in its statements and legislative proposals to induce manufacturers to remedy safety defects and noncompliances without charge. We have consistently supported these endeavors. In November 1969, the Under Secretary of Transportation wrote a letter to this committee expressing support for legislation resembling S. 355. Again last year, I expressed my personal support for similar legislation during this committee's February hearing on the Corvair.

Mr. Chairman, I wish today to reiterate our support for the concept of mandatory recall-remedy. I do not, however, regard this legislation as absolutely vital to the accomplishment of our safety mission. I say this because the willingness of manufacturers to remedy without charge has been generally good.

Since the passage of the act, about 40 million vehicles have been the subject of defect notification campaigns under section 113 of the act. Manufacturers have offered to remedy, without charge, about 90 percent of these vehicles. The remaining 10 percent involved cases in which the manufacturer and owner shared the repair cost or where the owner bore the cost of correcting the defect himself. In tire notification campaigns, manufacturers have either replaced the tire at their expense or shared the cost with the consumer.

It has been our experience that owners are less likely to respond to defect notification campaigns when the notice fails to include an offer to remedy without charge. This is not to say, of course, that the inclusion of such an offer in notification letters will insure that every defect will be corrected. Notification campaigns in which an offer to remedy has been made have had varying degrees of success.

Nevertheless, we do feel that the offer to remedy does serve as an inducement to the consumer to have his product corrected. Since this is in the interest of motor vehicle safety, we generally support legislation which would give the Department recall-remedy authority.

We have several problems with S. 355, as drafted, which we would like to mention at this time.

The first deals with the criterion which the Secretary must follow in determining whether or not to exempt a manufacturer from the requirement of remedying a defect or noncompliance without charge. The second deals with the nature of the proceeding by which the Secretary makes his determination.

With respect to our first problem, S. 355 provides only that the Secretary may exempt a manufacturer from the remedy requirement if the manufacturer can establish that the safety defect or noncom

pliance is so "inconsequential" that the "purposes of this title and the public interest would not be served by requiring the applicable manufacturers to remedy such defect or failure to comply without charge." We believe that, in order to provide the Secretary with sufficient guidance by which a sound judgment can be made, the bill should be modified so that the manufacturer's efforts to establish "inconsequentiality" are based upon the following three factors:

(1) The seriousness of the safety problem presented by the defect or noncompliance;

(2) the probability of the occurrence of accident or injury as a result of the defect or noncompliance; and

(3) the potential economic impact of the remedy upon the manufacturer and the owners.

We believe that these criteria are more appropriate for the decisionmaking required by this bill.

We also believe that the age of the vehicles involved in a campaign should be an important factor. We do not favor requiring manufacturers, except in special compelling circumstances, to absorb the cost of remedying a defect or noncompliance of a vehicle that is so old and worn out that it has minimal useful life remaining. In making this point, let me emphasize that we are talking about safety problems with which section 113 is concerned. These are problems that stem from a noncompliance or defect in performance, construction, components, or materials. We are not talking about—and section 113 does not extend to safety problems such as worn brakes or tires that occur in any aging vehicle as a result of normal wear and tear.

I think that a reasonable cutoff point would be vehicles that are more than 6 years old at the time of the notification. I base this cutoff date upon data on the mean age of vehicles in use, the high usage of late model vehicles, the high probability of early detection of a defect, NHTSA's defect recall experience, and the comparatively small number and low usage of older vehicles.

However, I would want the manufacturers to be required to remedy without charge older vehicles, where the Secretary determines a high probability of accident or injury if such defect or noncompliance were not remedied.

The second problem that we have with S. 355 concerns the requirement that the manufacturer be given an opportunity "at a hearing structured to proceed as expeditiously as practicable" to establish his case for not having to remedy without charge. This committee has long recognized the importance of there being prompt notification of owners once a defect is determined. Yet the language in this bill could be construed as requiring a 5 U.S.C. 556-557 trial-type hearing. To engage in such a proceeding could easily lead to extensive delay between the time a defect or noncompliance is determined and the date affected owners are notified. This would certainly be an undesirable situation in our mind.

We do not believe that the sponsors of S. 355 intended that there should be a formal, trial-type hearing on the issue of whether or not a "remedy without charge" directive should issue. Rather, we believe that the sponsors envisioned that there would be an informal hearing before the Secretary or his designee at which time the manufacturer would present his views and evidence as to why remedy without charge should not be required.

There should be no real objection to such an approach in view of the fact that as this committee has previously recognized-the manufacturer is entitled to a full de novo trial in court before he could be forced to remedy a defect without charge.

Should there by congressional insistence upon a 5 U.S.C. 556–557 trial-type hearing, the Department would not support the enactment of recall-remedy authority.

This concludes my prepared statement. If the committee so desires, my staff and I are available to work with your committee in the development of appropriate language to implement our suggestions. If you have any questions, I would be most happy to answer them

at this time.

Senator STEVENSON. Thank you, Mr. Toms, for presenting the position of the administration on S. 355. It is a position which I am pleased to note has changed since last February when the administration opposed repair at no cost legislation.

Let me attempt to clarify one issue which you raised in your statement with respect to "the hearing structured to proceed as expeditiously as practicable," to determine whether the failure to comply with an applicable motor vehicle safety standards is of an "inconsequential nature.”

Our intent is not to provide a formal hearing, as you have suggested; it is to offer a hybrid or compromise between a simple informal rulemaking procedure, and the more complex, complicated, and timeconsuming formal hearing procedure contained in sections 556 and 557 of title 5 of the U.S. Code.

The language, "structured to proceed as expeditiously as practicable" is intended to indicate the committee's desire not to require a formal oral hearing with cross-examination as part of the proceeding. It is the intent to afford the manufacturer greater procedural rights than those accorded under section 553 of title 5 of the Code, to build a public record, and to provide an opportunity for an agency hearing which assures judicial review on the basis of "substantial evidence."

Though the agency can determine the type of proceeding it should hold to deal with the issue as expeditiously as practicable, the committee desires to avoid the abuse of cross-examination to unduly delay the procedure. The committee also expects the NHTSA to exercise vigorously its discretion which permits it as a matter of policy to provide the exclusion of irrelevant, immaterial, or unduly repetitious evidence.

In addition, I am troubled by your recommendation to establish what appears to be four criteria to define "inconsequential failure to comply with the motor vehicle safety standard."

As I interpret your four standards, they appear to contradict the purpose for the existence of the National Traffic and Motor Vehicle Safety Act, namely, to remove unsafe motor vehicles from the Nation's highways.

I don't understand what difference the age of the motor vehicle makes. If the defect presents a danger to health and safety, it should be remedied. Why should those who happen to drive older carstraditionally the young and poor-be forced to weather safety related defects to any greater degree than the rich?

Since when was economic impact on the manufacturer a factor to consider when recalling a motor vehicle? Why must we wait for serious injury or death to require a recall?

The purpose of the act is to protect all motorists from unsafe cars. Why draw the arbitrary distinctions that you seek to define by the four criteria?

Well, I have given you a number of points on which we would very much appreciate your comments.

Mr. Toмs. We have talked at great length about the recommended cutoff for vehicles more than 6 years old. We have tried to determine the kinds of defects or findings of noncompliance that could occur in older cars. Because vehicles of that age have generally been driven in excess of 60,000 or 70,000 miles, there would be a great deal of wear on the drive train, engine, wheels, and all of the associated running gear. The only kinds of major defects that might carry over from assembly would perhaps pertain to the drive train itself and the steering mechanism. It is our feeling that any major defect present in a car more than 6 years old probably existed when the car was only a few years old. We would find such defects in the first few years. A second factor about the 6-year cutoff is that many cars change ownership a number of times during the 6-year period. We are somewhat concerned about the difficulty of keeping track of these vehicles and the cost of conducting an effective recall campaign on cars beyond that age.

Senator STEVENSON. Let me just interrupt to point out that the 1961 Corvair heater, which I mentioned earlier, was not a drive train safety defect, was it?

Mr. Toмs. I think that is a good example, Mr. Chairman, of a different type of defect. Of course, that car was built before the Safety Act came into being. It had been designed, you know, roughly some 18 years prior previous to the act's passage.

We honestly don't feel that that type of a system would be designed now that the Safety Act is in effect.

Mr. SCHNEIDER. The 6 years, Mr. hCairman, is not an absolute cutoff, as Mr. Toms pointed out in his testimony. We are not saying that older cars should never be the subject of a recall remedy.

We have suggested an exception whereby if there was a high probability of accident or injury, that the Secretary still could require the manufacturer to repair the remedy without charge in that case.

Mr. Toмs. There are some real advantages, Mr. Chairman, in trying to streamline the procedure. The 6-year cutoff point we think is an equitable point at which to streamline the process and facilitate recordkeeping. That is one of the reasons we make this suggestion.

On the earlier question, we thank you very much for that additional information on the record about what type of hearing would have to be held. We are very much concerned that we would not be forced to enter into long, cumbersome hearings.

We agree with you that an informal hearing before the Administrator or before the Secretary should be desirable. We would certainly wish to afford each manufacturer that opportunity.

However, we would not like to find our hands tied with complicated legal procedures that could drag out such a finding of noncompliance