    [Senate Hearing 113-64]
    [From the U.S. Government Publishing Office]

                                                             S. Hrg. 113-64

                   S. 921, THE RAECHEL AND JACQUELINE HOUCK

                          SAFE RENTAL CAR ACT OF 2013
    =======================================================================

                                    HEARING

                                   before the

                      SUBCOMMITTEE ON CONSUMER PROTECTION,

                         PRODUCT SAFETY, AND INSURANCE

                                     of the

                             COMMITTEE ON COMMERCE,

                          SCIENCE, AND TRANSPORTATION

                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 21, 2013

                                   __________

        Printed for the use of the Committee on Commerce, Science, and
                                 Transportation

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           SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                JOHN D. ROCKEFELLER IV, West Virginia, Chairman
    BARBARA BOXER, California            JOHN THUNE, South Dakota, Ranking
    BILL NELSON, Florida                 ROGER F. WICKER, Mississippi
    MARIA CANTWELL, Washington           ROY BLUNT, Missouri
    FRANK R. LAUTENBERG, New Jersey      MARCO RUBIO, Florida
    MARK PRYOR, Arkansas                 KELLY AYOTTE, New Hampshire
    CLAIRE McCASKILL, Missouri           DEAN HELLER, Nevada
    AMY KLOBUCHAR, Minnesota             DAN COATS, Indiana
    MARK WARNER, Virginia                TIM SCOTT, South Carolina
    MARK BEGICH, Alaska                  TED CRUZ, Texas
    RICHARD BLUMENTHAL, Connecticut      DEB FISCHER, Nebraska
    BRIAN SCHATZ, Hawaii                 RON JOHNSON, Wisconsin
    WILLIAM COWAN, Massachusetts
                        Ellen L. Doneski, Staff Director
                       James Reid, Deputy Staff Director
                         John Williams, General Counsel
                  David Schwietert, Republican Staff Director
                  Nick Rossi, Republican Deputy Staff Director
       Rebecca Seidel, Republican General Counsel and Chief Investigator
                                     ------

             SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT SAFETY,
                                 AND INSURANCE

    CLAIRE McCASKILL, Missouri,          DEAN HELLER, Nevada, Ranking
        Chairman                             Member
    BARBARA BOXER, California            ROY BLUNT, Missouri
    MARK PRYOR, Arkansas                 KELLY AYOTTE, New Hampshire
    AMY KLOBUCHAR, Minnesota             DAN COATS, Indiana
    RICHARD BLUMENTHAL, Connecticut      TED CRUZ, Texas
    BRIAN SCHATZ, Hawaii                 DEB FISCHER, Nebraska
    WILLIAM COWAN, Massachusetts

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on May 21, 2013.....................................     1
    Statement of Senator McCaskill...................................     1
    Prepared statement of Hon. Charles Schumer, U.S. Senator from New
      York...........................................................     3
    Statements and letters of support from a coalition of consumer
      groups: Enterprise, Hertz, Avis Budget, AAA, State Farm, the
      Trucking Renting and Leasing Association, the Trauma Foundation
      and Congresswoman Lois Capps...................................     4
    Statement of Senator Heller......................................    10
    Statement of Senator Boxer.......................................    10
    Statement of Senator Blumenthal..................................    24
    Statement of Senator Blunt.......................................    45

                                   Witnesses

    Carol ``Cally'' Houck, Mother of Raechel and Jacqueline Houck....    12
        Prepared statement...........................................    14
    Hon. David L. Strickland, Administrator, National Highway Traffic
      Safety Administration..........................................    15
        Prepared statement...........................................    16
    Sharon Faulkner, Executive Director, American Car Rental
      Association (ACRA).............................................    25
        Prepared statement...........................................    27
    Rosemary Shahan, President, Consumers for Auto Reliability and
      Safety.........................................................    30
        Prepared statement...........................................    31
    Mitch Bainwol, President and CEO, Alliance Of Automobile
      Manufacturers..................................................    33
        Prepared statement...........................................    34
    Peter K. Welch, President, National Automobile Dealers
      Association....................................................    37
        Prepared statement...........................................    39

                                    Appendix

    Hon. Brian Schatz, U.S. Senator from Hawaii, prepared statement..    55
    Response to written questions submitted by Hon. Claire McCaskill
      to:
        Hon. David L. Strickland.....................................    55
        Sharon Faulkner..............................................    58
        Rosemary Shahan..............................................    60
        Mitch Bainwol................................................    60
        Peter K. Welch...............................................    62
    Response to written questions submitted by Hon. Barbara Boxer to:
        Hon. David L. Strickland.....................................    56
        Sharon Faulkner..............................................    59
        Mitch Bainwol................................................    61
        Peter K. Welch...............................................    63

      S. 921, THE RAECHEL AND JACQUELINE HOUCK SAFE RENTAL CAR ACT OF 2013

                                  ----------                              TU
    ESDAY, MAY 21, 2013

                                   U.S. Senate,
          Subcommittee on Consumer Protection, Product
                                 Safety, and Insurance,
            Committee on Commerce, Science, and Transportation,
                                                        Washington, DC.
        The Subcommittee met, pursuant to notice, at 9:33 a.m. in
    Room SR-253, Russell Senate Office Building, Hon. Claire
    McCaskill, Chairman of the Subcommittee, presiding.

              OPENING STATEMENT OF HON. CLAIRE McCASKILL,
                       U.S. SENATOR FROM MISSOURI

        Senator McCaskill. This hearing will come to order. Thank
    you all for being here. Today's hearing will examine rental car
    safety, an issue that has received a great deal of attention
    over the past decade. Currently there is no federally mandated
    obligation for rental car companies to repair safety defects
    following a safety recall. Legislation we will examine today
    would change that.
        In 2004, sisters Raechel and Jacqueline Houck were killed
    when driving a rental car that had been recalled for a power
    steering hose defect that had not been repaired. The car caught
    fire while traveling on the highway, causing a loss of steering
    and a head-on collision with a semi trailer truck.
        Today's hearing is the result of several years of hard work
    by my colleagues, by the rental car industry, and by consumer
    advocates, including Cally Houck, the mother of Raechel and
    Jacqueline, who has dedicated so much time and energy to
    ensuring that other mothers do not suffer the tragedy she
    experienced.
        When a version of this bill was introduced nearly two years
    ago, the rental car industry was adamantly opposed. They wanted
    to make their own decisions about how and when to ground their
    vehicles. Long, intense negotiations led us to the point where
    we are today, with agreement between the key stakeholders. Last
    September, after months of negotiations, the four leading
    rental companies--Enterprise, Hertz, Avis, Budget, and Dollar
    Thrifty--and the industry's trade association agreed to support
    legislation to address recalls, and they all agreed to
    voluntarily comply with the requirements of the bill until the
    legislation could be enacted into law. I thank the industry for
    its earnest efforts to reach agreement, commitment to this
    process, and particularly for the continued efforts to see
    legislation enacted.
        Senator Schumer and Boxer's bill, S. 921, the Raechel and
    Jacqueline Houck Safe Rental Car Act of 2013, reflects that
    agreement. The bill establishes clear requirements for rental
    car companies and allows NHTSA to pursue enforcement action for
    violations. The bill would apply this standard to all companies
    engaged in renting cars because consumers rightly expect and
    deserve the same level of safety no matter where they are
    renting a car.
        This is not a new concept. The Motor Vehicle Safety Act
    already requires auto dealers to remedy any safety recalls
    before selling or leasing a new car. Senate Bill 921 simply
    applies that same standard, not just to sold cars or leased
    cars, but also to rental cars.
        Over the past several years bills have been introduced in
    at least two State legislatures and discussed in other states
    attempting to ground rental cars subject to recall. I have
    heard from the rental car industry and agree that this and
    other auto safety issues are best handled at the Federal level
    rather than creating a patchwork of State laws for the industry
    to navigate. By enacting this agreement into law, we can set a
    Federal standard for safety.
        Today we will hear from NHTSA about the agency's
    investigation into rental car companies' practices when it
    comes to repairing recalled vehicles. As the agency responsible
    for implementing and enforcing the standards created in Senate
    Bill 921, we will also hear the agency's thoughts on the bill.
        We will hear from the American Car Rental Association, the
    trade association for the rental car industry, on the actions
    the industry has taken to voluntarily improve its practices and
    the industry's support for the legislation that would codify
    those practices.
        The advocacy group Consumers for Automobile Reliability and
    Safety previously spearheaded efforts to enact legislation on
    this issue in California and has since shifted those efforts to
    Congress. We will hear from them on their work with the rental
    car industry to reach an agreement on this legislation.
        Despite the agreement reached between the rental companies
    and auto safety advocates, two separate but related industries
    have raised concerns about the impacts they believe the bill
    could have on them if it were to be enacted. The auto
    manufacturers, represented today by the Auto Alliance, have
    serious concerns about the liability that could be created
    through a mandate to ground vehicles. I'm sympathetic to this
    concern, believe it can be addressed, and look forward to
    hearing their proposals for doing so.
        The National Automobile Dealers Association has also raised
    concerns about the bill applying to auto dealers who rent cars.
    Especially since dealers are already required to remedy a
    recall before they sell or lease a new car, I'm struggling to
    see why this same standard would be so problematic for dealers
    to adhere to for the cars they rent. However, I look forward to
    hearing the industry's thoughts on how their concerns could be
    addressed.
        Before we get to our witnesses today, we will first hear
    from Cally Houck, who has worked tirelessly on this issue. We
    were also supposed to hear from Senator Schumer, but due to
    scheduling conflicts he will not be able to join us today. He
    will instead submit his statement for the record.
        [The prepared statement of Senator Schumer follows:]

     Prepared Statement of Hon. Charles Schumer, U.S. Senator from New York
        Thank you Chairman McCaskill for holding this important hearing.
        Millions of travelers will hit the road during the Memorial Day
    holiday weekend, many of them in rental cars. These travelers deserve
    total assurance that the cars they rent are safe. The Raechel and
    Jacqueline Houck Safe Rental Car Act would provide that assurance.
        In 2004, sisters Raechel and Jacqueline Houck were killed driving a
    rental car that had been recalled for a power steering hose defect but
    had not been repaired. Raechel was 24. Jacqueline was 20. Today, Ms.
    Carol Houck, Raechel and Jacqueline's mother, is here to testify about
    the need for this legislation--the need to ensure this tragedy is not
    repeated. We owe it to Raechel and Jacqueline to move this bill through
    Congress. We owe it to their family. We owe it to all drivers to put
    their safety first.
        Is this bill personal? You bet it is. My two daughters are almost
    exactly the same ages as Raechel and Jacqueline when they died.
        But this bill is also practical. Federal law already prohibits new
    car dealers from selling recalled vehicles without first fixing the
    safety defects. Rental companies have agreed to be held to the same
    standard. If a car is not safe enough to be bought and driven off the
    lot, then that car is not safe enough to rent.
        The Raechel and Jacqueline Houck Safe Rental Car Act is supported
    by companies representing virtually 100 percent of the rental car
    market. This includes both the large rental companies like Enterprise,
    Hertz, and Avis Budget, as well as small businesses represented by the
    American Car Rental Association (ACRA).
        Pretty amazing, isn't it? Virtually the entire industry is behind
    this bill. It wasn't easy, but after many months of negotiations and
    multiple iterations of the bill, we finally reached a compromise. The
    end result is a proposal that provides rental car customers additional
    assurance that the vehicles they rent are safe and gives companies that
    rent cars a regulatory framework that meets their operational concerns.
        It is apparent from testimony today that auto manufacturers and
    dealers have some additional concerns with the bill. While I am not
    sure I am in agreement with all of their requests, I am willing to
    continue working with manufacturers and dealers to try to address their
    outstanding issues.
        But let me be clear on one point--we will not vitiate the core
    principle of this bill. Simply put, a rental vehicle subject to a
    safety recall cannot be rented or sold until the safety defect is
    remedied. This is a straightforward, common sense standard.
        We hope that the auto manufacturers and the dealers will join in
    support of this bill. A bill that is supported by both large companies
    and small businesses. A bill that recognizes and embraces public safety
    as a top priority.
        I would like to thank all the witnesses for their testimony today.
    I also would like to thank Chairman McCaskill and Senator Boxer for
    working with me to forge the compromise between auto safety groups and
    rental car companies.
        We will continue to work to move this bill through Congress. We owe
    it to Raechel and Jacqueline. We owe it to their family. We owe it to
    all families.

        Senator McCaskill. I also ask unanimous consent that the
    statements and letters of support from a coalition of consumer
    groups: Enterprise, Hertz, Avis Budget, AAA, State Farm, the
    Trucking Renting and Leasing Association, the Trauma
    Foundation, and Congresswoman Lois Capps be entered into the
    record.
        [The information referred to follows:]

    Carol (Cally) Houck, Mother of Raechel and Jacqueline Houck, Consumers
    for Auto Reliability and Safety, Advocates for Highway and Auto Safety,
        Center for Auto Safety, Consumer Action, Consumer Federation of
     America, Consumers Union, National Association of Consumer Advocates,
                               Trauma Foundation
                                                            May 9, 2013
    Hon. Jay Rockefeller, Chairman,
    Hon. John Thune, Ranking Member,
    United States Senate,
    Committee on Commerce, Science, and Transportation,
    Washington, DC.

      Re: Support for the Raechel and Jacqueline Houck Safe Rental Car Act

    Dear Chairman Rockefeller and Ranking Member Thune:

        On behalf of each of our organizations, we write in support of the
    Raechel and Jacqueline Houck Safe Rental Car Act, sponsored by Sens.
    Charles Schumer, Lisa Murkowski, Barbara Boxer and Claire McCaskill.
    This bipartisan legislation will require that rental car companies
    ground vehicles that are subject to a safety recall until they are
    fixed.
        This measure is named in memory of Raechel and Jacqueline Houck,
    daughters of Carol (Gaily) Houck, who were killed by a rental car that
    was recalled due to a defect in a steering component, which caused an
    under-hood fire and loss of steering control. The car had not been
    repaired before it was rented out. Raechel and Jacqueline were ages 24
    and 20.
        In addition to our organizations, the legislation is also supported
    by all the major rental car companies and the American Car Rental
    Association, which represents the major rental car companies and most
    of the smaller rental car companies. To have leading national auto
    safety organizations and the rental car industry in agreement on
    legislation that would place rental car companies under Federal safety
    regulation for the first time is truly historic. Other supporters
    include the Truck Renting and Leasing Association, the American
    Automobile Association, and State Farm Insurance Company.
        This legislation represents a major improvement in auto safety,
    particularly since rental car companies are the largest purchasers of
    new vehicles in the nation. We hope that with enactment of this
    measure, consumers who rent or purchase rental cars, either as new or
    used vehicles, can do so with confidence that the vehicles do not have
    latent safety defects that are subject to a safety recall.
        We respectfully request that you support the bill and work
    diligently with us, the sponsors, the rental car industry, the AAA and
    other supporters to enact the legislation this year. Thank you for your
    consideration of our views.
                Sincerely,

    Carol (Cally) Houck, Mother of Raechel and Jacqueline Houck

    Rosemary Shahan, President, Consumers for Auto Reliability and Safety

    Clarence Ditlow, Executive Director, Center for Auto Safety

    Jacqueline S. Gillan, President, Advocates for Highway and Auto Safety

    Ken McEldowney, Executive Director, Consumer Action

    Ami V. Gadhia, Senior Policy Counsel, Consumers Union

    Jack Gillis, Public Affairs Director, Consumer Federation of America

    Ira Rheingold, Executive Director, National Association of Consumer
                Advocates

    Ben Kelley, Director, Injury Control Policy, Trauma Foundation

    Cc: Sen. Charles Schumer

    Members of the Committee on Commerce, Science, and Transportation
                                     ______

                                 San Francisco General Hospital
                                                           May 16, 2013
                               TRAUMA FOUNDATION
                  . . . preventing injuries for 30 years . . .

    Sen. Jay Rockefeller,
    Chairman, Senate Committee on Commerce, Science, and Transportation,
    United States Senate,
    Washington, DC.

      Re: Support for S. 921

    Dear Chairman Rockefeller,

        On behalf of the Trauma Foundation at San Francisco General
    Hospital, I am writing to express our strong support for S. 921, The
    Raechel and Jacqueline Houck Safe Rental Car Act of 2013.
        This urgently needed legislation will close a lethal loophole in
    existing laws and regulations governing the safety of motor vehicles.
    Because of that loophole, cars and trucks under open defect recall--
    vehicles for which safety hazards have been identified but left
    unrepaired--may be placed into the hands of unknowing rental car
    customers, with potentially deadly results.
        The title of S. 921 commemorates one such tragedy, in which two
    sisters, Raechel and Jacqueline Houck, died in a rental-car crash
    caused by such an unrepaired defect. Carol Houck, the sisters' mother,
    has worked tirelessly to bring this serious problem to the attention of
    the public and its policymakers. S. 921 is a result of that work.
        S. 921's passage will represent an important step forward for
    public health progress. The scourge of preventable motor vehicle
    crashes and crash deaths continues to afflict the nation's roadways,
    and recent data indicate that the occurrence of such fatalities is
    again on the increase. We commend the Committee and the bill's
    cosponsors for taking this important step toward reducing death and
    injury from crashes of unsafe motor vehicles.
                Sincerely,
                                                    Ben Kelley,
                                       Director, Injury Control Policy,
                                                     The Trauma Foundation.
                                     ______

                                            Enterprise Holdings
                                            St. Louis, MO, May 17, 2013

    Senator Claire McCaskill,
    United States Senate,
    Chairman,
    Subcommittee on Consumer Protection, Product Safety, and Insurance,
    Washington, DC.

    Senator Dean Heller,
    United States Senate,
    Ranking Member,
    Subcommittee on Consumer Protection, Product Safety, and Insurance,
    Washington, DC.

      RE: Support for S. 921

    Dear Senator McCaskill and Senator Heller:

        On behalf of our senior management and ownership, our employees and
    our customers, I am writing to express strong support for S. 921. We
    are appreciative that you are holding a public hearing on this
    important legislation and it is our hope that this legislation will
    soon become law.
        In short, S. 921 codifies practices that most rental car companies
    employ today, which is to ground any vehicle that has an open safety
    recall from the auto manufacturer. Those vehicles may not be re-rented
    or sold until the recall repairs have been completed.
        S. 921 is the culmination of good faith negotiations between
    consumer advocates, legislators and the rental car industry. We believe
    it creates a uniform, nation-wide framework that will give our
    customers additional confidence and assurance that they are renting
    safe vehicles.
        We would like to thank Senators Schumer and Murkowski and the other
    co-sponsors for introducing this legislation and we look forward to
    working with them and all other stakeholders for its successful
    passage.
                Sincerely,
                                                 Lee R. Kaplan,
                                          Chief Administrative Officer.
                                     ______

           Statement of Richard D. Broome, Executive Vice President,
                             The Hertz Corporation
        Chairman McCaskill, Ranking Member Heller and other Members of the
    Subcommittee, I am Richard Broome, Executive Vice President of The
    Hertz Corporation, headquartered in Park Ridge, New Jersey. On behalf
    of Hertz, Dollar and Thrifty car rental companies, I am pleased to
    submit testimony in support of the S. 921, the Raechel and Jacqueline
    Houck Safe Rental Car Act of 2013. All of us at Hertz thank Senators
    Boxer, McCaskill and Schumer, and your staffs, for taking the lead role
    on this legislation and for moving it forward towards enactment this
    year.
        For decades, Hertz policy has been to ground vehicles subject to
    safety recall. It is also our policy and practice to rent and sell
    these recalled vehicles only after they have been repaired. Over the
    years, our internal processes and systems have been upgraded to the
    point where recalled vehicles can now be locked down centrally through
    our reservation and fleet management systems. An employee who
    circumvented the system and proceeds to rent or sell an unrepaired
    recall vehicle would be terminated, although we have no evidence that a
    Hertz employee has ever violated the company's safety recall policy.
        We make vehicle safety a key element of our promise to customers,
    and we are proud of our performance over the years. We have grounded
    hundreds of thousands of recalled cars in just the past decade, at
    significant economic cost to the company. We work closely with our auto
    manufacturer partners to quickly repair these vehicles to minimize loss
    of use costs. In some instances, we are compensated for economic
    losses, in some instances we are not. Regardless, the safety of our
    rental vehicles and of our customers is our highest priority.
        In fact, the performance of the major car rental companies with
    respect to safety recalls has been exemplary, with all of the companies
    now having tough policies prohibiting the sale or rental of unrepaired
    recalls. This includes Dollar Thrifty Group, which Hertz purchased in
    November 2012 and which has adopted Hertz's policy and practices.
        Given the high level of compliance with the policy goal of S. 921
    by companies that comprise well over 90 percent of the market, it is
    fair to ask why a new law is needed. Our view is that the Federal
    government has historically set the standard for safety recalls, and
    that this legislation is a logical extension of that historical role.
    We could argue that the law doesn't go far enough because it leaves out
    other commercial vehicle operators, such as taxi and limousine
    services, for reasons we do not understand. Nevertheless, the consuming
    public deserves the highest level of confidence that the rental cars
    they drive or ride in are not subject to safety recall or that any
    safety defects have been fixed. A Federal law helps to confer that
    higher level of public confidence, and we support the elimination of
    doubt on matters of safety.
        Also, for a companies like Hertz, Dollar and Thrifty with tens of
    thousands of vehicles crossing state lines every day, a Federal law is
    imperative, if there is to be regulation in this area. The alternative
    is a patchwork quilt of state laws, which would be an operational and
    compliance nightmare for Hertz, Dollar and Thrifty, as well as
    consumers who would never know whether the car they drive is free of
    safety defects if states had inconsistent rules or none at all.
        Finally, S. 921 represents the culmination of several months of
    negotiations between Hertz and consumer groups, and subsequently
    between other rental companies, congressional staff and consumers. As
    such, we believe the legislation represents a fair balance assuring
    consumer safety while allowing the companies to implement the
    underlying policy within their individual operational practices and
    systems. S. 921 reflects a combination of clear regulatory policy and
    operational flexibility, and is testament to the good will and balanced
    sensitivity of all of the stakeholders. We applaud this example of
    consensus building among industry, consumers and legislators, and we
    support passage of S. 921.
                Respectfully submitted,
                                             Richard D. Broome,
                                              Executive Vice President,
                                  Corporate Affairs and Communications,
                                                     The Hertz Corporation.
                                     ______

    Statement of Robert Muhs, Vice President, Government Affairs, Corporate
            Compliance and Business Ethics, Avis Budget Group, Inc.
    Introduction
        Chairwoman McCaskill, Ranking Member Heller, and members of the
    Subcommittee on Consumer Protection, Product Safety, and Insurance, my
    name is Robert Muhs. I am Vice President for Government Affairs,
    Corporate Compliance & Business Ethics of Avis Budget Group, Inc. (Avis
    Budget Group) and our subsidiary brands Avis Rent A Car System, LLC
    (Avis), Budget Rent A Car System. Inc. (Budget) and Zipcar. Avis Budget
    Group commends you for holding a hearing on S. 921, The Raechel and
    Jacqueline Houck Safe Rental Car Act of 2013, and we thank you for the
    opportunity to submit this statement for the hearing record.
        Avis Budget Group is a leading global provider of vehicle rental
    and car share services, through the Avis, Budget and Zipcar brands.
    Headquartered in Parsippany, New Jersey, the company maintains an
    aggregate worldwide fleet of approximately 500,000 vehicles and conduct
    vehicle rental services in 10,000 rental locations in approximately 175
    countries around the world. Given the very nature and scope of our
    business, vehicle safety is and always has been a matter of great
    concern to the company's nearly 28,000 employees and its senior
    management. Avis Budget Group is and has been fully committed to
    ensuring the safety of our renters, their passengers and the public.
    S. 921--The Raechel and Jacqueline Houck Safe Rental Car Act of 2013
        S. 921 is named in honor of Rachel and Jacqueline Houck, two young
    women who in 2004 lost their lives in a very tragic accident involving
    a rental car subject to a recall that had not been repaired. This was a
    horrific event. All involved or affected--consumers, rental car
    companies, safety advocates and The Congress--can agree that we should
    do our utmost to prevent such an event from occurring again. The
    hearing you are conducting on S. 921 is an important step in realizing
    that objective. Avis Budget Group commends the leadership that you and
    the co-sponsors of the legislation have shown on this matter.
        S. 921 is a bipartisan solution that is fully supported by our
    company and other members of the rental car industry to provide a
    single nationwide standard that all rental car companies and consumers
    alike can look at and rely upon. Taken altogether, we believe the
    provisions of S. 921 advance the goal of consumer safety. They provide
    practical solutions and requirements that are very much consistent with
    Avis Budget Group's core values regarding the safety of our customers.
        Avis Budget strongly supports S. 921 for several reasons. First,
    the legislation is the product of extensive discussion and dialogue
    between Members of Congress, consumers and auto safety advocates, our
    industry and other stakeholders. Either directly or in partnership with
    the American Car Rental Association, we have participated in every
    facet of the work to develop consensus on how to best achieve our
    shared goals.
        Second, the bill provides a needed Federal solution. As you now,
    the rental car business inherently involves interstate commerce and as
    a consequence, the safety standards that would be codified by S. 921
    should be addressed as a matter of Federal law and regulation.
        Finally, requirements contained in the legislation are practical
    and workable. In very important aspects, they are grounded on the
    practices of our industry that we believe are effective and most
    importantly enhance consumer confidence and safety. We also believe
    these provisions may serve as a useful template if in the future the
    Subcommittee examines whether similar standards are appropriate for
    other commercial vehicle fleet operators.
    Conclusion
        S. 921 is a bipartisan measure which Avis Budget Group believes
    should be fully supported and enacted swiftly by the Congress. Avis
    Budget Group greatly appreciates the opportunity to submit this
    statement for the record in support of this reasonable and common sense
    measure. We are pleased to serve as a resource to the Congress, the
    Committee, and the Subcommittee and we look forward to our continued
    work together on this important matter.
                                     ______

                                                            AAA
                                       Heathrow, FL, September 14, 2012
    Hon. Barbara Boxer,
    U.S. Senate,
    Washington, DC.

    Dear Senator Boxer:

        I am writing to thank you for your continued efforts on the Raechel
    and Jacqueline Houck Safe Rental Car Act, which would prohibit car
    rental companies from renting or selling vehicles that are under a
    manufacturer safety recall. Currently, no law prohibits car rental
    companies from selling or renting such vehicles to unsuspecting
    consumers.
        As an advocate for the safety and security of all motorists, AAA
    views this legislation as a common-sense solution that would help keep
    unsafe vehicles off the road. We commend your leadership in working
    with industry, consumer and safety interests to produce a bipartisan,
    compromise piece of legislation that is supported by all interested
    parties.
        Once again, thank you for introducing this legislation to improve
    motorist safety. AAA looks forward to working with you to help ensure
    this bill becomes law.
                Sincerely,
                                           Robert L. Darbelnet,
                                 President and Chief Executive Officer.
    RLD/cs
                                     ______

                                 State Farm Insurance Companies
                                     Washington, DC, September 25, 2012
    Hon. Barbara Boxer,
    U.S. Senate,
    Washington, DC.

    Dear Senator Boxer:

        On behalf of State Farm, I am writing to voice our support for the
    ``Raechel and Jacqueline Houck Safe Rental Car Act,'' which would
    require car rental companies to conform to an automobile manufacturer's
    safety recall prior to renting or selling vehicles subject to the
    recall. Currently, no law prohibits car rental companies from selling
    or renting non-conforming vehicles to consumers.
        As you are aware, State Farm has been a leader in advocating
    automobile and highway safety legislation at the state and Federal
    levels for decades. As the leading automobile insurer in the United
    States, State Farm relies greatly on the rental car industry to provide
    safe and reliable vehicles to our policyholders, employees, and agents.
    We join with Hertz, Enterprise, Avis, Budget, the American Car Rental
    Association (ACRA), AAA, the Advocates for Highway and Auto Safety, and
    the numerous consumer and safety organizations that support this
    revised bill.
        We commend your leadership, as well as that of Senators Blunt,
    McCaskill, and Schumer, in sponsoring legislation that is supported by
    rental, safety, and consumer protection organizations and the insurance
    industry. We urge you to continue your efforts to build a broad, hi-
    partisan coalition of support in Congress.
        Thank you for your efforts to improve automobile safety.
                Sincerely,
                                                   Alan Maness,
                                             Associate General Counsel.
                                     ______

                          Truck Renting And Leasing Association
                                     Alexandria, VA, September 19, 2012

    Hon. John D. Rockefeller IV,
    Chairman,
    Committee on Commerce, Science, and Transportation,
    Washington, DC.

    Hon. Kay Bailey Hutchinson,
    Ranking Member,
    Committee on Commerce, Science, and Transportation,
    Washington, DC.

    Dear Senators Rockefeller and Hutchinson:

        On behalf of the Truck Renting and Leasing Association (TRALA), I
    am pleased to support the Senate passage of compromise legislation that
    will soon be introduced that would prohibit the renting of light weight
    vehicles that are subject to a manufacturer's recall until a remedy is
    completed.
        For much of the last year TRALA has worked with all the key
    industry stakeholders as well as the Senate offices for the sponsors of
    the proposed legislation to strike a fair and reasonable compromise
    approach on this issue. While there is not complete unanimity on this
    legislation--with one significant TRALA member still opposed--because
    of the changes that have been made to the final version of the bill
    this past week, TRALA now supports the legislation and would encourage
    your committee and the U.S. Senate to do the same.
        We appreciate, especially in this political climate, the efforts on
    everyone's part to reach a consensus that will help protect the public
    but not overly infringe on the ability of industry to continue to
    operate and expand their business as we try to slowly recover from the
    economic downturn. In particular, we value the cooperation and dialogue
    with Senators Schumer, Boxer, McCaskill and Blunt to facilitate this
    final outcome.
                Sincerely,
                                               Thomas M. James,
                                                     President and CEO.
                                     ______

                                  Congress of the United States
                                       House of Representatives
                                           Washington, DC, May 21, 2013

    Hon. Claire McCaskill, Chairman
    Subcommittee on Consumer Protection, Product Safety, and Insurance,

    Hon. Dean Heller, Ranking Member
    Subcommittee on Consumer Protection, Product Safety, and Insurance

    Dear Chairman McCaskill and Ranking Member Heller

        I write to offer my strong support for the Raechel and Jacqueline
    Houck Safe Rental Car Act (S. 921), and thank the Subcommittee for
    holding a hearing on this important legislation.
        While current law prohibits car dealerships from selling recalled
    vehicles to consumers, no law bans rental car companies from doing the
    same or renting them to unsuspecting consumers. This legal gap became
    an issue of public concern after Raechel and Jacqueline Houck were
    tragically killed in 2004 when the recalled PT Cruiser they had rented
    caught fire and crashed as a result of a safety defect in the car. This
    unspeakable tragedy could have and should have been prevented.
    Certainly, it should never be allowed to happen again.
        That is why I introduced the Raechel and Jacqueline Houck Safe
    Rental Car Act in the House last Congress, and intend to introduce the
    House companion to S. 921 shortly. The legislation would simply
    prohibit rental companies from renting or selling vehicles that are
    under safety recall.
        I am pleased that the rental car companies have come together with
    safety and consumer groups to support this common sense legislation,
    which would not have been possible without the courageous advocacy of
    Raechel and Jaqueline's mother. Cally, who has fought to call attention
    to this problem and ensure that this tragedy never happens again.
        Again, thank you for your efforts, and I look forward to continuing
    to work with you and the sponsors of S. 921to move this critical
    legislation forward.
                Sincerely,
                                                    Lois Capps,
                                                    Member of Congress,
                                          Committee on Energy and Commerce.

        Senator McCaskill. I hope to have a productive discussion
    today that leads to the enactment of common sense legislation
    for the stakeholders represented today and, most importantly,
    for the consumers.
        Senator Heller.

                    STATEMENT OF HON. DEAN HELLER,
                        U.S. SENATOR FROM NEVADA

        Senator Heller. Good morning.
        Senator McCaskill. Good morning.
        Senator Heller. And thank you, Chairman McCaskill, for
    holding this hearing today. I want to thank our panelists and I
    want to thank everybody in the audience for taking time this
    morning.
        I want to start by extending my condolences to you, Ms.
    Houck. We all know the origins of this issue and I want to
    personally thank you for your testimony today and for the
    insight that you will provide for this hearing.
        I also want to apologize. There was some scheduling
    miscommunications between the full committee and staff and I
    will not be able to stay long today. However, I will be
    reviewing the hearing.
        S. 921, the Raechel and Jacqueline Houck Safe Rental Car
    Act of 2013, will codify an agreement made by the auto rental
    industry to stop renting or selling vehicles that are under a
    safety recall before they are fixed. Among other things, the
    legislation provides rulemaking authority to NHTSA that will
    mandate all rental car companies have 24 to 48 hours to pull a
    vehicle subject to recall from their fleet. The legislation
    also gives NHTSA the authority to investigate and monitor the
    recall practices of rental car companies.
        The legislation has the support of large rental car
    companies, insurance companies, and consumer and safety groups,
    some of which are represented here today. Because this
    legislation turns a voluntary agreement into a mandate, there
    are some who have raised concerns and I understand they're also
    represented here also. This hearing today is important to
    listen to all sides in this debate and inform members of this
    committee and the Senate on the details of this legislation.
        Again, I appreciate the chairwoman for holding this hearing
    and I look forward to the testimonies and reviewing the
    information received from all the panelists today.
        Thank you.
        Senator McCaskill. Thank you. I want to vouch for Senator
    Heller in that we did have some scheduling issues. We're all
    doing our best here. I don't want anybody to interpret him
    having to leave as a lack of concern for the subject matter.
        Would you like to make a statement?
        Senator Boxer. I would, yes.
        Senator McCaskill. Senator Boxer.

                   STATEMENT OF HON. BARBARA BOXER,
                      U.S. SENATOR FROM CALIFORNIA

        Senator Boxer. Senator McCaskill, thank you so much for
    this, Senator Heller as well.
        On October 7, 2004, my constituent Cally Houck, who we will
    hear from, lost her two beautiful daughters, Raechel, 24, and
    Jacqueline, age 20. I want everyone to remember that's why she
    is here. This is what happened to her, and this is what could
    happen to any of our families if we don't act. Anyone standing
    in the way of this legislation ought to think about it if this
    had happened to their children, their grandchildren, their
    niece, their nephew. So I'm going to keep coming back to that.
        Now, this accident was caused by an unrepaired safety
    defect in the rental car they were driving. I have a picture of
    the girls.
        Now, if it weren't for Cally, who is an incredible woman,
    you'll soon see, Senators, they never would have really found
    out why this happened. I hope that in her testimony she will
    explain. If she doesn't, I want her to, because we can't
    question her because we have to move on to another panel. What
    she did, because she's an attorney, is to do discovery on her
    own until she found out why this happened.
        So I want to say life moves in mysterious ways, but because
    of her work it's very possible, if we do our job, this will
    never happen to anyone else.
        So for the last year and a half, when I got to know Cally,
    of course I couldn't stop thinking about how we needed to do
    this. I was fortunate to find such great partners in the
    Senate, Senators Schumer, Murkowski, McCaskill, and others, and
    the Raechel and Jacqueline Houck Safe Rental Car Act is a
    result of very, very long negotiation. Throughout this process,
    Congresswoman Lois Capps, who is the Congresswoman of Cally
    Houck, has also worked very hard on this.
        I'm pleased consumer safety organizations, the rental car
    industry have come together to support this legislation. I want
    to say, it's pretty simple. You know, when anyone tells you
    something's complicated, just know that they're just trying to
    get you not to think about it. This is very simple. It says
    rental car companies may not rent or sell unsafe recalled
    vehicles until they're repaired. So those of you who are going
    to come up here and say, oh, this is terrible, think again.
    Maybe you'll think again, because the bottom line here is if
    you went out on the street, I say to my dear colleagues, and
    you ask anyone here or in Nevada or in Missouri or in my state,
    if there was such a law that says you can't rent a car out
    that's been recalled, everyone would say, ``Of course there's a
    law; why would it be treated differently than anything else?
    It's common sense safety. It just makes a lot of sense.''
        Now, I want you to know, because this bill has been slow-
    walked I decided it was important for the major rental car
    companies to do this on their own. So on May 7, 2012, I wrote
    to the major rental car companies asking them to sign onto a
    pledge. This is the pledge: ``Effective immediately, our
    company is making a permanent commitment to not rent or sell
    any vehicles under safety recall until the defect has been
    remedied.''
        I thank Hertz from the bottom of my heart. They stepped
    out, they took the lead, and they signed that pledge word for
    word. The other companies have improved their policies. But
    while these voluntary efforts are fine, we need permanent
    legislation to hold these companies accountable.
        I want to conclude by again thanking Cally Houck, who is
    testifying. In the face of her unthinkable personal tragedy,
    losing the light of her life--and I ask my colleagues, look at
    this, it could be our kids--she found the strength and the
    determination that I find inspiring. Without her incredible
    advocacy and work to protect consumers, we would not have
    gotten this far.
        We have a lot of work ahead of us. I worry that the special
    interests will pound and pound and make this something that it
    isn't. But I've got to just tell them if they're out there--I
    don't know if you are--that I for one, I'm going to be going
    all over this country on this one with Cally, and I'm just
    going to be saying, What are they doing to you? Because this is
    common sense safety legislation, and I intend to work with my
    colleagues--and anyone who knows Claire McCaskill and Chuck
    Schumer and myself and Lois and others, I'll tell you, they
    know we're going to be dogged about it, because when I make a
    commitment to someone who lost the center of their life, I
    don't take it lightly.
        With that, I will yield, and I thank the Chairman.
        Senator McCaskill. Thank you, Senator Boxer.
        Now we'll hear from Cally Houck.

       STATEMENT OF CAROL ``CALLY'' HOUCK, MOTHER OF RAECHEL AND
                            JACQUELINE HOUCK

        Ms. Houck. Good morning, Madam Chair. Thank you for
    allowing me to address this committee today. I'd first like to
    thank Senator Schumer for authoring this legislation, named for
    my daughters Raechel and Jacqueline, and to Senators Murkowski,
    Blumenthal, Gillibrand, Casey, and Schatz, and my own Senators,
    Barbara Boxer and Dianne Feinstein, and you, Madam Chair, for
    your co-sponsorship of this important consumer legislation. I
    especially thank you, Senator Schumer, and Senator Boxer, and
    your staffs for your hard work and leadership on this issue.
        I appreciate the rental car industry for working with us
    for the past 2 years to resolve this issue. I'm pleased to say
    that all the major rental car companies now support this
    legislation. I especially thank Hertz for being the standard-
    bearer. Finally, I'd like to thank all of the consumer groups
    who have supported this effort, particularly Consumers for Auto
    Reliability and Safety.
        On October 7, 2004, after a four-day visit south to see the
    family, my girls hugged me goodbye with words of love and
    appreciation. Raechel had just returned from two years in Italy
    and I was so proud of them for their conscientious and
    passionate look on life. Raechel had to work that evening and
    they wanted to stop and see friends before heading out to drive
    back to Santa Cruz. I tell them to drive safe and call me.
    Jackie said she'd see me in a few weeks when she was scheduled
    to fly from Los Angeles to Central America for a few months.
        As I watched them drive away in the PT Cruiser upgrade they
    had rented up north, I didn't know this would be the last time
    I would ever hold them, kiss their precious faces. Hours later
    I received the phone call dreaded by every parent: my daughters
    had been involved in a terrible traffic collision that took
    both of their lives in a fiery crash with an 18-wheeler.
        My life will never be the same without my treasured
    daughters. Our family and our lives are forever altered. The
    promise of life my talented daughters held was snuffed out in a
    matter of seconds. Raechel was 24 years young and Jacqueline
    had just turned 20.
        In the weeks following our tragedy, still ravaged with
    excruciating grief and shock, we discovered through friends and
    acquaintances that the rental car my girls had been driving was
    under a safety recall. And after minimal investigation, we
    learned that the repairs had never been made. The defect
    involved the power steering hose that when it rubbed against
    another component caused a high pressure leak that ignited when
    it came into contact with the catalytic converter, causing an
    under-hood fire and the loss of steering control.
        We were dumbfounded. Why didn't the rental car company fix
    this defect before renting out a vehicle that was a ticking
    time bomb? After the company had received the recall notice,
    the vehicle had been rented three other times before my
    daughters had rented it. Moreover, we were stunned to learn
    that there was no law and no regulation that prohibited this
    reckless business practice.
        After 5 years of litigation and a few days before trial,
    the rental car company finally admitted 100 percent liability
    in the deaths of my daughters. The lawsuit wasn't about money.
    It was about learning the truth, holding the company
    accountable, and making sure the public learned the truth, too.
    We didn't agree to a confidentiality agreement and that is why
    I'm here today to tell you my story.
        We walked out of the courtroom knowing that this would
    likely happen again to someone else who rented a car under an
    open safety recall. We learned the company that rented the car
    to my kids never had a specific policy for dealing with
    recalled cars. The policy was to rent the car even if the car
    was under an open safety recall.
        During our campaign to bring this issue to the attention of
    lawmakers, we realized that the business of renting cars under
    open safety recalls, either through a rental company or an auto
    dealer, is a huge consumer problem. When the media reported on
    this issue, most consumers were stunned that in fact rental
    cars with dangerous defects can be rented out with impunity.
        An online petition to pressure rental car companies into
    supporting this common sense legislation resulted in 150,000
    signatures in 48 hours. We believe, as many consumers do, that
    rental car companies and auto dealers have a duty, since
    they're in the business of renting and selling cars, to ensure
    that the vehicles they are offering to the public are safe.
    Every provider of rental cars, whether from a big rental car
    company or a used car dealer, should be required to repair
    unreasonably dangerous defects before those cars are rented to
    the public.
        Recalled cars endanger the lives of everyone who shares the
    roads, not only the people who are riding in them, but other
    drivers as well. While my daughters happened to collide with an
    18-wheeler, resulting in minor injuries to the truck driver and
    his passenger, this could have easily been a minivan full of
    children, with more lives lost.
        Nobody should have to worry about whether a car they rent
    is safe to drive. Nobody should have to endure the loss of a
    loved one because a rental car company didn't bother to get an
    unsafe recalled car repaired. This is simple to fix. This is
    doable now. Please pass this law.
        Thank you.
        [The prepared statement of Ms. Houck follows:]

        Prepared Statement of Carol ``Cally'' Houck, Mother of Raechel
                              and Jacqueline Houck
        Good Morning, Madam Chair. Thank you for allowing me to address the
    Committee today. I'd first like to thank Senator Schumer for authoring
    this legislation, named for my daughters Raechel and Jacqueline, and to
    Senators Murkowski, Blumenthal, Gillibrand, Casey, my own Senators
    Barbara Boxer and Dianne Feinstein, and you, Madam Chair, for your co-
    sponsorship of this important consumer safety legislation. I especially
    thank you and Senators Schumer and Boxer and your staffs for your hard
    work and leadership on this issue.
        I also appreciate the rental car industry for working with us the
    past two years to resolve this issue. I'm pleased that all the major
    rental car companies now support this legislation. I especially thank
    Hertz for being the standard-bearer. And finally, I would like to thank
    all of the consumer groups who have supported this effort, particularly
    Consumers for Auto Reliability & Safety.
        On October 7, 2004, after a four-day visit south to see the family,
    my girls hugged me goodbye, with words of love and thanks. Raechel had
    just returned from two years in Italy, and I was so proud of them as
    conscientious and passionate young adults. Raechel had to work that
    evening, and they wanted to stop and see some friends before heading
    out to drive back to Santa Cruz. I told them to drive safe and call me.
    Jackie said she'd see me in a few weeks when she was scheduled to fly
    from LA to Central America for a few months.
        As I watched them drive away in the PT Cruiser ``upgrade'' they had
    rented up north, I did not know this would be the last time I would
    ever see them, hold them and kiss their precious faces. Hours later, I
    received the phone call dreaded by every parent. My daughters had been
    involved in a terrible traffic collision that took both of their lives
    in a fiery crash with an 18-wheeler. My life will never be the same
    without my treasured daughters. Our family and our lives are forever
    altered. The promise of life my talented daughters held was snuffed out
    in a matter of seconds. Raechel was 24 years young and Jacqueline had
    just turned 20.
        In the weeks following our tragedy, still ravaged with excruciating
    grief and shock, we learned from friends and acquaintances that the
    rental car my girls were driving was under a safety recall, and after
    minimal investigation, we learned that the repairs had never been made.
    The defect involved a power steering hose that would rub against
    another component, causing a high-pressure leak that ignited when it
    came into contact with the catalytic converter, causing an under-hood
    fire and loss of steering control.
        We were dumbfounded. Why didn't the rental car company fix this
    defect before renting out a vehicle that was a ticking time bomb? After
    the company had received the recall notice, the vehicle had been rented
    three other times before my daughters rented it. Moreover, we were
    stunned to learn that there was no law or regulation that prohibited
    this reckless business practice. After five years of litigation, and a
    few days before trial, the rental car company finally admitted 100
    percent liability in the deaths of Raechel and Jacqueline. Our lawsuit
    was NOT about the money. It was always about learning the truth,
    holding the company accountable, and making sure the public heard the
    truth, too. We refused to settle the case and sign a confidentiality
    agreement. We never agreed to secrecy, which is why I am able to be
    here today to tell my story.
        We walked out of the courtroom knowing that it was likely this
    would happen again to someone else who rented a car under an open
    safety recall. We learned the company that rented that car to my kids
    never had a specific policy for dealing with recalled cars. The policy
    was to rent the car, even if the car was under an open safety recall.
        During our campaign to bring this issue to the attention of
    lawmakers we realized that the business of renting cars under open
    safety recalls, either through a rental car company, or through an auto
    dealer, is a huge consumer problem. When the media reported on this
    issue, most consumers were stunned, that in fact rental cars with
    dangerous defects can be rented out with impunity. An online petition
    to pressure rental car companies into supporting common-sense
    legislation resulted in 150,000 signatures in 48 hours. We believed, as
    many consumers do, that rental car companies and auto dealers have a
    duty, since they are in the business of renting and selling cars, to
    ensure that the vehicles they are offering to the public are safe.
        Every provider of rental cars, whether from a big rental car
    company, or a used car dealer, should be required to repair
    unreasonably dangerous defects before those cars are rented to the
    public. Recalled cars endanger the lives of everyone who shares the
    roads--not only the people who are riding in them. While my daughters
    happened to collide with an 18-wheeler, and as a result the truck
    driver and his co-worker suffered relatively minor injuries, it could
    just as easily have been a minivan full of kids, with even more lives
    lost. Nobody should have to worry about whether a car they rent is safe
    to drive. Nobody should have to endure the loss of a loved one because
    a rental car company didn't bother to get an unsafe, recalled car
    repaired. This is simple to fix. This is do-able NOW. Please pass this
    law.

        Senator McCaskill. Thank you, Ms. Houck.
        We now welcome David Strickland, the Administrator of the
    National Highway Traffic Safety Administration.

                 STATEMENT OF HON. DAVID L. STRICKLAND,

     ADMINISTRATOR, NATIONAL HIGHWAY TRAFFIC SAFETY ADMINISTRATION

        Mr. Strickland. Madam Chairman, Mrs. Boxer, Senator
    Blumenthal: thank you so much for giving me this opportunity to
    testify about this very important issue. The Raechel and
    Jacqueline Houck Safe Rental Car Act of 2013 is a very
    important piece of legislation that, frankly, addresses a
    safety gap that the National Highway Traffic Safety
    Administration has in order to make sure that we can enforce
    against rental car companies that do not fix their vehicles.
    I'd also like to thank Senator Schumer and Senator Boxer again
    for reintroducing this fantastic bill. This really is our
    opportunity to address something that, frankly, is a wrong that
    needs to be made right.
        The tragedy surrounding the deaths of the two women for
    which this legislation is named cannot be overstated. Their
    mother, Cally Houck, has worked tirelessly to ensure that this
    does not happen to another family. I can also say, Senator
    Boxer, that she met with me and my staff as well, and I
    couldn't agree with you more, there isn't a greater American, a
    more passionate mother, than Cally.
        The National Highway Traffic Safety Administration is
    tasked with ensuring the safety and the reliability of the
    United States vehicle fleet. We play a critical role in
    protecting drivers from the risks associated with auto safety
    recalls. The agency has one of the most effective defect
    investigation programs in the world. We receive and screen over
    40,000 consumer complaints every single year, and we pursue
    investigations and recalls when warranted. We are continually
    working to provide drivers with the information that they need
    to stay safe behind the wheel.
        All NHTSA safety recalls address an unreasonable risk to
    safety and should not be ignored. Unfortunately, we do not have
    the statutory authority to protect rental car customers.
    Currently there is no prohibition on rental car companies from
    renting vehicles that are under a recall but have yet to be
    remedied. This is precisely why the legislation the Senate is
    considering is so critical.
        In November 2010, NHTSA opened an inquiry to learn about
    rental car companies' recall completion rates and the policies
    concerning the rental of recalled vehicles. We sent formal
    information requests to various auto manufacturers seeking
    information on recall completion rates for several different
    recall campaigns. The information requested focused on recall
    campaigns that involved new vehicles that were likely to
    include large numbers of vehicles found in rental fleets. The
    information submitted by the manufacturers provided an
    indication of the volume and speed with which recall-related
    repairs were performed in these rental car fleets.
        The agency also sent an information request to the major
    rental car companies themselves, asking them to provide
    information about their recall policies. The information that
    we received at the time indicated that major rental car
    companies did not have firm written policies requiring the
    vehicle to be grounded until repaired. Instead, the companies
    allowed the recalled vehicles to be rented under certain
    circumstances.
        While the inquiry is still ongoing, the information
    submitted by the manufacturers indicated that the recall
    completion rate of the major rental fleets was about 50 percent
    at 120 days after the start of the recall and about 60 percent
    one full year after the recall was started.
        We want all drivers to be safe on the road, whether they're
    driving rental vehicles or their own personal cars. We believe
    that rental car companies should provide safe vehicles for
    consumers and that companies should promptly remedy these
    recalled vehicles. We understand that major rental car
    companies are supportive of this legislation and we appreciate
    their efforts to prevent tragedies like the one that occurred
    with the Houck family from ever happening again.
        At the National Highway Traffic Safety Administration, we
    will continue to work to ensure the highest standards of safety
    on our nation's roadways. S. 921 will close a gap in current
    law and give us one more tool in protecting the driving public.
        I am now ready to answer any questions the Committee may
    have, and I also want to take one moment to pray for the
    families in Oklahoma. Once again, as a person who works on
    public health and safety every single day, to see those types
    of tragedies, it really is just heartbreaking.
        [The prepared statement of Mr. Strickland follows:]

        Prepared Statement of Hon. David L. Strickland, Administrator,
                 National Highway Traffic Safety Administration
        Mr. Chairman, Ranking Member, and members of the Subcommittee,
    thank you for the opportunity to return again to the Commerce Committee
    to testify about S. 921, the ``Raechel and Jacqueline Houck Safe Rental
    Car Act of 2013.'' I would also like to thank Senators Schumer and
    Boxer, for introducing and reintroducing this bill in the 112th and
    113th Congresses. It is important legislation that would protect the
    American motoring public.
        The tragedy surrounding the deaths of the two young women for whom
    this legislation is named cannot be overstated. Their mother, Cally
    Houck has worked tirelessly to ensure that this does not happen to
    another family, and her efforts have served to highlight a very serious
    gap in Federal law.
        The National Highway Traffic Safety Administration (NHTSA) is
    tasked with ensuring the safety and reliability of the U.S. vehicle
    fleet; we play a critical role in protecting drivers from the risks
    associated with auto safety recalls. The NHTSA has one of the most
    effective defect investigation programs in the world. We receive and
    screen more than 40,000 consumer complaints every year, and we pursue
    investigations and recalls when warranted. We are continually working
    to provide drivers with the information that they need to stay safe
    behind the wheel. All NHTSA safety recalls address an unreasonable risk
    to safety and should not be ignored. Unfortunately, we do not have the
    statutory authority to protect rental car consumers. Currently, there
    is no prohibition on rental car companies renting vehicles that are
    under a recall, but have not yet been remedied. That is precisely why
    the legislation you are considering today is so critical.
        In November of 2010, NHTSA opened an inquiry to learn more about
    rental car companies' recall completion rates and policies concerning
    the rental of recalled vehicles. We sent formal information requests to
    various auto manufacturers, seeking information on recall completion
    rates for several different recall campaigns. The information requests
    focused on recall campaigns that involved new vehicles and were likely
    to include large numbers of vehicles typically found in rental vehicle
    fleets. The information submitted by the manufacturers provided an
    indication of the volume and speed with which recall-related repairs
    were performed in rental car fleets.
        NHTSA also sent information requests to the major rental car
    companies asking them to provide information about their recall
    policies. The information that we received at the time indicated that
    the major rental car companies did not have firm written policies
    requiring a vehicle to be grounded until repaired. Instead, the
    companies allowed recalled vehicles to be rented under certain
    circumstances.
        While this inquiry is still ongoing, the information submitted by
    the manufacturers indicated that the recall completion rates for the
    major rental fleets were about 50 percent at 120 days after the start
    of the recall, and about 60 percent one year after the start of the
    recall.
        We want all drivers to be safe on the road, whether they are
    driving rental vehicles or their own personal vehicles. We believe that
    rental car companies should provide safe vehicles for consumers and
    that the companies should promptly remedy recalled vehicles. We
    understand that the major rental car companies are supportive of this
    legislation, and we appreciate their efforts to prevent tragedies, like
    what occurred to the Houck family, from happening again.
        At NHTSA, we will continue to work to ensure the highest standards
    of safety on our Nation's roadways. S. 921 will close a gap in current
    law and give us one more tool in protecting the public.
        Thank you for the opportunity to testify and I am happy to take any
    questions.

        Senator McCaskill. I think we all share your prayers, Mr.
    Strickland. It was 2 years ago and 2 days that we had the
    tragedy strike Joplin and this all brings it back vividly, what
    a community in Missouri faced. I can only say to the people of
    Moore, Oklahoma, that the outpouring of support will be
    significant and it will be inspiring. It certainly was in
    Joplin, and the tenacity of the Joplin community was a sight to
    behold. I am sure that the good people in Moore, Oklahoma, will
    have that same inner strength that will help them through this,
    along with a lot of faith.
        I'm going to try to have a habit to, with some frequency,
    to defer to my colleagues for questioning first in order to
    encourage participation in our subcommittee hearings. So I will
    turn over for the first set of questions to Senator Boxer.
        Senator Boxer. Thank you.
        As I said in my opening statement, this is a very
    straightforward and important reform. Frankly, it's shameful
    that this hasn't been fixed before. I just want to ask you, Mr.
    Strickland--thank you so much for being here and we're so happy
    to see you in this position.
        Mr. Strickland. Thank you.
        Senator Boxer. Have you had a chance to look at the safety
    recall that was sent out on this power steering hose by
    Daimler-Chrysler to the owners of that vehicle?
        Mr. Strickland. Yes, Senator Boxer. It's NHTSA policy,
    basically the way recalls work is that we will either screen
    and we'll see a particular issue or anomaly in a particular
    vehicle and we will notify the manufacturer that we believe
    there's an unreasonable risk to safety. The manufacturer can
    then make a decision to voluntarily recall the vehicle or, if
    they disagree with the agency, they can then go to a more
    formal process.
        In this particular issue, this was an influence recall by
    NHTSA, but this was voluntarily done by Daimler-Chrysler. So
    yes, we knew of this recall and we knew of the importance of
    getting this thing fixed.
        Senator Boxer. Well, I ask unanimous consent to place in
    the record this actual recall notice. Is that all right?
        Senator McCaskill. Without objection.
        [The information referred to follows:]

        Senator Boxer. Thank you.
        Let me just share with my friends--and I'm so glad, Senator
    Blumenthal, you're here, because you and the chairman are
    attorneys. And this is just so straightforward. This was sent
    out by Daimler-Chrysler: ``Dear'' name: ``This notice was sent
    to you in accordance with the requirements of the National
    Traffic and Motor Vehicle Safety Act. Daimler-Chrysler
    Corporation has decided that a defect which relates to motor
    vehicle safety exists in some 2001 through 2004 model year
    Chrysler PT Cruiser and 2005 model year'' blah, blah. It
    describes whom it's sent to.
        They describe the problem. It's very straightforward: ``The
    problem is the power steering pressure hose in your PT Cruiser
    may contact the transaxle differential cover.'' And it talks
    about how the hose could rub through and leak power steering
    fluid. Then it says: ``Power steering fluid leakage in the
    presence of an ignition source can result in an under-hood
    fire.''
        Right here. And the rental car company got this notice. To
    my understanding, they got this notice; they did nothing. There
    was no law and they did nothing.
        Now, this is the question I want to ask you. It's not
    complicated, but if this is so important, important enough that
    Chrysler told anyone who owned one of these vehicles that they
    should--what should they do? It says right here: ``What you
    must do: Contact your dealer right away to schedule an
    appointment and bring this letter.''
        So if it was important enough to notify the owners and then
    to notify the rental company, isn't it exactly as important to
    notify the people who are unknowingly marching into a defective
    vehicle?
        Mr. Strickland. Not only is it more important, Mrs. Boxer--
    --
        Senator Boxer. As important.
        Mr. Strickland.--it's as important and it should be fixed.
    If it poses an unreasonable risk to safety, the car rental
    company frankly has a moral obligation to get that car fixed as
    soon as it possibly can. We want everybody to get their cars
    fixed.
        Senator Boxer. Right. So if we're going to notify everybody
    else, and by law they have to, we need to fix this law just to
    make sure that this tragedy doesn't happen again.
        Now, is there anything worse about a person who leases a
    car? No. We've got to protect all our people. Now, I understand
    one of the later panels, Madam Chairman, who's opposing us is
    going to point out: well, there are a lot of recall notices.
    And I would ask unanimous consent to place in the record
    another four of these that deal with lots of other issues. May
    I do that?
        Senator McCaskill. Without objection.
        [The information referred to follows:]

                                                               RECEIVED
                            By Recall Mgt Div. at 8:14 am, Nov 23, 2009
                            2010 Model Year Corolla
       Non-Compliance Recall--Airbag Caution Label on Driver's Sun-Visor

    Dear Toyota Owner:

    This notice is being sent to you in accordance with the requirements of
    the National Traffic and Motor Vehicle Safety Act. Toyota has decided
    that certain 2010 Model Year Toyota Corolla vehicles fail to conform to
    a provision of the Federal Motor Vehicle Safety Standards (FMVSS) that
    requires adhesive strength of the airbag caution label.
    What is the problem?
            On certain 2010 model year Corolla vehicles, the airbag caution
            label may have been affixed with an adhesive that does not meet
            the requirements of FMVSS 208. In the worst case, the airbag
            caution label may peel off and the driver could fail to heed
            the airbag caution information resulting in injury in the event
            of a crash.
    What Toyota will do?
            Any Toyota dealer will inspect the airbag caution label to
            assure the label was installed with the required strength
            adhesive. If the required strength adhesive was not utilized,
            the dealer will replace the driver's sun-visor with a new one
            at NO CHARGE to you.
    What should you do?
            Please contact your authorized Toyota dealer to make
            appointment to have your airbag caution label on the driver's
            sun-visor inspected. If the required strength label adhesive
            was not utilized, your dealer will need to order and receive
            the replacement sun-visor. We apologize for this inconvenience.

            The repair will take approximately 15 minutes. However,
            depending upon the dealer's work schedule, it may be necessary
            to make your vehicle available for a longer period of time.

            We request that you present this notice to the dealer at the
            time of your service appointment.

            If you no longer own the vehicle, please indicate so on the
            enclosed postage paid form, providing us with the name and
            address of the new owner.
    What if you have other questions?
            Your local Toyota dealer will be more than happy to answer any
            of your questions and set up an appointment to perform the
            inspection and if necessary replacement. If you require further
            assistance, you may contact the Toyota Customer Experience
            Center at 1-888-270-9371 Monday through Friday, 5:00 am to 6:00
            pm, Saturday 7:00 am through 4:00 pm Pacific Standard Time.

    If you believe that the dealer or Toyota has failed or is unable to
    remedy the defect within a reasonable time, you may submit a complaint
    to the Administrator, National Highway Traffic Safety Administration,
    1200 New Jersey Avenue S.E., Washington, DC 20590 or call the toll free
    Vehicle Safety Hot Line at 1-888-327-4236 (TTY: 1-800-424-9153), or go
    to http://www.safercar.gov.

    If you are a vehicle lessor, Federal law requires that any vehicle
    lessor receiving this recall notice must forward a copy of this notice
    to the lessee within ten days.

    We have sent this notice in the interest of your continued satisfaction
    with our products, and we sincerely regret any inconvenience this
    condition may have caused you.

    Thank you for driving a Toyota.

    Sincerely,

    TOYOTA MOTOR SALES, U.S.A., INC.
                                     ______

                                           Bulletin No.: 09298A
                                                           January 2010
    Dear General Motors Customer:

    This notice is sent to you in accordance with the requirements of the
    National Traffic and Motor Vehicle Safety Act.

    General Motors has decided that certain 2010 model year Chevrolet
    Equinox and GMC Terrain vehicles fail to conform to Federal/Canada
    Motor Vehicle Safety Standard 103, ``Windshield Defrosting and
    Defogging Systems'', and Standard 101, ``Controls and Displays''. As a
    result, GM is conducting a recall. We apologize for this inconvenience.
    However, we are concerned about your safety and continued satisfaction
    with our products.
    IMPORTANT
       Your vehicle is involved in recall 09298.

       Schedule an appointment with your GM dealer.

       This service will be performed for you at no charge.
    Why is your vehicle being recalled?
    The software in the center instrument panel can cause the heating, air
    conditioning, defrost, and radio controls, as well as the panel
    illumination to become inoperative. Driving without a functioning
    defrost system can decrease your visibility under certain driving
    conditions and could result in a crash without warning. Driving without
    panel illumination can divert your attention while looking for a
    control.
    What will we do?
    Your GM dealer will replace the computer module in the center
    instrument panel. This service will be performed for you at no charge.
    Because of service scheduling requirements, it is likely that your
    dealer will need your vehicle longer than the actual service correction
    time of approximately 20 minutes.

    If your vehicle is within the New Vehicle Limited Warranty, your dealer
    may provide you with shuttle service or some other form of courtesy
    transportation while your vehicle is at the dealership for this repair.
    Please refer to your Owner's Manual and your dealer for details on
    courtesy transportation.
    What should you do?
    You should contact your GM dealer to arrange a service appointment as
    soon as possible. When scheduling your appointment, please provide your
    dealer with your vehicle's 17-character vehicle identification number
    (VIN). Your VIN can be found above your name and address at the top of
    this letter, and will follow the numbers ``09298''. Your dealer will
    need your VIN to order parts for your vehicle so that they will be
    available on the day of your service appointment.
    Do you have questions?
    If you have questions or concerns that your dealer is unable to
    resolve, please contact the appropriate Customer Assistance Center at
    the number listed below. More information about your vehicle can be
    found at the Owner Center at www.gmownercenter.com.

    ------------------------------------------------------------------------
                                                            Text Telephones
                Division                    Number               (TTY)
    ------------------------------------------------------------------------
    Chevrolet                            1-800-630-2438      1-800-833-2438
    GMC                                  1-866-996-9463      1-800-462-8583
    Guam                                 1-671-648-8450
    Puerto Rico--English                 1-800-496-9992
    Puerto Rico--Espanol                 1-800-496-9993
    Virgin Islands                       1-800-496-9994
    ------------------------------------------------------------------------

    If after contacting your dealer and the Customer Assistance Center, you
    are still not satisfied we have done our best to remedy this condition
    without charge and within a reasonable time, you may wish to write the
    Administrator, National Highway Traffic Safety Administration, 1200
    New Jersey Avenue, SE, Washington DC 20590, or call the toll-free
    Vehicle Safety Hotline at 1.888.327.4236 (TTY 1.800.424.9153), or go to
    http://www.safercar.gov.
    Federal regulation requires that any vehicle lessor receiving this
    recall notice must forward a copy of this notice to the lessee within
    ten days.

                                                  Scott Lawson,
                          Director, Customer and Relationship Services.
                                     ______

                                     ______

                                Wed, Aug 1 2012

               Ford sues Dana over part linked to Windstar recall

        (Reuters)--Ford Motor Co (F.N: Quote, Profile, Research, Stock
    Buzz) has sued Dana Holding Corp (DAN.N: Quote, Profile, Research,
    Stock Buzz), one of its largest suppliers, over a part linked to the
    recall last year of more than 425,000 Ford Windstar minivans.
        In a July 27 complaint filed in a Wayne County, Michigan state
    court, Ford said Dana has refused to accept responsibility for the
    ``inadequate'' subframes it had supplied for Windstars made during the
    1999 to 2003 model years.
        Ford said it has suffered ``substantial damages'' from the
    subframes and the recall, but that Dana has refused to cover its costs.
    The lawsuit seeks compensation for past and future damages related to
    the subframes, as well as other costs.
        A spokesman for Dana, which is based in Maumee, Ohio, did not
    immediately respond to a request for comment.
        On January 26, 2011, Ford recalled 425,288 Windstars in 22 mostly
    cold-weather U.S. states plus the District of Columbia, saying that
    subframe brackets and mounts might separate, causing a loss of steering
    control and a greater risk of a crash.
        The recall followed a National Highway Traffic Safety
    Administration probe into dozens of reports of subframe problems,
    nearly all from what it called ``Salt Belt'' states.
        ``Ford is asking the court to enforce the cost sharing terms of our
    supply agreement with Dana,'' said Todd Nissen, a spokesman for the
    Dearborn, Michigan-based automaker.
        Last month, Ford announced two recalls for its new 2013 Escape,
    including one urging owners to stop driving the sport-utility vehicles
    with 1.6-liter engines because of a fire risk.
        In Wednesday trading, Ford shares fell 15 cents to $9.04, while
    Dana shares fell 53 cents to $12.65.
        The case is Ford Motor Co. v. Dana Holding Corp et al., Wayne
    County, Michigan Circuit Court, No. 12-009955.
        (Reporting by Jonathan Stempel in New York; Editing by Bernard Orr)
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        Senator Boxer. OK. Very, very clear--Corolla, this, that, a
    whole series of these. And I understand one of those against us
    is going to say: Well, it didn't say it was life-threatening--
    it didn't say ``Do not drive.'' So if it doesn't say do not
    drive, the opponents say: Big deal. It didn't say ``Do not
    drive'' on this one, on Daimler-Chrysler. So if you come here
    with that argument, you are not making an argument that is
    going to hold up for one second, so don't even make it. And if
    you do, I'll be here.
        What to do? Go right in and get it fixed. Every one of
    these says that. Somebody said: Oh, well, what if it's just a
    defogger or something like that? Big deal. And that's in here.
    One of them was a defogger. Did you ever try driving when a
    defogger doesn't work? It once happened to me. You can't see a
    damn thing. So don't tell me that a lot of these are so
    unimportant. They're all important.
        Essentially, I want to thank you for your support for this
    legislation, and I urge the Obama Administration to work with
    us, because we've got to get it through this committee, we've
    got to get it through the Senate, and we've got to get the
    House to do it. And we cannot stop until it's done. So we're
    going to need the President's help, the administration's help.
        So thank you very much.
        Mr. Strickland. Thank you, Ms. Boxer.
        Senator McCaskill. Senator Blumenthal.

                 STATEMENT OF HON. RICHARD BLUMENTHAL,
                     U.S. SENATOR FROM CONNECTICUT

        Senator Blumenthal. Thank you, Senator McCaskill. I want to
    thank you for having this hearing on this critically important
    topic and using this subcommittee, which is so important, and
    thank you also to Senator Boxer and most especially Senator
    Schumer. I'm very proud to be joining them as well as Senator
    McCaskill in co-sponsoring this very, very important bill.
        I just want to say a particular thanks to Ms. Houck for
    being here today. I know how much courage and fortitude it
    takes. But your testimony puts a face and a voice to an issue
    that for many people is simply abstract and technical. There's
    nothing technical or abstract about the dangers or the damage
    suffered every day in America as a result of defects in
    automobiles that recalls can help to cure.
        In Connecticut, a Greenwich man named Gary Massey was
    permanently disabled in a 2008 crash that involved his car, a
    Lexus ES-350 loaner, that had been recalled for an unsecure
    floor mat but not repaired. He hit a tractor-trailer on the
    highway while the car was careening out of control. Now, a
    floor mat doesn't involve what a lot of people think would be a
    critical part of an automobile's system. The position of the
    National Automobile Dealers, our friends in the association, is
    that only those recalls--and I'm quoting--``which require
    immediate repairs to systems such as steering, fuel delivery,
    accelerator controls, or other crucial components,'' end quote,
    should be considered before renting a car.
        I respect their point of view, but my question for you, Mr.
    Strickland, is: Do you think that rental companies or auto
    dealers should be deciding which recalls are crucial? Aren't
    they all crucial?
        Mr. Strickland. Senator Blumenthal, there is one standard
    for safety that the National Highway Traffic Safety
    Administration follows and enforces. We deal with unreasonable
    risk to safety. We don't gradate them. If there is a judgment
    that it is an unreasonable risk, it's an unreasonable risk and
    it needs to be repaired.
        The notion that there should be some gradation of
    unreasonable risk is frankly counter to the policy for safety
    and frankly dangerous. Senator, I just have to say on the
    unsecured mats, your constituent that was involved in a crash,
    the Saylor family in San Diego, four people died because of an
    unsecured mat. So you can't say that these risks are small or
    large. They can all possibly injure or kill someone and they
    have to be addressed equally.
        Senator Blumenthal. Anything that goes wrong while the
    driver is behind the wheel can involve a crash or some other
    kind of malfunction that can result in human injury or death,
    is that not so?
        Mr. Strickland. Absolutely right.
        Senator Blumenthal. Thank you very much, Mr. Strickland.
    Thank you for being here today and I really appreciate your
    testimony. Thank you.
        Mr. Strickland. Thank you, Senator.
        Senator McCaskill. Thank you, Mr. Strickland, for being
    here. We appreciate your testimony.
        Mr. Strickland. Thank you, Madam Chairman.
        Senator McCaskill. We will continue to be in consultation
    with you as we move toward final passage of this legislation.
        If the second panel will come up, that would be terrific.
        Welcome. I will introduce the panel. We have Ms. Sharon
    Faulkner, Executive Director of American Car Rental
    Association; Ms. Rosemary Shahan--Am I saying that correctly?
        Ms. Shahan. ``SHAY-han.''
        Senator McCaskill. ``SHAY-han,'' President of Consumers for
    Auto Reliability and Safety; Mr. Mitch Bainwol, President and
    CEO, Alliance of Automobile Manufacturers; and Mr. Peter Welch,
    the President of the National Automobile Dealers Association.
        We will begin with the testimony of Ms. Faulkner.

    STATEMENT OF SHARON FAULKNER, EXECUTIVE DIRECTOR, AMERICAN CAR
                       RENTAL ASSOCIATION (ACRA)

        Ms. Faulkner. Good morning and thank you, Senator McCaskill
    and Senator Heller and Senator Blumenthal and members of the
    Subcommittee. I appreciate the opportunity to be here in
    support of legislation of vital importance to the rental car
    and car sharing industry and to our customers.
        My name is Sharon Faulkner and I'm the Executive Director
    of the American Car Rental Association, or ACRA. ACRA
    represents more than 235 companies in the rental car and car
    sharing industry. Our members range from the brands you would
    recognize, such as Enterprise, Avis, Hertz; it also includes
    many mid-sized companies, as well as small and mom-and-pop
    operations. Our members run fleets as large as 1 million
    vehicles and as small as 10 vehicles.
        On a personal note, before becoming Executive Director I
    along with my husband operated one of those smaller rental car
    companies in upstate New York for more than 30 years. While I
    was a franchisee or licensee of one of the major brands, we
    were truly a smaller business, operating about 6 locations and
    300 vehicles. When my husband and I decided to sell our
    business several years ago and I was asked to assume my current
    role as the Executive Director of our trade association, I
    jumped at that opportunity because I believe the car rental
    industry provides a very important service and this role allows
    me to continue to promote outstanding customer satisfaction.
        It is critically important to understand the makeup of ACRA
    and that our organization actively participated in the process
    that produced the legislation embodied in S. 921. Safety in our
    industry is paramount. It's about trust between our customers
    and our individual businesses. The minute our customers don't
    feel safe is the minute we lose customers and potentially our
    livelihoods. Therefore, our industry has always placed a high
    priority on providing cars that are properly maintained and
    safe for our customers to use.
        Over the last several years, with the sad and unfortunate
    loss of Raechel and Jacqueline Houck, the issue of recalls in
    rental cars has been raised. Senators Schumer and Boxer
    ultimately introduced legislation in 2011 attempting to address
    these safety concerns. We as an industry initially had serious
    reservations with the broad scope of the legislation as well as
    the implementation of it. Additionally, we believed as an
    industry we were already taking the appropriate steps to
    protect our customers by following the guidance from the auto
    manufacturers.
        Over time, many of our members adopted conservative
    policies of grounding most, if not all, vehicles with an open
    recall. As a result, we believed legislation was not necessary
    and opposed the original legislation.
        However, we ultimately concluded that our customers would
    expect us to support this type of legislation, and if we could
    achieve a workable solution we would do just that. We then
    proactively engaged in a dialogue with the staffs of Senators
    Schumer, Boxer, McCaskill, and Blunt, along with other
    stakeholders such as key members of our industry and consumer
    advocates, including Ms. Houck.
        Over the course of several months last year, our industry
    worked diligently through the scope and the operational
    concerns we had with the initial bill. We wanted to ensure that
    the legislation would be something that ACRA could emphatically
    support, and S. 921 is such a bill. I am happy to highlight for
    you the key compromise components of the bill.
        An industry-supported provision in the bill defines the
    time-frame in which rental companies need to ground the
    vehicles after receiving the safety recall notice. There is a
    period of time that the companies need in order to receive the
    notice and successfully ground the appropriate vehicles. The
    original bill had no defined time-frame and many members were
    concerned how that may be interpreted. At our urging, the
    legislation now calls for the vehicles to be grounded within 24
    hours of receiving the safety recall notice, and we do have 48
    hours in the case of larger recalls. The only exemption to the
    ``Do not rent'' requirement is when the manufacturer has issued
    a safety recall and has not developed a permanent repair, but
    offers a temporary fix or an interim remedy that eliminates the
    safety risk. If the rental car company performs the interim
    remedy, then the car may be continued to be rented.
        The best real life example of this is when there was a
    recall due to a faulty accelerator pedal. Our industry, along
    with other consumers, at the direction of the manufacturer
    pulled the floor mats out of the vehicles and continued to keep
    the cars in service. Thousands of private consumers did the
    same and the vehicles remained safely on the road. The bill now
    contains language that specifically permits an interim remedy
    when appropriate.
        Our industry also sells a large number of cars each year.
    The legislation requires rental car companies to permanently
    repair any safety recall prior to selling a vehicle either
    through retail or wholesale markets. The only exception to this
    requirement, at the behest of the industry, is when a vehicle
    has been so severely damaged that it can only be sold for
    parts.
        I would like to underscore here that this sales prohibition
    for rental car companies will be unique. We will be the only
    used car seller that will be required to perform any recall
    work prior to sale, either at retail or wholesale.
        In conclusion, we have come together with the sponsors,
    supporters, and staff in good faith negotiations. The consumer
    advocates listened and were pragmatic about many of our early
    objections, and I firmly believe that our industry did
    likewise. This is the way the process is supposed to work and
    we're thankful to be a part of it.
        We're often asked why as an industry we are willing to
    accept new regulations upon ourselves. The response to that is
    easy: we engaged and became part of the process. The end result
    is a proposal that will provide our customers additional
    assurance that the vehicles they rent are safe and provides our
    industry with a uniform Federal standard across the country and
    that addresses our original operational concerns. I encourage
    those who oppose S. 921 to engage toward that same important
    goal that we have.
        I respectfully ask you to support S. 921. I look forward to
    any questions that you might have.
        [The prepared statement of Ms. Faulkner follows:]

          Prepared Statement of Sharon Faulkner, Executive Director,
                     American Car Rental Association (ACRA)
        Good afternoon and thank you, Senator McCaskill and Senator Heller
    and members of the Subcommittee on Consumer Protection, Product Safety
    and Insurance. I truly appreciate the opportunity to be here today to
    speak in support of legislation of vital importance to the rental car
    industry and to our customers.
        My name is Sharon Faulkner and I am the Executive Director of the
    American Car Rental Association--or ACRA. ACRA represents 235 companies
    in the rental car industry. Our members range from the brands you would
    recognize such as Enterprise, Alamo and National Car Rental; Avis,
    Budget, Hertz, Dollar and Thrifty. It also includes many mid-size,
    regional companies as well as the smaller, Mom & Pop operators. Our
    members run fleets as large as one million cars and as small as ten.
        On a personal note, before becoming the Executive Director, I--
    along with my husband--operated one of those smaller, Mom & Pop rental
    car companies in Upstate New York for more than 30 years. While I was a
    franchisee or licensee of one of the major brands, we were truly a
    small business, operating six locations and 300 vehicles.
        We were the typical small business in America and it allowed us to
    raise our three boys. But, it was a labor of love. . .and I grew to
    love our business, our customers and this industry.
        That is why when my husband and I decided to sell our business
    several years ago and I was asked to assume my current role as
    Executive Director of our trade association, I jumped at that
    opportunity. I believe the car rental industry provides a very
    important service and this role allows me to continue promoting
    outstanding customer service.
        I share this with you because it is critically important to
    understand the make-up of ACRA and that our organization actively
    participated in the process that produced the legislation embodied in
    S. 921.
        Our organization unanimously endorsed it and we--along with many of
    our members--are working hard for its passage.
    Rental Car Safety
        Safety in our industry is paramount. It's about trust--between our
    customers and our individual businesses. The minute our customers don't
    feel safe is the minute we lose customers and potentially our
    livelihoods. Therefore, our industry has always placed a high priority
    on providing cars that are properly maintained and safe for our
    customers to use.
    From Opposition to Support
        Over the last several years, the issue of safety recalls and rental
    cars has been raised. Senators Schumer and Boxer ultimately introduced
    legislation in 2011 attempting to address these safety concerns. We, as
    an industry, had serious reservations with the broad scope of the
    legislation as well as the implementation of it. Additionally, we
    believed we were already taking the appropriate steps to protect our
    customers by following the guidance from the manufacturers. Over time,
    many of our members adopted conservative policies of grounding most, if
    not all, vehicles with an open recall. To further demonstrate our
    commitment, most ACRA members adopted a formal pledge to this voluntary
    grounding. As a result, we believed legislation was not necessary and
    opposed the original legislation.
        However, we ultimately concluded that our customers would expect us
    to support this type of legislation and if we could achieve a workable
    solution, we would do just that.
        We then pro-actively engaged in a dialogue with the staffs of Sens.
    Schumer, Boxer, McCaskill and Blunt--along with other stakeholders such
    as key members of our industry and consumer advocates, including Mrs.
    Houck.
    Collaboration and Compromise
        Over the course of several months last year, our industry worked
    through the scope and the operational concerns we had had with the
    initial bill. We wanted to ensure that as an organization that we
    didn't just support a bill for the sake of supporting it. . .but that
    it would be a bill we could emphatically get behind and support.
        S. 921 is such a bill.
    S.921
        The bill is fairly simple. At the heart of it is the requirement
    that rental car companies remove from service any vehicle that has a
    manufacturer safety recall and has not yet been repaired. Rental
    companies may not re-rent or sell any unrepaired vehicle.
        I am happy to highlight for you the key compromise components of
    the bill:

            Timing of Notice and Grounding

            An industry-supported provision in the bill defines the time-
            frame in which rental companies need to ground the vehicles
            after receiving the safety recall notice. There is a period of
            time the companies need in order to receive the notice and
            successfully lock down the appropriate vehicles. The original
            bill had no defined time-frame and many members were concerned
            how that may be interpreted. At our urging, the legislation now
            calls for the vehicles to be grounded within 24 hours of
            receiving the safety recall notice. In the situation of a
            particularly large recall--one that affects more than 5,000
            vehicles for one company, the lock down time-frame is 48 hours.

            Interim Remedy

            The only exception to the ``do not rent'' requirement is when
            the manufacturer has issued a safety recall and has not
            developed the permanent repair, but offers a temporary fix--or
            interim remedy--that eliminates the safety risk. If the rental
            car company performs the interim remedy, then the car may
            continued to be rented. Once the permanent repair is offered by
            the manufacturer, the vehicle must be pulled from service and
            permanently repaired before being re-rented.

            The best real life example of this is when there was a recall
            due to a faulty accelerator pedal. While there was no permanent
            fix at the time of the notice being sent, the manufacturer
            communicated to all consumers, including rental car companies,
            that if they removed the driver's side floor mat, the pedal
            would un-stick and the risk would be mitigated. Our industry,
            along with thousands of other consumers, pulled out the floor
            mats and continued to keep the cars in service. Thousands of
            other consumers did the same and the vehicles remained safely
            on the road. Many members were concerned that the original
            legislation did not specifically address this circumstance.
            Language was agreed to by all parties and an interim remedy is
            permissible under S. 921.

            Car Sales

            Our industry purchases the largest number of cars from the
            manufacturers every year . . . and we also sell a large number
            of cars each year through retail and wholesale channels. To
            ensure the stream of commerce maintains integrity, the
            legislation requires that rental car companies permanently
            repair any safety recall to any vehicle prior to selling that
            vehicle--either through retail or wholesale markets. The only
            exception to this requirement--at the behest of industry--is
            when a vehicle has been so severely damaged that it will only
            be sold for parts, the rental company does not need to perform
            the recall work.

            One point I would like to underscore here is that this sales
            prohibition for rental car companies will be unique in the used
            car market. We will be the only used car seller that will be
            required to perform any recall work prior to sale--either at
            retail or wholesale.
    Conclusion
        In conclusion, the process has worked. We came together with the
    sponsors, supporters and staff in good-faith negotiations to work
    through the issues and address our concerns. The consumer advocates
    listened and were pragmatic to many of our early objections . . . and I
    firmly believe that our industry did likewise. This is the way the
    process is supposed to work. We at ACRA are thankful to be a part of
    it.
        As we continue to talk to members of Congress and their staff in
    support of the bill, we are often asked why as an industry we are
    willing to accept new regulations upon ourselves. The response to that
    is easy. After listening to our customers, we engaged and became part
    of the process. The end result is a proposal that will provide our
    customers additional assurance that the vehicles they rent are safe and
    provides our industry with a uniform Federal standard across the
    country and addresses our original operational concerns. I encourage
    those who oppose S. 921 to engage toward the same important goal.
        Therefore, I respectfully ask you to support S. 921. I look forward
    to any questions you may have.
        Thank you.
                                     ______

     American Car Rental Association--November/December 2012--AUTO RENTAL
                                      NEWS

               A CAUSE WE ALL EMBRACE, A BILL WE CAN ALL SUPPORT

        A proposed bill governing recalled rental vehicles shows that
    collaboration between the auto rental industry and key stakeholders can
    result in a legislative solution that advances the public good.

        ``NOTHING GETS DONE IN WASHINGTON.'' UNFORTUNATELY,that's become
    the conventional wisdom in the face of a growing sense that the art of
    constructive legislative compromise is all but dead.
        But as we move through this election season, we just had a most
    encouraging example of how people with differing viewpoints can get
    beyond those differences and arrive at legislative solutions that
    advance the public good. We're talking about the recent compromise
    agreement struck between the rental car industry and consumer groups on
    legislation governing rental vehicles subject to a manufacturer's
    recall.
        This landmark bill--and the coalition that came together behind
    it--showed that important things can get done in Washington through
    hard work and honest communication. Our industry can be proud to have
    played a role in that process. The goal is to have the legislation
    introduced when Congress returns to work after the November elections.
        This proposed legislation is the result of a great deal of
    thoughtful industry collaboration by the American Car Rental
    Association (ACRA), and all the major car rental players: Enterprise
    Holdings, Avis Budget Group, Hertz Corp. and Dollar Thrifty Automotive
    Group. We arrived at a solution that will give our customers what
    they've asked for: Increased confidence that the car they rent is
    properly maintained and safe to drive. This is a principle we all want
    to deliver, but converting internal policies into legislation is no
    easy task. After all, ACRA members were already committed to not
    renting cars under recall.
        Therefore, there were significant practical considerations that had
    to be worked through, including the time needed to review recall
    notices, identify affected vehicles, and alert all branch offices and
    employees. We needed lawmakers to take such operational realities into
    account. We had legitimate concerns and needed to have a place at the
    table in the development of legislation that would have significant
    impact on those operations.
        To that end, ACRA and a number of our member companies worked for
    many months with other stakeholders, including Sens. Charles Schumer,
    Barbara Boxer, Claire McCaskill and Roy Blunt, as well as Reps. Leonard
    Lance, G.K. Butterfield, John Barrow and Lois Capps, the Consumers for
    Auto Reliability and Safety (CARS) and Carol Houck, whose daughters
    were tragically killed in 2004 in an accident involving a recalled
    rental car.
        When all parties sat down at the table together, we were able to
    work out our differences and develop a legislative solution that
    standardizes our existing safeguards and gives us a uniform, industry-
    wide approach to addressing recalled vehicles.
        The legislation we're supporting prohibits the rental of any
    vehicle subject to a safety recall notice--including vehicles rented
    from car sharing services--and prohibits car rental companies from
    selling used vehicles subject to an open recall. We also believe it can
    be a model for the broader discussion about fleet safety in all corners
    of the automotive industry.
        At the end of the day, we believe this compromise represents a
    workable and enforceable law that will be much more effective in
    practice because it reflects the realities of our business. This is
    because the industry had a voice in the process and collaborated with
    all parties on its development.
        Now it's time for all of you to make your voices heard. We urge you
    to join with ACRA and our members who have worked to develop this bill
    in working for its passage. Contact your elected representatives to
    help us serve the best interests of our customers and our industry by
    moving this legislation forward.

        Senator McCaskill. Thank you very much, Ms. Faulkner.
        Ms. Shahan.

      STATEMENT OF ROSEMARY SHAHAN, PRESIDENT, CONSUMERS FOR AUTO
                         RELIABILITY AND SAFETY

        Ms. Shahan. Madam Chair, Senator Boxer, Senator Blumenthal,
    Senator Blunt: Thank you very much for the invitation to
    testify for the Raechel and Jacqueline Houck Safe Rental Car
    Act of 2013. I'm Rosemary Shahan. I'm President of Consumers
    for Auto Reliability and Safety. We're based in Sacramento,
    California, and we're probably best known for initiating
    California's auto lemon law that helped inspire the lemon law
    that Senator Blumenthal worked so diligently to pass in
    Connecticut and was enacted in all 50 states.
        I would especially like to thank Senator Schumer, Senator
    Boxer, and you, Senator McCaskill, and your staffs for your
    excellent and inspiring leadership and hard work, and Senator
    Blumenthal, Senators Murkowski, Feinstein, Gillibrand, Casey,
    and Schatz for co-sponsoring this vitally important auto safety
    legislation.
        When I first heard from Cally Houck about what had
    happened, I've been working on auto safety issues since 1979
    and I had no idea that rental car companies were exempt from
    our safety recall system. To me it just seemed like a no-
    brainer. Since then we've done polling on this issue. In the
    great State of Missouri, we polled and found that among the
    public, 86 percent supported requiring rental car companies to
    ground vehicles when they're under safety recall and get them
    fixed. In fact, the most common reaction that we get from
    people is: ``You mean this isn't the law already?'' The other
    reaction we get is: ``You mean they have to be told?'' Clearly,
    the answer to the first one is: no, it's not the law already;
    and yes, they do have to be told.
        I'm very pleased to be here today with the rental car
    industry. We worked very diligently with them, with your
    leadership and help, and reached a workable compromise that
    improves safety for consumers and takes into account their
    business model. It's a very balanced compromise.
        Really, the question before you, as Senator Boxer has
    mentioned, is whether Congress should allow rental car
    companies to rent vehicles to the public that are so unsafe
    that it's a violation of Federal law to sell them as new cars
    and whether the decision to risk the public safety should
    depend on the type of the transaction and not on how unsafe the
    vehicle is. To consumers it really doesn't make any sense to
    decide whether you're exposed to the risk based on whether you
    buy this as a new car from the car dealer or you rent it from a
    rental car company. People expect that when they rent a
    vehicle, whether it's from a rental car company like
    Enterprise, Hertz, or Avis, or whether it's from a car dealer,
    they expect it to be safe. They just feel like this is
    something that is so basic.
        Once the safety recall is issued, it's a violation of
    Federal law for a new car dealer to sell it as a new car, but
    it's still legal to rent the same car to a family that's going
    to get into it and take it to Disneyland. That's what we really
    hope that you will help us change.
        This legislation applies only to vehicles that are being
    recalled by the manufacturer under a Federal motor vehicle
    safety recall. It does not require rental car companies to
    ground vehicles for things like service campaigns or less risky
    types of problems or for recalls of the emissions system. It
    applies only to vehicles where the rental car company is the
    registered owner and receives the notice that Senator Boxer
    showed, a very specifically mandated and worded notice.
        It requires them to ground them as soon as practicable or
    within 24 hours for smaller recalls or 48 hours for the largest
    recalls, involving 5,000 vehicles or more in a particular
    company's fleet. It allows them to continue to rent vehicles
    pending an ultimate repair when the manufacturer's notice
    provides for an interim measure that eliminates the safety
    risk.
        We believe it has the flexibility for the industry at the
    same time it protects consumers. It doesn't do everything we
    wanted to accomplish, but we really need this law. We agreed
    with the rental car companies to join together in support of
    this legislation in order to create a uniform Federal standard
    rather than pursuing legislation State by State. California
    Senator Bill Monning, who represents the district where Raechel
    and Jackie were killed, has agreed to forestall enactment of
    legislation he authored in 2011 in order to allow Congress time
    to address the problem nationally, where it really should be
    addressed.
        We hope and pray that you will vote to enact this Act named
    for Raechel and Jackie. It's beyond your power to bring them
    back to life, but the fate of others who rent vehicles to visit
    their parents, take a vacation, or go on a business trip or
    share the roads with them rests in your hands.
        Thank you again and I look forward to your questions.
        [The prepared statement of Ms. Shahan follows:]

               Prepared Statement of Rosemary Shahan, President,
                   Consumers for Auto Reliability and Safety
        Madame Chair and Senators, I'm Rosemary Shahan, President of
    Consumers for Auto Reliability and Safety, based in Sacramento,
    California. Thank you for the invitation to testify for the Raechel and
    Jacqueline Houck Safe Rental Car Act of 2013. I would especially like
    to thank Senator Schumer, Senator Boxer, and you and your staffs for
    your leadership and hard work, and Senator Blumenthal, Senators
    Murkowski, Feinstein, Gillibrand and Casey for co-sponsoring this
    vitally important auto safety measure.
        CARS is a national award-winning non-profit auto safety and
    consumer advocacy organization dedicated to preventing motor vehicle-
    related injuries, fatalities and economic losses. We greatly appreciate
    that there is bi-partisan support for this bill, and also welcome the
    support from all the major rental car companies, the American Car
    Rental Association, State Farm Insurance Company, and the American
    Automobile Association.
        When I first heard from Cally Houck about the tragic crash that
    killed Raechel and Jacquie, I was horrified, as anyone would be. And of
    course my heart went out to Cally. But in addition to my natural human
    reaction--as a safety advocate, I was aghast to learn that the rental
    car company was not prohibited from renting cars that are under a
    Federal safety recall. I knew that new car dealers are prohibited from
    selling new vehicles that are subject to a Federal safety recall.
    That's been the law since the 1960s. But I hadn't realized that law
    does NOT apply to rental car companies. I had always just assumed that
    of course rental car companies would not be allowed to rent unsafe,
    recalled cars to the public. Unfortunately, I was wrong.
        The question before you is whether Congress should continue to
    allow rental car companies to rent vehicles to the public that are so
    unsafe, it is a violation of Federal law to sell them as new cars. It
    is whether the decision to risk the public's safety, should depend on
    the type of transaction--and not on how unsafe the vehicle is.
        Under the Federal Motor Vehicle Safety Act, when a vehicle fails to
    comply with Federal safety standards or presents an otherwise
    unreasonable risk to safety, the manufacturer is required to recall it
    and fix it without any charge to the owner. Typical defects that result
    in auto safety recalls include: brakes that fail, axles that break,
    fires, faulty steering, air bags that don't inflate when you need them
    or do inflate when you don't, seat belts that don't stay buckled, and
    other serious, life-threatening defects. Almost always, the
    manufacturers agree that the vehicles are unsafe, and recall them
    without waiting for the National Highway Traffic Safety Administration
    to force their hand. But occasionally manufacturers resist issuing
    safety recalls and the National Highway Traffic Safety Administration,
    the public, and sometimes Congress have to pressure them to act.
        Once a safety recall is issued, it is a violation of Federal law
    for a new car dealer to sell it as a new car, but perfectly legal to
    rent the same car to a family headed for Disneyland. I hope you will
    agree there is no rational basis for that type of double standard,
    where some people are protected because they are buying a new car,
    while others' lives are put at risk merely because they are renting.
        We know from doing polling about rental cars and safety recalls
    that the public overwhelmingly supports requiring rental car companies
    to ground recalled vehicles until they are fixed. In fact, that
    question polled in the great state of Missouri at 86 percent support.
    The most common reaction we get from people when they are told about
    this bill is ``What? You mean there isn't a law already?'' News anchors
    for all the major networks, including Fox News, have expressed the same
    reaction.
        While we heartily support this bill, it is the result of lengthy,
    hard-fought negotiations among the rental car industry and the auto
    safety community. It fairly balances the public's interest in safety
    with the rental car industry's business model. It represents a
    reasoned, rational compromise with the rental car companies. Our top
    priority was for it to be effective, and also workable, given the
    realities of the auto rental marketplace.

       This bill applies only to vehicles that are being recalled
            by the manufacturer under a Federal motor vehicle safety
            recall. It does NOT require rental car companies to ground
            vehicles when manufacturers conduct ``service campaigns'' or
            ``customer satisfaction campaigns'' for less threatening
            defects, or for recalls of the emissions system. It applies
            only to Federal safety recalls. Period.

       This bill applies only to vehicles where the rental car
            company is the registered owner and receives the federally
            mandated notice that manufacturers must send to each registered
            owner, and only when the rental car company receives the
            specific Vehicle Identification Number, or VIN, of the vehicle
            that is being recalled. That is the bright line that triggers
            the obligation for rental car companies to ground recalled
            vehicles--not when they first become aware of the problems, or
            when they receive an earlier heads-up notification from the
            manufacturer. This would also apply to auto dealers who rent
            vehicles to the public. Their obligation to ground and repair a
            recalled vehicle would kick in only after they receive the
            official recall notice for a specific vehicle.

       This bill requires rental car companies to ground vehicles
            under a safety recall ``as soon as practicable'' or within 24
            hours for smaller recalls, or 48 hours for the largest recalls,
            involving over 5,000 vehicles in their fleet. This gives them
            some flexibility for dealing with logistics when they have
            thousands of recalled vehicles scattered around the country.

       This bill specifically allows rental car companies to
            continue to rent vehicles pending a final repair when the
            manufacturer's notice provides for an interim measure that
            eliminates the safety risk, pending availability of parts for
            the ``permanent'' fix.

    This bill does not do everything we wanted to accomplish.

       It does not apply to larger rental vehicles over 10,000
            pounds GVWR. Instead, it provides for the National Highway
            Traffic Safety Administration to conduct a study about those
            vehicles and report to Congress within a year about its
            findings.

       It does not require rental car companies to notify consumers
            who have already rented vehicles when the rental car company
            receives the safety recall notice from the manufacturer. We
            agonized over that and decided that there were too many
            different scenarios to legislate a solution for each one that
            would protect the public and be fair to the rental car
            companies.

        We agreed with the rental car companies to join together in support
    of this legislation in order to create a uniform Federal standard,
    rather than pursuing legislation state by state. California Senator
    Bill Monning, who represents the district where Raechel and Jacquie
    were killed, has agreed to forestall enactment of legislation he
    authored in 2011, in order to allow Congress time to address the
    problem nationally.
        I hope and pray that you will vote to enact this Act, named for
    Raechel and Jacqueline. It is beyond your power to bring them back to
    life, but the fate of others who rent vehicles to visit their parents,
    take a vacation, or go on a business trip--or share the roads with
    them--rests in your hands. Thank you again, and I look forward to your
    questions.

        Senator McCaskill. Thank you.
        Mr. Bainwol.

      STATEMENT OF MITCH BAINWOL, PRESIDENT AND CEO, ALLIANCE OF
                        AUTOMOBILE MANUFACTURERS

        Mr. Bainwol. Chairman McCaskill, Senator Boxer, Senator
    Blunt: Thank you for the opportunity today to testify. My name
    is Mitchell Bainwol. I am President of the Alliance of
    Automobile Manufacturers. Our 12 members produce and/or sell
    about three of four cars in this country.
        Before I begin, I'd like to make a comment as a dad. I have
    three kids ages 15 to 21. Two drive. The third is about to
    learn to drive, which is a tough process for any father. Every
    time they go on a trip, I wait for that text or that call that
    says they've made it to the destination, and I can't imagine
    what it would be like not to get that call. So I get the
    impetus behind this hearing in a very personal, real way.
        I'm moved by the work that Mrs. Houck has done to address
    the tragedy that occurred in 2004. She's made a difference.
    Rental car policies are forever changed. Her experience and her
    commitment moved the rental car industry. With the big four
    voluntary agreement, in many ways this is a settled question.
        So we're now focused on two questions: one, how to lock in
    the commitment that she received; and two, whether the proposed
    statutory response generates side effects that warrant
    modification as we move through the legislative process in the
    Senate. I would like to say nothing more than that we expect
    smooth sailing as we move forward, but we do have some concerns
    that we hope can be addressed. We were not part of the crafting
    process. Our input was not part of that exercise and this is
    our first opportunity to really engage.
        So let's step back and look at the fact situation. First,
    the awful crash that killed the Houck sisters in 2004 caused
    the rental car industry to revise its practices regarding the
    repair of recalled vehicles. The safety benefits are evident,
    that there have not been any other fatalities in the almost 9
    years that have transpired. We're not complacent about this at
    all, yet we are very, very thankful, especially given the huge
    magnitude of activity that characterizes the U.S. rental
    market.
        Second, the rental car companies representing 94 percent of
    the market have pledged to maintain that policy. So the scope
    of the issue is really how to protect the insurance policy and
    then how you deal with the 6 percent of the market that hasn't
    made the same commitment.
        So we view this as important progress, and we turn now to
    the effect of this bill from a public policy perspective. I
    understand that things can be simple, but I think we have to
    unpack it a bit to understand the implications of Federalizing
    the voluntary action. We're most fearful that it creates a
    dual-track system, a new system for rental car companies that
    would ground every vehicle, period, essentially overriding
    manufacturer guidance and overriding the guidance of NHTSA as
    reflected in that process; and two, the current but now
    separate system for moms, dads, and other vehicle owners who
    also want their vehicles repaired in a timely fashion.
        The dual-track system would have significant real world
    consequences that we should all find concerning, because they
    would create future problems that we can avoid. Those two
    problems are these: one, it would place families at a
    disadvantage relative to rental car companies because the bill
    creates enormous economic pressure to move those companies to
    the front of the line for the repairs, ahead of the rest of
    your constituents; and two, it would increase costs for all
    rental car customers, families and business folks, because the
    legislation introduces loss of use liability that ultimately
    will be passed on to consumers.
        Given that the safety benefits have already been realized
    for 94 percent of the market, it is fair to evaluate whether
    introducing these adverse consequences is prudent. Our
    conclusion is that the bill needs some work and we're pledging
    to work with you to get to a fix that meets the objective that
    you're looking for without introducing these adverse
    consequences.
        One option the Committee should look at carefully would be
    to convert the legislation into a meaningful, precise, and
    prescriptive notification program that would both eliminate the
    dual-track challenge as well as address the liability concern.
    Senator Boxer, you introduced your first question to
    Administrator Strickland on the question of notification. We
    agree with you absolutely. When a customer goes to the rental
    car counter to get a car, they should be notified. That's
    exactly the right approach.
        We're open to other approaches. We're not prescriptive in
    terms of how to deal with it, but we do think that we need to
    continue to try to craft something that in fact meets the very
    noble objective that you've laid out. We agree with the
    objective, we agree with the intent, and we want to make sure
    that we solve this problem without introducing adverse
    consequences.
        So thank you very much.
        [The prepared statement of Mr. Bainwol follows:]

      Prepared Statement of Mitch Bainwol, President and CEO, Alliance of
                      Automobile Manufacturers (Alliance)
        Thank you, Chairman McCaskill, Ranking Member Heller and
    Subcommittee members. My name is Mitch Bainwol and I am President and
    CEO at the Alliance of Automobile Manufacturers (Alliance). The
    Alliance is a trade association of twelve car and light truck
    manufacturers including BMW Group, Chrysler Group LLC, Ford Motor
    Company, General Motors, Jaguar Land Rover, Mazda, Mercedes-Benz,
    Mitsubishi Motors, Porsche, Toyota, Volkswagen Group of America and
    Volvo. For Alliance members, who account for roughly three quarters of
    all vehicles sold in the U.S. each year, safety absolutely ranks as our
    top priority. The Alliance appreciates the opportunity to comment on S.
    921, the Raechel and Jacqueline Houck Safe Rental Car Act of 2013.
        Let me say up front that we completely identify with the goals of
    the bill sponsors--to promote speedy repair of recalled vehicles and to
    prevent another accident like the one that killed Raechel and
    Jacqueline Houck in 2004.
        The Commerce Committee has been considering how to address this
    issue for some time. Since more than 9 out of 10 vehicle recalls do not
    involve instructions or recommendations to ``stop driving'' the vehicle
    until repaired, how rental car companies should manage these situations
    has been the subject of some debate. Among the steps that could be
    taken is to make sure rental car customers should have the same recall
    information provided to vehicle owners, so they can make an informed
    decision prior to renting a vehicle, in the unusual event that a
    recalled vehicle has not yet been repaired. The Commerce Committee
    considered such an approach in early drafts of MAP-21.
        Grounding affected vehicles certainly is warranted and appropriate
    for recalls that direct owners to stop driving vehicles, but a broad,
    Federal mandate grounding all vehicles regardless of the nature of the
    recall triggers potential negative impacts that consumer notifications
    would not. Without accompanying consumer protection provisions, a
    fleet-wide grounding mandate could negatively impact both prospective
    renters and ordinary vehicle owners.
        Unfortunately, the bill as currently drafted will give rise to
    unintended, negative consequences for consumers.
        First, this bill pits businesses against ordinary consumers in
    recall situations. To minimize out of service time, rental car
    companies will demand (and have demanded) ``front of the line'' access
    to parts and service, which may force ordinary consumers--moms and dads
    driving their family vehicles--to the back of the line for recall
    repairs. These businesses, which may have affected vehicles sitting
    unrented on their lots, should not be allowed to ``jump the line''
    ahead of individuals that rely on their vehicles every day. Public
    policy that has the potential to bias compliance in favor of business
    over families ought to be reviewed very carefully, no matter how noble
    the intent.
        Second, this bill would increase costs by giving rental car
    companies the opportunity to pursue ``loss of use'' damages against
    manufacturers. They entered into the voluntary agreements without loss
    of use benefits; legislation that fundamentally changes the economic
    relationship by instituting this claim is problematic and will produce
    increased costs that ultimately will be passed along to consumers.
        It is critical to note two points: (1) not all recalls are the
    same, and (2) all recalls are subject to review and approval by NHTSA.
    Most recalls are initiated by auto manufacturers without any
    involvement of NHTSA in the decision to recall. However, whether a
    defect or noncompliance is initially identified by the manufacturer or
    by NHTSA, the proposed remedy and conditions of the recall--even the
    language of the notice to consumers--is reviewed by and subject to
    NHTSA approval. In short, the recall process is very well supervised by
    our regulator.
        The overwhelming majority of recalls do not direct consumers to
    stop driving their vehicles. However, this bill requires all rental
    cars to be grounded no matter the circumstances of the recall. This
    provision gives rise to a myriad of anti-consumer impacts.
        To be more specific, in 2010 (the most recent year complete data is
    available), only 8 percent of recalls included instructions to
    consumers to stop driving their vehicles. The flip side of that
    equation is relevant; NHTSA did not require a ``stop drive''
    instruction for 92 percent of recalls.
        And here's why. Most recalls involve issues that could result in
    unsafe driving conditions IF left unaddressed over time, rather than
    posing an immediate danger. For example, one company recently issued a
    recall because the HVAC knobs in two of its models could break and the
    inability to operate the ``defrost'' could create a hazard in icy or
    snowy weather. Under the language of this bill, these vehicles would
    have to be grounded . . . in Florida . . . in August. This is one
    example that demonstrates that a one size fits all approach compromises
    broader consumer interests.
        To their credit, the sponsors recognized that the grounding
    requirement is overly broad and included an exception for certain
    cases. However, the exception established in Section 3 is not effective
    because it is inconsistent with current recall practices. The exception
    in Section 3 requires that interim steps specified in recall notices
    ``alter the vehicle'' in order to ``eliminate'' safety risks. In the
    defrost knob recall example, there was no interim means to ``alter the
    vehicle.'' The old knobs needed to be replaced with new knobs. To the
    extent instructions are included in a recall notice, they typically
    describe actions that drivers should take--not ways to ``alter the
    vehicle.'' Moreover, ``elimination'' of safety risks is not a workable
    legal standard. It is unlikely that a manufacturer would be willing to
    assert that some interim measure would actually ``eliminate'' all
    safety risks posed by the defect. Further, we do not believe that NHTSA
    would allow manufacturers to issue a recall notice advising consumers
    that some step short of complete remedy would ``eliminate'' the safety
    risk posed by the defect. Thus the exception, while well motivated,
    does not effectively mitigate the grounding requirement.

            Establishing a Federal mandate that rental car companies ground
            any vehicle subject to a recall regardless of the circumstances
            of the recall effectively prioritizes rental car companies
            above other vehicle owners for service and repairs.

        Under the current recall program, once NHTSA has reviewed and
    approved a manufacturer's proposed recall notice, the exact same notice
    language is sent to all vehicle owners. The language in a notice to
    rental car companies is identical to the language Joe or Jane Consumer
    receives. Both the rental car company and the average citizen owner are
    treated equally under the recall. That strikes us as entirely
    appropriate.
        This bill would introduce the first legal distinction amongst
    owners in the recall process. While it wouldn't require manufacturers
    to treat rental car companies differently per se, it would incentivize
    prioritizing recall repairs on rental fleets to avoid economic harm in
    a way that simply doesn't exist today. Even if rental companies did not
    receive special treatment, the mere fact that all of the recalled
    vehicles in their fleets would have to be repaired immediately would
    result in average vehicle owners being pushed to the back of a long
    line. Imagine your constituents receiving a recall notice and taking
    their vehicles to their dealers to be repaired, only to learn that
    there are 100 rental cars in line in front of them.
        In 2000, this Committee rewrote the laws governing recalls with a
    bias toward initiating recalls as quickly and as widely as possible. By
    all measures, you were extremely successful. Problems are being
    identified sooner, and manufacturers and NHTSA are taking swift action.
    Any requirement that has the potential to change the equities in this
    process must be evaluated carefully.
        If rental fleets are grounded regardless of the recall, rental car
    companies would want immediate access to parts and service to get their
    fleets up and running as soon as possible. They would demand priority
    treatment both from manufacturers and repairers and potentially
    threaten manufacturers who did not provide priority with ``loss of
    use'' lawsuits. It simply is not tenable--or appropriate--to ask
    manufacturers and repairers to choose or assign priority amongst
    customers.
        It is the longstanding position of both auto manufacturers and
    NHTSA that recalls should be taken seriously by every vehicle owner and
    every recalled vehicle should be repaired. We do not want to frustrate
    consumers seeking to have their vehicles repaired as soon as possible,
    and we are concerned about potential delays for a class of non-
    corporate owners.

            Establishing a Federal mandate that rental car companies ground
            any vehicle subject to a recall--regardless of the
            circumstances of the recall--will ultimately increase costs to
            consumers without any additional safety benefit.

        Rental car companies today theoretically could attempt to pursue
    damages against manufacturers for ``loss of use'' of the vehicle for
    the period it is out of service while waiting for repair. However,
    absent a Federal mandate, they likely would not prevail in state
    courts. Imposing a Federal requirement mandating the wholesale
    grounding of recalled vehicles owned by rental car companies
    significantly changes the legal equation, going well beyond the purpose
    of the bill.
        ``Loss of use'' damages can be profoundly anti-consumer. For
    instance, the Supreme Court of Colorado recently ruled that rental car
    companies don't even need to show that a vehicle would otherwise have
    been rented to receive loss of use damages. To combat abuse of
    consumers, some states, including California and New York, legally
    prohibit rental car companies from seeking ``loss of use'' claims
    directly against consumers or their insurance companies in cases where
    a consumer damages a vehicle.
        This bill mandates that rental car companies ground recalled
    vehicles until they are repaired, but it puts no time limit on the
    repair. It is very easy to imagine a rental agency, particularly one in
    a seasonal market or with low take rates, not worrying about slow
    completion of recall remedies if the company is able to seek
    compensation for all of the time the vehicle is ``out of service.''
    Today, rental car companies have enormous incentives to perform repairs
    as soon as possible to get vehicles back in service. They also have
    means of minimizing costs. This bill unintentionally removes those pro-
    consumer, pro-safety incentives.
        Some argue that ``loss of use'' damages could be addressed by
    manufacturers and rental companies up front, in their contracts--after
    all, in most cases, both parties are large corporations with a
    symbiotic relationship. This is not universally true--there are large
    and small manufacturers and large and small rental businesses, and they
    will not always be bargaining on a ``level playing field.'' But even in
    cases where both parties are on a similar footing, consumers will wind
    up paying the tab for a cost that doesn't currently exist. What
    otherwise seems to be a reasonable attempt to put the agreement by the
    rental car companies into statute will, in practice, generate new
    costs.
        Given the current state of the industry's practice with respect to
    recalls, the practical safety effects of S. 921 are likely to be
    limited. The tragic crash that killed the Houck sisters in 2004 caused
    the rental car industry to revise its practices regarding the repair of
    recalled vehicles in order to prevent a similar tragedy. The Alliance
    commends these companies for voluntarily reforming their process. Last
    fall, the ``Big Four'' car rental companies--which account for 94
    percent of rentals--announced an agreement to voluntarily stop renting
    recalled vehicles until they are repaired. Consequently, special
    attention needs to be paid to the potential for unintended
    consequences.
        At a minimum, this legislation needs to recognize the adverse
    impacts noted above and include a pro-consumer provision that
    explicitly prohibits ``loss of use'' claims. This will reinforce the
    existing incentive toward speedy repair of the affected vehicle and
    minimize costs that ultimately would be passed to consumers. To their
    credit, some of the rental car companies have clearly stated that
    pursuing ``loss of use'' is not their intent and that they would be
    amenable to a provision prohibiting ``loss of use'' damages. S. 921
    should be amended to include this prohibition. ``Loss of use'' simply
    cannot be contracted away without harming the consumer.

            The Alliance stands ready to work with the Committee to address
            potential unintended impacts.

        Auto safety is an incredibly important issue, and while the
    Congress, the Administration, auto manufacturers and other stakeholders
    have devoted enormous resources to reducing traffic deaths, the fact is
    that more than 30,000 people die in crashes every year. This Committee
    has a long history of focusing thoughtfully on policies that will
    significantly improve road safety. You deserve your share of credit for
    the historic decline in traffic deaths in the last seven years.
        We recommend that the Committee consider further requiring rental
    companies to provide their customers with recall notices in the unusual
    case that a recalled vehicle has not yet been repaired. It would
    provide a very strong incentive for rental companies that have not
    taken the pledge to ground all recalled vehicles to repair them as
    quickly as possible, without creating two classes of vehicle owners
    under the recall statutes. We also recognize that there could be other
    ways to address the potential unintended consequences, and we are open
    to considering alternatives. The bottom line is that the Alliance
    stands ready to work with you to ensure that we can continue to achieve
    our shared goals without creating new, unintended, and negative
    consequences for the driving public.

        Senator McCaskill. Thank you, Mr. Bainwol.
        Mr. Welch.

      STATEMENT OF PETER K. WELCH, PRESIDENT, NATIONAL AUTOMOBILE
                          DEALERS ASSOCIATION

        Mr. Welch. Thank you, Madam Chair, Senators. My name is
    Peter Welch. I'm the relatively new President of the National
    Automobile Dealers Association. NADA represents over 16,000
    franchise new car and truck dealer members, 40 percent of which
    sell fewer than 200 new cars a year. We're in virtually every
    community in the country.
        As you know, dealers play a vital role in ensuring that
    recalled vehicles are fixed and made safe. For millions of
    consumers it's the dealer alone who remedies a recalled
    vehicle. When owners receive a recall notice but fail to act,
    many dealers will contact their customers to schedule an
    appointment. When a consumer brings her car in for routine
    service, it's the dealer who performs the recall or warranty
    work outstanding and at no charge to the consumer. During the
    2010 Toyota unintended acceleration recall, many Toyota
    dealerships stayed open 24 hours a day to meet demand. The
    recall system Congress created is dependent on new car dealers
    to faithfully fix the millions of vehicles that are recalled
    annually.
        We support the purpose behind S. 921. Vehicles that are
    unsafe to operate should not be rented. Not only is it
    irresponsible, but the legal liability that a dealership would
    face for doing so would probably bankrupt most of them.
        We do have a few concerns and, as the other witnesses
    indicated, we'd like to work with the Committee and the authors
    and the co-authors to make it even a better bill and to
    hopefully address some of our concerns. Our concerns are not
    many, but notwithstanding some of the testimony we heard this
    morning, not all recalls are the same. Some recalls it has been
    our experience don't render a vehicle unsafe to drive in the
    near term. But S. 921 in its current form really doesn't
    distinguish between recalls that pose an immediate danger and
    those of a more technical nature or those that could manifest
    themselves over a long period of time. But regardless of that,
    all of the vehicles would have to be grounded.
        We gave a couple examples in my submitted testimony. I
    won't elaborate, but we have others, some where there's a
    misprint, for instance, in an owner's manual that violates the
    federal Motor Vehicle Safety Standards and Regulations. We have
    another example that we submitted on a visor sticker that had a
    propensity to separate. A dealer may not have that replacement
    visor in stock, yet that would have to be grounded as well.
        We also believe that it's somewhat overly broad, in that it
    globs in the same category these multinational rental car
    companies that have thousands of vehicles of all makes and
    models in the same pool with franchise new car dealers, many of
    which have very small loaner fleets, nine or ten. But anybody
    that has five would be covered under the bill.
        Recall work can sometimes be delayed through no fault of
    the dealer because parts are unavailable or have not yet been
    designed, tested, manufactured, or distributed. The standard
    where an auto manufacturer can do a so-called temporary fix
    that would eliminate a safety risk--it has been our experience
    that eliminating a safety risk is a very high bar, and we doubt
    that any manufacturers would issue to us.
        Senator Boxer mentioned earlier that some manufacturers do
    issue stop-drive notices. About 10 percent of them are there.
    There are a larger category of vehicles that would be unsafe to
    drive and we would not advocate, for all the reasons stated
    above, that those vehicles be rented or operated.
        Finally, the bill would subject dealers to new inspections,
    new reporting requirements, new penalties, and give NHTSA the
    authority to add more regulatory burdens as it deemed
    appropriate. In tax law, health care, and other areas, Congress
    has recognized the difference between big businesses and small
    businesses. We believe there is a vast difference between a
    multinational corporation with fleets of hundreds of thousands
    of rental cars and auto dealers with a fleet of five vehicles.
        We pledge to work with the Subcommittee to ensure that
    dealers are not disproportionately impacted by the well-
    intentioned legislation, and we thank you for the opportunity
    to testify today.
        [The prepared statement of Mr. Welch follows:]

               Prepared Statement of Peter K. Welch, President,
                    National Automobile Dealers Association
        Madame Chairman, Ranking Member Heller and Subcommittee members,
    thank you for inviting me to testify. My name is Peter Welch and I am
    President of the National Automobile Dealers Association (NADA). NADA
    is a national trade association that represents the interests of over
    16,000 franchised new car and truck dealer members. NADA members are
    primarily engaged in the retail sale and lease of new and used motor
    vehicles, but also engage in automotive service, repairs and parts
    sales. Last year America's franchised new car and truck dealers
    collectively employed nearly a million individuals, and sold or leased
    over 14.4 million new vehicles. NADA members operate in every
    congressional district in the country, and 40 percent of our members
    sell fewer than 200 new vehicles per year. NADA appreciates the
    opportunity to comment on the Raechel and Jacqueline Houck Safe Rental
    Car Act of 2013, a bill that would regulate most rented vehicles under
    open recall, but not taxis or limousines for hire.
        Dealers play a vital role in ensuring that defective and non-
    conforming vehicles are fixed and made safe to drive. For millions of
    customers, it is the dealer alone who remedies a recalled vehicle. When
    motorists receive a recall notice but fail to act on it, many dealers
    will independently contact their customers to alert them to the recall
    and schedule an appointment. When a customer brings her car in for
    routine service, it is the dealer who performs any recall or warranty
    work outstanding--and at no consumer charge. And the quality of the
    repair can be assured because the work performed at franchised new car
    dealerships will be done by a factory trained technician. During
    extraordinary circumstances, such as the 2010 Toyota unintended
    acceleration recall, many Toyota dealerships stayed open 24 hours a day
    to meet demand. Our recall system, which Congress created, is entirely
    dependent on the franchised new car dealers who faithfully fix millions
    of recalled vehicles every year.
        Before I get to the concerns we have with the bill, I would like to
    make one thing perfectly clear: America's franchised new car dealers
    support the purpose behind S. 921. Vehicles that are not mechanically
    sound or are unsafe to operate should never be rented to members of the
    public. Not only is it irresponsible, the legal liability for doing so
    is so severe that it would bankrupt most of our members.
        However, we do have a number of concerns that we respectfully ask
    the Subcommittee to consider.
        Not all ``safety recalls'' render a vehicle unsafe to operate. We
    agree that recalls which require immediate repairs to systems such as
    steering, fuel delivery, accelerator controls, or other crucial
    components should not be rented to the public until the defect is
    remedied. On the other hand, many recalls are due to defects or non-
    compliance with technical Federal motor vehicle standards which,
    depending on the circumstances, may not render a vehicle unsafe to
    operate until a recall fix has been completed. For example, a July 2012
    recall was issued for certain vehicles equipped with a front sunroof
    glass panel that was susceptible to breakage in extremely cold weather.
    While this recall could be of concern to a motorist in Minnesota in
    January, it is unlikely to cause anyone in a warm climate harm. Another
    recent recall was due to the owner's manual containing an inaccurate
    description of the operation of the front passenger occupant
    classification system. Since owner's manuals are no longer routinely
    found in the glove box, it is unlikely this recall if left unremedied
    for a short while would cause injury. Yet another recall involved a
    passenger car being recalled because the air bag label installed on the
    driver's side sun visor could separate from the surface of the visor.
    In this example, if the dealer did not have a replacement sun visor in
    stock, the mere possibility of the air bag label peeling off would have
    been enough to ground the vehicle under this bill.
        These examples demonstrate that S. 921 does not distinguish between
    serious recalls and minor recalls, and would require a vehicle to be
    grounded until the recall is addressed, no matter how minor.
        S. 921 is also overly broad in that it regulates auto dealerships
    that operate small rental or loaner fleets in the same manner as multi-
    national rental car giants. The Hertz, Avis/Budget, and Enterprises of
    the world have hundreds of thousands of vehicles in their rental fleets
    because their primary business purpose is to rent vehicles. In
    comparison, the primary business of a franchised new car dealer is to
    sell, lease, and service vehicles. Renting cars or providing loaner
    vehicles to service customers is incidental to a dealer's primary
    business, and no dealer has tens of thousands of vehicles for rent.
        Unlike large rental car companies that maintain a wide array of
    vehicle makes and models in their fleets, many dealers only maintain a
    single vehicle model in their loaner pools. S. 921 could cause an
    economic hardship for small dealers if a part necessary to fix a
    dealer's only loaner vehicle model is unavailable. Large rental car
    companies have the model mix and wherewithal to avoid this problem;
    many dealers do not.
        Every day across America, dealers start fixing recalled vehicles as
    soon as they receive the necessary parts and instructions from their
    manufacturers. Indeed, it is standard practice for a new car dealer to
    check every vehicle it is franchised to service for any outstanding
    warranty or recall work whenever that car enters its service
    department. But sometimes recall work cannot be performed through no
    fault of the dealer. These cases involve situations where recall parts
    are unavailable or, in some cases, have not yet been designed or
    manufactured by the automaker. Section 3 of the bill purports to
    address this problem by allowing rental car companies (which under the
    sweeping definition in the bill of ``rental company'' would include
    many auto dealers) to perform a ``temporary fix'', but only if the
    vehicle's manufacturer includes in its recall notice a provision that
    ``specifies actions to temporarily alter the vehicle that eliminate the
    safety risk posed by the defect or noncompliance'' (emphasis added).
        As a practical matter we do not believe that an auto manufacturer
    would ever include such a provision in one of its recall notices. An
    interim measure may ``reduce'' a safety risk or in rarer instances make
    it safe to operate for an interim period, but ``eliminating'' a safety
    risk is a very high bar. We are interested to learn whether the
    National Highway Traffic Safety Administration (NHTSA) would permit
    automakers to allow a dealer to take an interim measure to alter a
    vehicle in a manner that ``eliminates'' a noticed safety risk. In those
    recalls where no interim eliminating measure is specified by the
    manufacturer, the vehicle would have to be put out of service.
    Moreover, there is no provision in the bill to make a dealer whole for
    this loss of use.
        S. 921 would also create friction between large rental companies,
    auto manufacturers, franchised new car dealers and members of the
    public who own recalled vehicles. The friction point would revolve
    around the priority of access to recall parts. The bill would create a
    tug-of-war between large rental companies who have the economic power
    to demand they receive recall parts first, and franchised new car
    dealers who will try to keep recall parts in stock so that they can fix
    vehicles for members of the public who have received recall notices
    sent by automakers.
        Finally, we are also concerned that the bill would subject auto
    dealers to new inspections [49 U.S.C. Sec. 30166(c)(2)], additional
    reporting requirements [49 U.S.C. Sec. 30166(e)], and significant
    monetary penalties (up to $15 million) for violations [49 U.S.C.
    Sec. 30165(a)(1)]. In addition, Section 9 of the bill gives NHTSA open-
    ended authority to add more regulatory burdens ``as appropriate.''
        In conclusion, I urge the Subcommittee to mindful of the unique
    needs of small business during your consideration of this bill. The
    large rental car companies that support this legislation comprise 93
    percent of the market. While this bill is unlikely to put any dealer
    out of business, it has the power to make it uneconomical or
    impractical for dealers to provide loaner or rental cars to a number of
    their customers.
        In tax law, health care law, and many other areas, Congress has
    understood the differences between big business and small business and
    has legislated accordingly. We urge this subcommittee to closely
    examine whether a multinational corporation with nearly a million
    vehicle rental fleet should be regulated the same as an auto dealer on
    Main Street with a fleet of 5 loaner vehicles. We are ready to work
    with the Chairman and Ranking Member to ensure that small dealers are
    not disproportionately impacted by this well-intentioned legislation.
        Thank you for your consideration.

        Senator McCaskill. Thank you.
        I think I want to start out by just making a statement that
    all car rental companies sell cars and the vast majority of car
    dealerships rent cars. So we're talking about two different
    commercial enterprises where the emphasis may be on one or the
    other, but they're both engaging in the same category.
        So let me start with you, Mr. Bainwol. You say that you're
    worried about a dual track. Wouldn't that same worry I guess
    exist right now? If they're voluntarily grounding all their
    cars right now and they are without a doubt--if you take the
    big four together, they're not as good a customer as your
    dealers, but they are a very big customer right now. So I don't
    understand why making it mandatory creates any more of a dual
    track than making it voluntary.
        Mr. Bainwol. The biggest reason--and I'm not a lawyer, but
    the biggest reason is that by making it mandatory you've
    introduced loss of use liability. Once you introduce loss of
    use liability, you then change the cost equation and you make
    it--you set up the incentive structure such that the pressure
    will be to solve the Enterprise problem and not your
    constituent's problem.
        Senator McCaskill. Well, what about the dealers----
        Senator Boxer. But----
        Senator McCaskill. It'll be your turn in a minute.
        I'm trying to hold her down here, honestly. She's about to
    come out of her chair.
        I'm trying to figure out, though. Don't you have to do that
    now for your dealers for them to be able to sell these cars? I
    mean, don't they have a loss of use in terms of being able to
    move their product? And they're all---- believe me, they're
    paying that floor plan. I don't think you're taking over the
    floor plan while they're waiting for the recalled vehicles to
    be fixed before sale, are you?
        Mr. Bainwol. We definitely want to keep this question as
    simple as we possibly can, but we have to also make sure we
    unpack this to the point that we understand what we're talking
    about.
        Senator McCaskill. But you understand the point I'm making?
        Mr. Bainwol. I think I do. But let me just make this point.
    You cannot sell a car where there's a recall, right. So what
    happens is when a recall is issued the customer receives, the
    owner of the car receives, the notification. In the case of the
    rental car companies, they are the owner, so they're receiving
    that notification. The problem that we have today is that the
    customer who goes to the rental car counter is not getting that
    notification like the moms and dads are who have bought the car
    when they buy it themselves.
        Senator McCaskill. I get that.
        Mr. Welch, don't you guys make money on the back end when
    there's a recall?
        Mr. Welch. We are reimbursed by the auto manufacturers.
        Senator McCaskill. Isn't it profitable? I mean, I remember
    once upon a time I was very involved in a car dealership, and I
    remember, even in the darkest hours, the back end was reliable
    and recalls were not a bad thing. They were a bad thing in
    terms of the disruption of the business, but they're
    profitable, aren't they? Aren't recall repairs profitable for
    you?
        Mr. Welch. Yes, they are, Senator.
        Senator McCaskill. OK. So if they're profitable for you--
    and are most of the rental cars that you guys do, I assume
    they're part of your floor plan and you're moving them through
    and you move them back out for sale?
        Mr. Welch. That's not correct, Senator.
        Senator McCaskill. OK.
        Mr. Welch. Vehicles that are in our inventory would be
    untitled vehicles. They would be new vehicles. Vehicles that
    would be in a loaner fleet or that would be in a rental fleet
    of a dealer would be licensed and registered. Our insurance
    carriers wouldn't allow us to just pluck vehicles out of our
    inventory and put them in a rental.
        Senator McCaskill. But after you license them and you loan
    them or you rent them, I assume you're going to sell them?
        Mr. Welch. We would eventually sell them----
        Senator McCaskill. And you would sell them on the used lot
    as opposed to wholesale, correct?
        Mr. Welch. We may take them to the auction or wholesale
    them. It would all depend on the circumstances.
        Senator McCaskill. Well, I would just say that I think
    there certainly is an impetus, if you know the history of the
    car and you know--and you can control how many miles you put on
    it, it certainly would be decent used car inventory as opposed
    to some of the other cars that you would typically wholesale.
    So I guess my question is, if you know you've got to fix it
    before you can either wholesale it or put it on the used lot,
    why would you mind fixing it as quickly as possible as opposed
    to waiting until after you move it out of your rental or loaner
    fleet into the used lot or off to the auction?
        Mr. Welch. Senator, you're absolutely correct when you
    stated earlier that we have an incentive to do it. As soon as
    the parts are available, we immediately fix the car. The
    bottleneck occurs, quite frankly, because of back order on
    parts and for really no other reason.
        Senator McCaskill. Well, the interesting thing is we're
    dealing with two big folks here. For the automobile
    manufacturers, the rental car companies are a big customer, but
    nobody's bigger than your dealers. So the irony is we've got
    these big folks up here trying to figure out how to get this
    done and all we're trying to do is make sure the little folks
    down here are not somehow caught up in how you prioritize what
    gets fixed when.
        But I know this: The dealers are incentivized to fix, and I
    have a hard time imagining that most dealers aren't going to
    move those recall notice cars that are in their rental or
    loaner fleet immediately into the back and get that cash-flow
    going on that recall as quickly as possible.
        I will turn it over to Senator Blunt now for questions.
        Senator Blunt. If Senator Boxer wants to go ahead----
        Senator Boxer. Really? Senator Blunt, you've always been my
    friend.
        Well, I am out of my seat, Mr. Bainwol, at some of the
    things you say. Honestly, I don't know what planet you're
    living on. You are trying to say that, oh, if these rental car
    companies get first dibs at the fix it's going to hurt my
    constituents? Who do you think's renting these cars? Our
    constituents. It's all about the people. So don't----
        Mr. Bainwol. Senator----
        Senator Boxer. Wait a minute. I will ask you my question
    when I ask you my question. I have to get this off my chest.
        We're trying to protect, Senator McCaskill, the little
    people. We're trying to protect our constituents, whether they
    own a car, whether they lease a car, whether they rent a car
    for a weekend, like Cally's daughters did or your kids might.
        You know, you said it really well when you opened up: As a
    dad, I wait for that text or that call that they made it to
    their destination, quote unquote.
        Now, it's bad enough when we teach our kids to drive--in my
    case, my grandson's now learning; I have post-traumatic stress
    thinking back--even if they step into a perfectly safe car. But
    if I know they could be in a recalled car, my stress will go
    exponentially up.
        I'll tell you something. After this happened to Cally, the
    first call I made was to my family and then to my staff, and
    you know what I said? I said, only go to Hertz, because they
    were the only ones that stepped up to the plate immediately and
    said, we'll do this voluntarily. And then, happily, the others
    came along. Thank you, all of you, and I'm going to keep
    looking at that every day until we pass this law.
        But to also sit here and say it's a settled question, the
    companies are doing it on their own. I know you're not a
    lawyer. I'm not either, but I've got to tell you, it ain't a
    settled question until there's a law. You've got people of
    goodwill now. What happens in 5, 10, 15 years? So don't tell me
    it's a settled question when you're treating people
    differently. Her children, Cally's children, were not treated
    the same as somebody who went in to buy a new car. So let's be
    clear.
        I want to ask each of you to respond yea or nay, yes or no,
    to this question. I'm going to start with Ms. Faulkner and go
    right down: Do you believe a rental car company should be
    allowed to rent out or sell a vehicle that is under a safety
    recall, understanding that we do have interim fixes? Do you
    believe a rental car company should be allowed to rent out or
    sell a vehicle that is under a safety recall?
        Ms. Faulkner. Nay.
        Ms. Shahan. No.
        Mr. Bainwol. It's not a fair question, ma'am.
        Senator Boxer. It certainly is. Yes or no?
        Mr. Bainwol. The answer is that in today's world most of
    the marketplace does not do it, so it's an academic question,
    not a practical question.
        Senator Boxer. Do you think--do you think, sir--I didn't
    ask you whether they do it or they don't. I asked you if they
    should. Do you believe a rental car company should be allowed
    to rent out or sell a vehicle that is under a safety recall?
        Mr. Bainwol. It----
        Senator Boxer. Yes or no?
        Mr. Bainwol. Well----
        Senator Boxer. You don't answer.
        Mr. Welch?
        Mr. Welch. If the vehicle's unsafe it shouldn't be rented.
        Senator Boxer. Thank you.
        Let me say, there are other things that you're saying here.
    Mr. Welch, I want to talk to you about this. You said that the
    problem is there are not enough parts. Now--and Mr. Bainwol
    said: oh, we've got to deal with the people who own the cars
    first and we can't, we don't--we can't. Here's the deal.
    Suppose there was no rental car business at all and we had a
    certain number of cars that had to be fixed because there was
    no rental car business. Are you saying that there ought to be
    some type of priority? If we had no rental car business but we
    had the same number of cars sold, are you saying you couldn't
    handle it, sir, in terms of the parts?
        Mr. Bainwol, I'm asking you.
        Mr. Bainwol. I'm not a parts administrator. What I'm saying
    is that the bill as you've drafted it introduces a bias to put
    Enterprise ahead of a regular customer, ahead of a regular mom
    and dad.
        Senator Boxer. Show me in the bill where we do that?
        Mr. Bainwol. You do that by----
        Senator Boxer. You're making it up.
        Mr. Bainwol. No, I'm not.
        Senator Boxer. Show me the page.
        Mr. Bainwol. Senator, first of all----
        Senator Boxer. Show it to me.
        Mr. Bainwol. Senator, let's back up for a second.
        Senator Boxer. Show me the page.
        Mr. Bainwol. Senator, can we back up for a second? May I
    have a chance to respond?
        Senator Boxer. I'm asking you. You said our bill gives
    priority for the fixes to go to the rental car company first.
    Show me where we do that in the bill, sir?
        Mr. Bainwol. Once you federalize a voluntary agreement,
    you've introduced absolutely a loss of use liability. That by
    definition produces an economic incentive to treat Enterprise
    over other customers.
        Senator Boxer. I don't agree with you.
        Now, let me say this. You talk about this voluntary
    agreement. Do you know how this agreement came about, sir?
        Mr. Bainwol. I know you invested much time and effort into
    it.
        Senator Boxer. That's not the point. I wrote a pledge. We
    took it out to the companies. Hertz was right there and the
    others signed the pledge. So don't say this was something that
    they came together and did. They did it because they were
    challenged.
        But they support this law. Good for them.
        Mr. Bainwol. Senator, may I add one point?
        Senator Boxer. No. Just a minute. I want to ask you another
    question. This is my last question. If you as a manufacturer
    don't have enough parts to repair your defective vehicles, you
    better figure that out. One, don't make a defective product in
    the first place. That's the best idea. Second, announce the
    recall sooner so fewer defective cars are sold. And third, make
    more parts.
        You created the problem if the car is broken and you should
    fix it. So I'm not sympathetic to this point, we don't have
    enough parts, because if we had no rental car industry and
    everyone owned their cars you'd have to fix everybody's cars.
    You wouldn't make these false distinctions. These are all our
    constituents. All we're trying to do is protect them. And I
    have to say, I am greatly disappointed. I hope when you offer
    to help us fix our legislation you mean it.
        Mr. Bainwol. I do. Senator, there is no question that we
    have a shared commitment to deal with the problem, OK. And we
    say that with absolute commitment.
        Ninety-four percent of the problem has been solved by the
    voluntary action. The question is how you deal with the 6
    percent and how you deal with the problem in a fashion that
    doesn't introduce adverse consequences.
        Senator McCaskill. Understand that voluntary is voluntary,
    and they could change their minds tomorrow, Mr. Bainwol. So I
    get that you're saying right now let 6 percent go and----
        Mr. Bainwol. I'm not saying that at all, Senator. I'm
    saying let's deal with it in a different fashion. The core
    problem here is that you have a breakdown in notification. So
    my suggestion is you take the voluntary action, you go ahead
    and you move a bill that requires notification, so that no
    consumer ever again rents a car without being fully notified
    about the recall status, and then you move forward.
        Senator McCaskill. Senator Blunt.

                     STATEMENT OF HON. ROY BLUNT,
                       U.S. SENATOR FROM MISSOURI

        Senator Blunt. I'm assuming, Mr. Bainwol, your point is
    that all recalls are not equal?
        Mr. Bainwol. That is part of the point. My broader point is
    that the marketplace has solved this problem and when you
    Federalize a voluntary agreement you introduce adverse
    consequences that are anti-consumer.
        Senator Blunt. But you're saying if you told somebody that
    was renting a car that it was under recall there might be
    reasons they would still want to rent that car?
        Mr. Bainwol. Correct. If there's a loose, as Mr. Welch
    said, if there's a loose slip of paper on the visor, then a
    rational human being might say I'll accept the car, I want the
    car, that's OK.
        Senator Blunt. But you wouldn't have a recall on that,
    would you, a loose slip of paper on the visor?
        Mr. Welch. That was the subject of one recall, Senator,
    yes.
        Mr. Bainwol. Or if the defroster doesn't work in Florida in
    August, you might make the choice that that's OK.
        Senator Blunt. So you're saying that all recalls would not
    be the same, which is what I asked?
        Mr. Bainwol. That's correct.
        Senator Blunt. Now, Ms. Faulkner, maybe I'm a little--I
    thought in your testimony you said there was something in this
    bill that allowed for accommodation of some recalls. You
    mentioned the floor mat-accelerator problem earlier. Would you
    tell me a little more about--am I wrong on that? Is there
    something in here that lets you accommodate some recalls by an
    adjustment onsite, or what did you mean by that?
        You said that the floor mats were taken out and that's
    exactly what should have been--I believe that's what you said,
    that that was exactly what should have been done.
        Ms. Faulkner. That is what I said. But that was a directive
    from the manufacturer to all consumers, including the car
    rental industry. They said that was a safety fix. That is the
    only time that we would be allowed to make a decision on a
    recall, is if the manufacturer tells us: Here is your interim
    fix, the car is now safe, and you can rent it or you can drive
    it as a consumer. Otherwise, we get it repaired. We were just
    showing you an example of what a possible interim remedy could
    be.
        Senator Blunt. And does the law as it's drafted now allow
    for that interim remedy?
        Ms. Faulkner. It allows for that interim remedy if the
    manufacturer gives us the guidelines to do so.
        Senator Blunt. Not to be argumentative here, but do you
    read this the same way as the representative of the
    manufacturers, Mr. Bainwol?
        Mr. Bainwol. Senator Blunt, I apologize. I was lost in
    thought about something entirely different.
        Senator Blunt. Well, it was the idea that this bill would
    allow you, if there was an interim remedy like taking the floor
    mat out, to tell everybody and they would do that, and that was
    an interim----
        Mr. Bainwol. We believe that the notion of a interim fix
    here is a--doesn't really work in the real world. The idea that
    you would eliminate the risk, as Mr. Welch said, is a bar that
    I don't think a manufacturer would be able to meet.
        Senator Blunt. But in the case of the floor mat, did that
    actually do----
        Mr. Bainwol. No, I'm speaking more conceptually in terms of
    the exemption in the bill that allows a product where the risk
    is eliminated. That is a bar that makes exemption from a
    practical purpose meaningless.
        Senator Blunt. So since it eliminates it, that would be the
    problem you'd have? You'd have to say this eliminates the risk?
        Mr. Bainwol. Right.
        Senator Blunt. Mr. Welch, do you think loaner cars and
    rental cars from a dealership should be treated differently in
    this area of recall and disclosure?
        Mr. Welch. Well, I think there are two or three different
    standards. First of all, if the vehicle is unsafe, if there's
    compromise to a critical component of the vehicle, it shouldn't
    be rented in any circumstance, period. If it falls into that
    category where the rubber on the tire may separate after 50,000
    miles and there are only 10,000 miles on the vehicle or, by the
    way, there's a condition on the vehicle that isn't even subject
    to a recall, for instance it has cracked windshields or worn-
    out brakes or something, those vehicles just should not be on
    the road, period.
        Our problem is one of proportionality. Many of our small
    dealers only have a single model in their entire loaner fleet
    and if that vehicle happens to be subject to one of these what
    I would call technical recalls, our entire fleet, unlike a
    Hertz or Avis that has thousands of vehicles of all line makes,
    it may be an economic hardship for them, but we're just plain
    out of luck for the average dealer that has nine or ten loaner
    vehicles that are put out there on the road.
        Senator Blunt. But you wouldn't loan that vehicle out if
    you thought it was unsafe?
        Mr. Welch. The tort liability for negligence, Senator, is
    so huge that we would be sued and lose.
        Senator Blunt. And you don't think in the case of--if you
    also had a rental car, you wouldn't treat it differently than
    you'd treat that loaner car?
        Mr. Welch. No differently whatsoever.
        Senator Blunt. You said in response to Senator Boxer's
    question that everybody was asked, that you wouldn't be for
    unsafe vehicles being rented. I think that's--you actually
    changed the question, I thought, a little bit.
        I assume, Mr. Bainwol, you're not for unsafe vehicles being
    rented either?
        Mr. Bainwol. That's correct.
        Senator Blunt. Most everything I thought of to ask I
    thought that Senator Boxer and Senator McCaskill asked and I've
    benefited from the answers. I'm going to yield back my--well,
    actually I'm over my time.
        Thank you, Chairman.
        Senator McCaskill. Thank you, Senator Blunt.
        Just briefly, I don't have a lot of followup questions. I
    think I understand where everyone is and I get it. I get--
    believe me, I understand the car dealers not welcoming more
    Federal Government to the dealership. I understand that in
    terms of an overall thematic problem, although I do have a
    sense that, while on a much smaller scale, there is still a
    high probability that somebody could get a rental car from a
    dealership that had a problem that hadn't been fixed. I
    certainly know you have incentives profit-wise to get those
    things fixed as quickly as possible.
        It seems to me that a lot of this is fear about being sued,
    Mr. Bainwol, that the manufacturers are worried that you're
    opening up a new line of vulnerability in terms of your
    liability for loss of use in terms of the profits of the rental
    car company, their loss of profits during the time period in
    which the recalls are being performed and the repairs are being
    done.
        I'm just curious. Does that same fear exist about loss of
    profits and costs associated with your dealers when they have a
    number of vehicles that they have to take off the floor, that
    they have to continue to pay interest on their floor plan? Have
    the manufacturers ever been sued by the dealers for loss of
    profits due to a recall?
        Mr. Bainwol. Peter may know the answer to that.
        Mr. Welch. Senator, actually there is a provision in the
    law that if a franchise new car dealer has a grounded fleet,
    that the provisions do allow us to collect monetary damages up
    to 1 percent of the MSRP per month. So we are compensated in
    circumstances, as were our Toyota dealers recently.
        Senator McCaskill. So my colleague just asked what ``MSRP''
    is.
        Mr. Welch. Manufacturer's suggested retail price. Excuse
    me.
        Senator McCaskill. Most of us don't know that because most
    of us don't pay that, right?
        [Laughter.]
        Senator McCaskill. I don't know very many consumers that
    are paying MSRP. If they are, they need to see me because I can
    help them.
        So you collect 1 percent?
        Mr. Welch. The regulations and the law does allow us, in
    those limited circumstances.
        Senator McCaskill. So it looks like we have a solution, Mr.
    Bainwol. How about one percent?
        Mr. Bainwol. Well, remember, we go back to the core
    proposition at the very beginning, which is that's a case of a
    dealer selling a car. What we're talking about here is where a
    purchase has already been made and it's what to do about a
    recall post-purchase. So it's a different animal. But your
    broader point about the concern about loss of use is completely
    valid and it does get introduced by virtue of an approach that
    is a mandate rather than a notification.
        Senator McCaskill. But you get the point I'm making.
        Mr. Bainwol. Oh, I do, I do.
        Senator McCaskill. You would have had the same fear for
    your dealers except we put 1 percent in the law. I didn't hear
    you suggest that when we met that 1 percent might solve the
    problem.
        Mr. Bainwol. No, no, no, no, no, no. The concern here is
    that this changes the incentive structure and the relationship
    and the economics between the rental car companies and the
    manufacturer. So for instance, if you're in slow season and the
    utilization rate is very low and a call is recalled, all of a
    sudden it becomes a revenue source because of the recall,
    because a car that's otherwise not rented is generating
    revenue. That's the concern on loss of use liability.
        So I guess I would raise the question here if loss of use
    liability is not something that the rental car companies want
    to pursue. Perhaps Ms. Faulkner could clarify that.
        Senator McCaskill. And I think that's something you can
    talk among yourselves about, because if it's a slow season and
    they're going to try to make a loss of use case against you,
    first of all, this is a sophisticated buyer-seller
    relationship. This isn't Joe Average coming in to buy a car.
    This is Enterprise and Hertz buying hundreds and thousands of
    cars from you guys every single year.
        Mr. Bainwol. There was----
        Senator McCaskill. Let me finish. I guess my point is that
    if you were going to try--let's just say that it's the slow
    season and Budget decides: Hey, we've got a recall out here;
    let's ship all those cars in for repair and then let's sue them
    for not being able to rent the cars for loss of use, and it's
    the slow season, and you're saying you're afraid of that
    revenue stream. Well, can't we just put in the law that you
    have to show actual loss of use profits, not augment your slow
    season by turning in recalled cars and then sue them for it?
        First of all, I can't imagine they'd be motivated to sue
    because they're biting the hands that feed them. You're going
    to turn around and charge them a lot more per vehicle the next
    year, which really impacts their bottom line.
        Mr. Bainwol. There's a more basic point here, and the basic
    point is simple. That is, in the voluntary action there is no
    loss of use. Once you convert it, you introduce that risk. Why
    introduce that risk? Why throw into a system that has a
    workable solution an economic problem that has all sorts of
    adverse consequences? Why not just simply carve it out?
        Senator McCaskill. I think what you've got, Mr. Bainwol--
    and you may think that you can kill this legislation this year,
    but I think you're on the losing side potentially of a very bad
    public relations situation if you're not careful.
        Second, I think this is something we can work out. I think
    this is something particularly that you ought to work out with
    you really good customers the rental car companies, because
    nobody buys more, and I bet you make more money off the cars
    you sell to rental companies than the price you make the
    dealers pay you for them.
        Mr. Bainwol. We've established a relationship here as
    though we don't want to see a bill move forward. We do. We want
    to see a bill move forward that is productive, meets the goals,
    but doesn't introduce adverse consequences.
        Senator McCaskill. Well, let's work out that loss of use
    thing. Let's make sure that it's actual loss of use, so nobody
    can use the slow season to milk you guys.
        Mr. Bainwol. Why not just carve it out?
        Senator McCaskill. I think that when you start carving out
    whole causes of action from the Federal level, it gets to be a
    pretty dicey proposition. So I think that we've got to be
    careful about that.
        I'm open to talking about anything. I just don't want us to
    leave here under the assumption this bill is going to move,
    with the plan that maybe it's really not going to move with
    some help from you guys maybe down the hall. So I want to make
    sure we try to get this worked out now rather than ending up
    six, 9 months from now with Ms. Houck going, what happened? We
    got all the rental companies to agree and everyone agreed, and
    the only people that were outside of the circle, so to speak,
    were the people who were making the cars, that I think provide
    a pretty good, solid, safe vehicle, especially the strides you
    have made in terms of safety is remarkable in this country. I'm
    very proud of it and I'm very proud of the automobile
    manufacturing industry. So this should not be an adversarial
    situation. I remain hopeful that we can get it worked out.
        Thank you.
        Senator Boxer. May I follow up, please? May I follow up?
        Senator McCaskill. Sure.
        Senator Boxer. I want to pick up on this whole question. It
    sounds to me like you want to write our bill. And it's fine
    that you'll be at the table. I'd love to hear from you. But I
    want to pick up on--you've got to be very careful because you
    don't--you might get something that has bad ramifications for
    you, and I wanted to see what you think about this argument.
        You suggest the bill should include language prohibiting
    rental car companies from seeking loss of use damages from a
    manufacturer for having to ground rental cars for a long time.
    My philosophy on this one is you shouldn't take that long to
    figure out how to work this out and fix it, and if you act in a
    reasonable time I don't think you should be sued.
        But set it aside. Let's say for argument's sake we were to
    put that in. Look what this opens up. Should Congress also
    prohibit manufacturers from suing their parts suppliers for
    making faulty parts that trigger expensive recalls? Do you
    think we ought to get into that?
        Mr. Bainwol. You know, we don't want to write this bill.
        Senator Boxer. Well, I just asked you a question.
        Mr. Bainwol. But let----
        Senator Boxer. Can you answer the question?
        Mr. Bainwol. You raised a series of questions. Let me----
        Senator Boxer. No, no, it's not a series. I asked one
    question. Please answer my question, sir?
        Mr. Bainwol. Please restate it.
        Senator Boxer. Should Congress prohibit manufacturers from
    suing their parts suppliers for making faulty parts that
    trigger expensive recalls?
        Mr. Bainwol. I think that's an entirely different question.
        Senator Boxer. Should we do it?
        Mr. Bainwol. I think that----
        Senator Boxer. Of course not. Of course not.
        Mr. Bainwol.--that is a different question.
        Senator Boxer. Wait a minute. Once we wade into this
    question--and my chairman is an attorney. Once you wade into
    this question of who can sue for what and how and when and
    where, watch out, because that's a whole other issue. In 2009
    General Motors sued a supplier saying it spent more than $30
    million fixing problems with the steering system of Chevrolet
    Cobalt, it's best-selling car. From 2008, Chrysler LLC is
    proceeding with its suit against Canadian auto parts maker
    Magna International to recoup money spent on a recall involving
    defective heated seats in minivans.
        [The article about the lawsuit follows:]

                        The Blade--Published: 6/18/2008

                 Chrysler sues supplier to recoup recall costs

        DETROIT Chrysler LLC is proceeding with its lawsuit against
    Canadian auto parts maker Magna International Inc. to recoup money it
    spent on a recall involving defective heated seats in minivans.
        Chrysler recalled 161,500 Dodge Grand Caravan and Chrysler Town &
    Country minivans from the 1999-2001 model years three years ago because
    the heating element in some of the seats overheated and burned through
    the fabric, Chrysler spokesman Mike Palese said.
        He declined to reveal the amount Chrysler is seeking from Magna in
    the action filed in February, but said it is significant. He said
    Chrysler sued after exhausting all other options available in the
    normal course of business.

    Copyright 2013 The Blade. All rights reserved. This material may not be
    copied or distributed without permission.

        Senator Boxer. The point is of course we shouldn't do that,
    and we shouldn't also wade into this issue. If you don't fix
    recalled cars in a timely fashion, it's a problem. As I said
    before, it's part of your business. You have to take care of
    business. You have to take care of fixing these cars.
        So I ask unanimous consent to place in the record an
    article, ``GM sues over millions spent on steering repairs.''
    If I might put that in the record, Madam Chairman.
        Senator McCaskill. Absolutely.
        [The article referred to follows:]

       By The Associated Press on November 23, 2009 at 11:58 AM, updated
                          November 23, 2009 at 6:56 PM

                GM sues over millions spent on steering repairs

            AP photo

        General Motors says it's costing tens of millions of dollars to
    repair shaky steering columns in its best-selling small car and other
    models.
        General Motors Co. has sued a supplier, saying it has spent more
    than $30 million fixing problems in the steering systems of the
    Chevrolet Cobalt, its best-selling small car, and other vehicles.
        GM said customers have complained about unusual rattles, ``clunks''
    and other noises. It pinpointed the flaw to ``excessive gear
    backlash,'' which causes problems in the steering column when driving
    on rough roads.
        The lawsuit names JTEKT North America Inc., based in Plymouth,
    Mich., and an affiliated company, JTEKT Automotive Virginia Inc. of
    Daleville, Va.
        GM said it wants to be paid for replacing thousands of parts under
    customer warranty claims on the Cobalt, Pursuit, G5, HHR and other
    cars, starting with 2005 model year.
        By fall, the cost had exceeded $30 million, and ``GM's damages are
    expected to continue to increase as additional warranty claims are
    made,'' the automaker's lawsuit said.
        ``JTEKT contends the components all met the specifications and
    testing requirements that GM gave it,'' said Bob Haddad, a lawyer for
    the supplier. ``The issues do not affect the operator's ability to
    control the vehicle. This is a noise issue.''
        Changes were made at GM's request, and JTEKT continues to provide
    steering assemblies, Haddad said Monday.
        The steering systems are in tens of thousands of GM cars. It is not
    considered a safety issue, said Alan Adler, a GM spokesman.
        He said the lawsuit likely will be settled out of court. It was
    filed in August in Macomb County Circuit Court, amended there in
    October and moved Nov. 17 to Federal court in Detroit.
        The Cobalt is GM's best-selling small car and its highest-mileage
    vehicle. The company sold 90,940 Cobalts through October, but sales are
    down 46 percent from the same period in 2008.
        The car, built in Lordstown, Ohio, is due to be replaced next year
    by the Chevrolet Cruze, which GM promises will get around 40 miles per
    gallon on the highway and be competitive with the best small cars in
    the world.

        Mr. Bainwol. May I make one comment, Senator?
        Senator Boxer. Yes.
        Mr. Bainwol. We agree with you, we want to see these
    vehicles fixed as quickly as possible. There's not a debate
    about the safety desire here. Nobody wants to see an event like
    what transpired in 2004 transpire. We're with you on that.
        Senator Boxer. Well, that's good.
        Mr. Bainwol. The challenge here--and we don't want to write
    the bill. But we want to contribute to crafting the bill, which
    we were not.
        Senator Boxer. Well, that's fine. That's fine. We will look
    and see as to whether what you recommend is in the public
    interest. But some of the things you said today are disturbing
    and maybe you'll rethink them. You hinted that you definitely
    feel a young person comes to the counter at one of the rental
    car companies and said, I want to rent a car, that they say
    there's one car left on the lot, and you seem to indicate you
    would support the rental people having to say, but we want you
    to know there has been a recall notice about this car, there's
    a faulty floor mat or there's a faulty windshield wiper or the
    defogger system is out--and by the way, with the weather the
    way it is, don't say if a system goes out in Florida in August
    it's a good thing. I don't know if you've ever experienced
    getting stuck without a defogger in a car. You might as well
    not--you can't see anything. So let's be clear.
        And then we heard about these floor mats. Now, I think
    we've--so in my opinion, if it's my 18-year-old or 21-year-old
    who's going to the counter, they're ready to go on a vacation
    and they're told, oh, there's this little thing over here in
    the steering, you know, it's not going to rain this weekend,
    the windshield wiper is broken, has to be recalled--I don't
    want to give that decision to my grandson or your kid or my
    chairman's, one of her daughters. And I don't think that should
    be on their shoulders to make a decision. We're the grown-ups
    in the room.
        Fix it if it's broken. Don't fight us.
        And I would say in closing, I'd like to hear from Ms.
    Shahan, because she's worked so hard. You've heard a lot of
    things here today and I would like you to state, because you
    speak from the heart and also from facts, is our bill a danger
    to anybody? Is it going to do something bad, or is it going to
    protect our constituents?
        Ms. Shahan. Senator, it will save lives and prevent
    injuries, there's no question about it. To me, it's disturbing
    to hear the auto manufacturers propose notification in lieu of
    fixing the car.
        Mr. Bainwol. I'm not proposing it in lieu of fixing the
    car. I'm saying fix the car as expeditiously as you possibly
    can. Please do not put words in my mouth. Fix the car, achieve
    the safety objective that we all share, and give notification,
    just as we do to every other consumer that buys a car. They get
    notification of the recall. The gap in the process right now is
    that when you rent a car there is no notification because the
    car companies receive the notification, not the car company----
    the rental car customer.
        Senator Boxer. Well, I've got news for you. I own a car and
    everybody contacts me about it. So it's just not true.
        Please continue. Sorry you were interrupted.
        Ms. Shahan. Yes. I had understood Mr. Bainwol to indicate
    that notification was important.
        Senator Boxer. Yes, he just said it again.
        Ms. Shahan. Right. And we don't see that as a substitute
    for fixing the car.
        As far as the cases that have been raised about so-called
    technical problems, a lot of times what are seen as technical
    really aren't that technical. For instance, the notice on the
    visor. In most vehicles these days, there's a notice on the
    visor that's very important for parents to see, and it says:
    Danger. Warning. Do not have a child under a certain age or
    size sitting in the front seat because of the possible problems
    with air bags. That's a federally mandated notice that goes on
    the visor, and if it's missing it's an important thing. Plus
    it's illegal to sell that car in the first place.
        We believe that the manufacturers should comply with the
    Federal safety standards. If they have a problem with the
    Federal safety standards, come to Congress, come to NHTSA, try
    to change the Federal safety recall system.
        That's not what this bill does. This bill does not change
    the existing Federal safety recall system. It keeps it intact,
    and all it does is extent the existing system to rental car
    companies, including car dealers. That's all it does. It
    doesn't overhaul the existing safety recall system. Basically
    what they're doing is complaining about the existing safety
    recall system and saying, we shouldn't have to recall this, we
    shouldn't have to recall that. This is not the bill to have
    that debate about. This is a very simple, straightforward
    consumer protection measure. We desperately need it.
        Thank you.
        Senator Boxer. Thank you very much.
        I want to say, Madam Chairman, thank you very much for this
    opportunity. I hope we will be successful, and I know working
    with you has been a real experience because---- because,
    because, you're a no-nonsense Senator. I think what we heard
    today is a little bit of nonsense, to be honest with you.
        Senator McCaskill. Well, I'm going to remain optimistic. We
    began this process with a lot of the rental car companies not
    on board, and we have been able to negotiate and work toward a
    solution that is I think a good one. Now I want to make sure
    that we work with the manufacturers and the dealers to try, if
    we can, to address their concerns in a way that protects the
    integrity of the bill, with the overall goal of, obviously,
    protecting consumers.
        So I will remain optimistic about that and, Mr. Bainwol and
    Mr. Welch, we'll look forward to working with you and your
    staffs to try to see if we can't figure out a way to address
    some of the concerns that you've expressed today without
    harming the integrity of the bill.
        I will tell you, Ms. Houck, that my daughter will have her
    24th birthday on Thursday and her younger sister is 21. I
    cannot imagine the grief that you must feel each and every day.
    So on behalf of all of my colleagues, we thank you for
    channeling that grief in such a constructive way, with
    integrity and intellect and passion, and I know how proud your
    daughters would be of you. Thank you.
        [Whereupon, at 11:08 a.m., the hearing was adjourned.]
                                A P P E N D I X

       Prepared Statement of Hon. Brian Schatz, U.S. Senator from Hawaii
        Thank you, Chairwoman McCaskill, for holding this important
    hearing. I also want to thank Senator Schumer for his leadership and
    sponsoring this common sense legislation. As you know, Hawai`i enjoys
    the company of more than 10 million visitors each year and a large
    portion of our guests choose to rent cars. With that, I applaud every
    effort to improve the safety, security and peace of mind of those
    visiting our wonderful island State.
        The Raechel and Jacqueline Houck Safe Rental Car Act will advance
    efforts to protect Americans renting vehicles for any occasion, whether
    it is for business or pleasure. Our current law requires that auto
    dealers address recall notices before vehicles can be sold. This bill
    takes the same pragmatic approach by extending that law to rental car
    companies by requiring them to comply with safety recalls and fix
    defective vehicles before renting them to consumers.
        Every major rental car company in the country supports this bill,
    as does the American Car Rental Association. The Truck Renting and
    Leasing Association that represents nearly all truck rental and leasing
    operations in the United States also supports this important effort.
    The widespread industry support should be a sign that these kinds of
    consumer protections are essential and long overdue.
        The Raechel and Jacqueline Houck Safe Rental Car Act promotes
    common sense consumer protections that will guard America's rental car
    patrons wherever they drive. I look forward to working with you, Madam
    Chairwoman, and our colleagues in making every effort to advance this
    legislation to the floor.
        Thank you, Chairwoman McCaskill.
                                     ______

      Response to Written Questions Submitted by Hon. Claire McCaskill to
                            Hon. David L. Strickland
        Question 1. Currently, NHTSA has no regulatory authority over
    rental car companies' compliance with recall notices. By endorsing S.
    921, the industry has agreed to subject itself to NHTSA oversight and
    enforcement with regard to recalls. What, if any, additional funding or
    manpower resources do you expect the agency would need to implement and
    enforce S. 921 if it were to become law?
        Answer. NHTSA believes it can implement and enforce S. 921 without
    additional funding or manpower. However, the addition of a full time
    person and about $100,000 per year would allow us to conduct outreach
    to increase consumer awareness as well as rigorous enforcement without
    compromising other priorities. These additional resources are not
    included in the President's Fiscal Year 2014 budget request for NHTSA.

        Question 2. The issue of disclosure often has been discussed as a
    possible alternative to mandatory grounding of vehicles when a recall
    occurs. In other words, allow the rental company to notify the consumer
    at the rental counter that the vehicle he is about to rent is under
    safety recall and allow the consumer to then make the decision as to
    whether or not to rent the car. What are NHTSA's thoughts on this
    option versus the mandatory grounding included in S. 921?
        Answer. NHTSA does not believe this is a realistic option.
    Consumers should not be expected to make an important decision about
    safety while in an often stressful and distracting travel scenario.
    Assuming a consumer is able to actually focus on the notice, it may put
    them in the very difficult position of having to choose their immediate
    transportation needs over their personal safety.

        Question 3. Section 30120 of the Motor Vehicle Safety Act already
    prohibits auto dealers from selling or leasing a new car under safety
    recall until it has been remedied. This bill expands that provision to
    cover rental companies and rental vehicles.

        Question 3a. How does NHTSA currently enforce the prohibition as it
    applies to the sale and lease of cars?

        Question 3b. How it would enforce the provision with regard to
    rental companies if S. 921 were to become law?

        Question 3c. What penalties exist for violations?
        Answer. NHTSA has a very effective hotline. We receive about 42,000
    complaints from consumers each year. Some of these have involved
    dealers selling and delivering new vehicles subject to recalls that
    have not been completed. We recently resolved a case involving
    substantial penalties with respect to a large dealer that was selling
    motorcycles in violation of the prohibition. We envision enforcing the
    rental car provision the same way as we currently enforce the new car
    dealer provision. When we learn of an alleged violation, we investigate
    the claims, and take the appropriate action as necessary. The penalties
    for violations by auto dealers are in 49 U.S.C. 30165.

        Question 4. We heard from industry witnesses in the hearing that
    made the case for some form of a small business exemption to S. 921.
    Are you aware of any auto safety standards which include a small
    business exemption for businesses?
        Answer. Manufacturers are not relieved of their responsibilities to
    report and conduct safety recalls based on their size. Nor is there an
    exemption based on dealer size in the context of prohibitions against
    the sale and delivery of new cars with an outstanding safety defect or
    noncompliance with a Federal Motor Vehicle Safety Standard (FMVSS).
    NHTSA considers the small business status of manufacturers, dealers,
    and other businesses in every case in which it needs to assess a
    penalty for violations of the Motor Vehicle Safety Act and our
    regulations.
        NHTSA often includes phase-in provisions that allow small
    manufacturers additional time to comply with new or revised FMVSS.
    Furthermore, we have authority to, and do, grant exemptions to low-
    volume manufacturers from certain FMVSS under limited circumstances.

        Question 5. You testified that NHTSA's audit of the rental car
    industry showed data that rental car companies repaired 50 percent of
    its recalled vehicles within the first 120 days of receiving the recall
    notice and 60 percent within the first year.

        Question 5a. What is the age and source of this data?

        Question 5b. Did NHTSA receive any other data related to the audit
    of rental car industry compliance with recall notices that contradicted
    the data cited?
        Answer. This information represents a summary of data from an audit
    query NHTSA initiated in 2010. The source of the information was
    several vehicle manufacturers who provided us with recalls completion
    information broken down by rental car companies. Several major rental
    car companies provided responses to NHTSA that disputed this
    information.
        We do not regularly receive any data on the rental car industry's
    performance. This was a specific inquiry and there is no ongoing
    obligation on anyone to produce this information.
                                     ______

       Response to Written Questions Submitted by Hon. Barbara Boxer to
                            Hon. David L. Strickland
        Question 1. Are safety recalls issued for trivial defects, or only
    for defects that pose a serious safety risk?
        Answer. All safety recalls are conducted either because the vehicle
    contains a safety defect, which by definition means it presents an
    unreasonable risk, or a failure to comply with Federal motor vehicle
    safety standard.

        Question 2. Are there other types of notices a manufacturer can
    issue, besides a safety recall, if a defect does not pose a true safety
    concern?
        Answer. Manufacturers have a wide variety of campaigns they use to
    address non-safety defects. Some campaigns involve active notification
    to owners, and some do not. This area is not regulated by NHTSA and is
    left to the discretion of the manufacturers.

        Question 3. If the defroster knob isn't working on a vehicle, and
    that vehicle is being driven in Florida during the summer rather than
    in a cold environment, why is that a safety concern?
        Answer. Weather patterns and conditions change sometimes suddenly,
    even in places with a mild climate. For example, Florida experiences
    extremely humid conditions in the summer that can cause windshields to
    fog up. Temperatures and humidity are what make a defroster a necessary
    item. People in Florida also often drive their vehicles to other states
    with colder climates, for example, New York, and parts of Florida do
    experience freezing temperatures during the winter.
        Nevertheless, if a manufacturer does not believe a particular issue
    presents a safety defect in a particular region, it can conduct a
    regional recall that pertains only to certain regions, so long as it is
    consistent with the data on the incidence of the problem and there is a
    reasonable technical basis for excluding other regions.

        Question 4. If a vehicle is missing a warning label inside the
    passenger cabin telling drivers about the danger the passenger-side
    airbag can pose to children in car seats or under the age of 12, why is
    that a safety concern?
        Answer. Particularly in an unfamiliar rental vehicle, an uninformed
    driver or adult passenger may place a child in a child safety seat in
    the front passenger seat not knowing the potential deadly consequences.

        Question 5. The Moving Ahead for Progress in the 21st Century Act
    (P.L. 112-141) required that all safety recall information be publicly
    available on a website, and searchable by make, model, and VIN. When
    does NHTSA anticipate completing rulemaking on that provision?
        Answer. NHTSA published the final rulemaking in the Federal
    Register on August 20, 2013. It is available at https://
    www.federalregister.gov/articles/2013/08/20/2013-19785/early-warning-
    reporting-foreign-defect-reporting-and-motor-vehicle-and-equipment-
    recall-regulations.

        Question 6. Please describe the process by which NHTSA works with
    the manufacturer to determine what types of defects pose a serious
    safety concern and warrant a safety recall. How does NHTSA work with
    auto manufacturers to develop an appropriate remedy and wording for
    recall notices to owners?
        Answer. While NHTSA does have frequent communications with the
    entities it regulates, we do not work with manufacturers to determine
    what types of defects pose a serious safety concern. Manufacturers have
    a statutory duty to identify safety defects and conduct recalls. When a
    manufacturer has not done so and a possible defect exists, NHTSA
    conducts an independent investigation that may include data analysis
    and testing to determine whether a safety defect trend exists.
        Similarly, recall remedies are at the discretion of the
    manufacturer, and NHTSA does not dictate them. NHTSA limits its
    involvement on choice of remedy only to those situations where it
    appears that the remedy is not complete or may be likely to fail.
        The wording of recall notices is, in part, dictated by Federal law.
    NHTSA reviews every draft notification a manufacturer submits on a
    recall to ensure the notices are compliant. We also use this
    opportunity to offer suggestions that may help the success of a recall
    campaign. Where appropriate, we encourage manufacturers to use a number
    of means of communication, including e-mails, phone calls, and website
    postings, to inform owners and users about recalls.

        Question 7. Is a lack of sufficient parts to remedy a safety defect
    a common problem? If so, what steps can manufacturers take to avoid
    this problem? Do some manufacturers have a better track record than
    others with producing enough parts?
        Answer. It can be a concern, particularly with very large volume
    recalls or recalls where a part is no longer produced or was not a
    universal part.
        We are not certain manufacturers can completely avoid this problem,
    other than not manufacturing products with defects, which responsible
    manufacturers are already taking every step to avoid.
        We have not studied in any exacting detail whether some
    manufacturers have more problems than others in this area. We reiterate
    that the problem, in our view, stems more from the size of the
    particular recalls a manufacturer conducts, as well as the type of
    part. Manufacturers should make defect and noncompliance decisions and
    conduct recalls promptly without any concern that they will be labeled
    as deficient if those recalls results in reasonable parts delays.

        Question 8. If stakeholders have concerns about safety recall
    notices to owners (including the clarity or content of these recall
    notices, or the types of defects that warrant safety recalls in the
    first place), is there a mechanism for stakeholders to present those
    concerns to NHTSA and work with the agency to address them? Does NHTSA
    currently have authority to prescribe changes to the content of safety
    recall notices, or the requirements that trigger a safety recall, as
    needed?
        Answer. Owners are always welcome to file a complaint on
    www.safercar.gov or call our toll-free hotline to voice their concerns.
        NHTSA has the authority to require changes to safety recall
    notices. Manufacturers frequently revise their proposed owner
    notification letters after discussions with NHTSA staff.
                                     ______

      Response to Written Questions Submitted by Hon. Claire McCaskill to
                                Sharon Faulkner
        Question 1. The Automobile Alliance testified that a mandatory
    grounding of vehicles for rental fleets would require automakers and
    their dealers to grant preferential treatment for repairs to rental car
    companies, at the expense of individual consumers. How do the largest
    rental companies typically handle recall-related repairs today?
        Answer. It is our understanding at the American Car Rental
    Association (ACRA) that the major rental car companies today ground all
    vehicles when they have received from the manufacturer the safety
    recall notice and vehicle identification numbers (VINs) for the
    affected vehicles. Those vehicles are not re-rented until the
    prescribed work is complete.

        Question 2. In what way, if any, would a mandatory grounding of
    vehicles change the way in which rental companies respond to recall
    repairs versus the voluntary agreement that much of the industry
    already abides by?
        Answer. For all practical purposes, ACRA does not believe that the
    mandatory grounding would change the way in which our members respond
    to the safety recall notices. As stated above, we believe most are
    doing this already. However, not all rental car companies are members
    of ACRA, but ACRA did develop a ``pledge'' to adopt the grounding
    policy two years ago and asked all its members to adhere to it. We
    believe most members are complying with the pledge. Certainly if S. 921
    passes as written, our members' voluntary actions would be obligatory
    and all rental car companies would be required to follow this policy.

        Question 3. Administrator Strickland of NHTSA testified that
    NHTSA's audit query for the rental car industry from several years ago
    produced data that showed rental car companies repaired 50 percent of
    its recalled vehicles within the first 120 days of receiving the recall
    notice and 60 percent within the first year. Do you agree with those
    statistics?
        Answer. ACRA respectfully, yet strongly, disagrees with the
    statistics presented by Administrator Strickland regarding the
    completion rates of rental car companies. Unfortunately, Mr. Strickland
    continues to use old and incomplete data to measure our industry's
    completion rates. The data NHTSA originally received came from auto
    manufacturers, which cautioned NHTSA that the information was likely
    incomplete due to the high turnover rate of vehicles for rental car
    companies. NHTSA then sought information from the largest rental car
    companies.

        Question 4. Did the rental car industry provide more current data
    on this matter?
        Answer. Several of the larger members did respond to NHTSA's audit
    query and demonstrated that the completion rate for the specified
    recalls requested was above 90 percent within the first 90 days of the
    recall notice. These responses were posted on NHTSA's website. These
    completion rates are typical if there are sufficient parts available
    from the manufacturers. It is unfortunate that Mr. Strickland continues
    to quote incorrect statistics, or at least present them without the
    appropriate context.
        However, as quickly as many of our members are repairing their
    vehicles due to recalls under most circumstances, how quickly we repair
    is not the issue. The issue is that these vehicles for the most part
    are being pulled from service until repaired.

        Question 5. Among the reasons you stated for why ACRA supports this
    legislation is that your members do not want a patch-work of state
    regulations governing your recall practices and, therefore, would like
    to see Congress act. However, S.921 as currently drafted does not
    contain an expressed state pre-emption clause. Why does S. 921 not
    contain a preemption clause?
        Answer. Originally ACRA supported a specific preemption clause as
    our members thought it would be an appropriate provision in this
    legislation. However, as we discussed with several Senators and staff,
    we came to understand that preemption clauses in general are
    controversial and continuing to advocate for one could impede ultimate
    passage of the legislation. Therefore, in the interest of compromise
    and moving forward, we agreed to not include such a provision in the
    bill.

        Question 6. Despite the absence of an explicit preemption clause in
    what way(s) does the legislation effectively address the industry's
    concerns about a potential patchwork of state laws?
        Answer. ACRA believes that even without a specific preemption
    clause in the legislation, the ultimate effect of this Federal
    legislation will be to deter states from pursuing additional
    legislation on the matter. In fact, there is legislation in several
    states currently that are being held from further advancement pending
    this Federal legislation. This leads us to conclude that states will
    defer to Congress if Congress acts.

        Question 7. One idea that has been proposed by NADA is some sort of
    small-business carve-out. Based on Small Business Administration (SBA)
    definitions, an auto dealership with 200 or fewer employees is a small
    business and a rental car company with $35.5 million or less in annual
    revenue is a small business. Ms. Faulkner: Do you know how many rental
    car companies, or what percentage of companies in the industry, would
    still be covered by the provisions of the bill if such an exemption
    existed?
        Answer. ACRA has more than 250 rental car company members. However,
    our best estimate is that there are approximately 2,000 rental car
    companies operating in the United States. Of those, there are three
    companies that account for the majority of the total rental car market.
    Therefore, there are thousands of rental car companies that would
    likely meet the SBA definition and would be exempted if the exemption
    was based upon that definition.

        Question 8. Mr. Welch and Ms. Faulkner: Are you aware of any other
    auto safety standards that include a small business exemption?
        Answer. No.

        Question 9. Concerns have been raised about a new Federal mandate
    for the grounding of vehicles creating a situation where automakers
    would be more susceptible to lawsuits from rental companies for loss of
    use. Mr. Bainwol and Ms. Faulkner: What if any obstacles exist for the
    automakers and rental car companies to address this liability issue
    contractually?
        Answer. ACRA is unaware of any potential impediments to addressing
    this issue on a contractual basis. However, our members believe that
    any attempt to require a vehicle purchaser to waive its right to sue
    for defects would be against public policy.

        Question 10. Mr. Bainwol and Ms. Faulkner: Are you aware of any
    instances in which a rental car company has sued an automaker for loss
    of use?
        Answer. ACRA is not aware of any lawsuits against any automaker for
    loss of use.

        Question 11. Ms. Faulkner: Would the rental car industry support
    the type of loss of use liability protection the automakers are
    seeking?
        Answer. ACRA would oppose any attempt to foreclose our members from
    pursuing loss of use claims against an auto manufacturer. As stated
    above, we believe any such action would be against general public
    policy and would unfairly shift the costs of defective vehicles from
    the manufacturers, who are responsible for any defects, to rental car
    companies and their customers who are not responsible for the existence
    of the defects.

        Question 12. In the hearing, the mechanism in place by which auto
    dealers are currently compensated by automakers for loss of use when a
    new car is grounded due to a recall was raised. It was stated that auto
    dealers receive 1 percent of value per month from automakers in such
    cases. It appears this framework exists through voluntary or
    contractual agreement between auto dealers and automakers. What is your
    position on creating such a compensation structure between automakers
    and rental companies (including auto dealers who rent cars) when loss
    of use occurs due to grounding?
        Answer. Actually under the Motor Vehicle Safety Act (Title 49 Sec.
    30116), auto manufacturers are required to compensate dealers when a
    new car cannot be sold due to a recall. It is neither voluntary, nor
    part of a contractual agreement, but rather the law requires it. ACRA
    would be open to discuss the compensation issue. History has shown that
    the parties (rental car company and auto manufacturer) can and do most
    often work these issues out. Assuming there are not parts delays, our
    members are able to get the vehicles repaired quickly (as cited above)
    and back into their active fleets. There are on occasion more extreme
    circumstances where there are significant parts delays; but, again, the
    parties generally work that out privately among themselves.
                                     ______

       Response to Written Questions Submitted by Hon. Barbara Boxer to
                                Sharon Faulkner
        Question 1. Is it true that most rental vehicles end up being sold
    on the used car market once the rental car company is ready to dispose
    of them? In addition to keeping rental car customers safe, would this
    legislation help make consumers safer when they purchase a used car
    that was previously owned by a rental car company?
        Answer. Most ACRA members sell their rental cars through wholesale
    channels. Those vehicles are then purchased by licensed dealers. The
    vast majority of these vehicles will have the recall completed--along
    with any other defects remedied- prior to a retail sale. To the extent
    that some rental car companies are not currently completing recalls
    prior to sale, this law, if passed, would ensure that they are required
    to do so, and consumers would benefit. Under the proposed bill rental
    car companies as defined in the legislation will be the only seller of
    used vehicles to have this requirement.

        Question 2. Despite several rental car companies' voluntary efforts
    to strengthen their recall compliance policies, why is it important to
    enact these protections into law?
        Answer. While we believe that most members of ACRA are complying
    with the provisions of this legislation, as mentioned above, our
    membership does not include all rental car companies operating in the
    US. It is critical that there is one uniform standard that applies
    across the board for our industry. This ensures fairness and certainty
    in the law.
                                     ______

      Response to Written Questions Submitted by Hon. Claire McCaskill to
                                Rosemary Shahan
        Question 1. The vast majority of bills introduced never become law.
    If we are unsuccessful in enacting S. 921 or other Federal legislation
    effectively dealing with the safety of rental cars subject to recall
    what would be the likely plan of action for your organization and other
    auto safety advocates?
        Answer. We would work to get the legislation enacted in key states,
    either through legislation or through the initiative process.

        Question 2. You heard in the testimony from Mr. Bainwol and Mr.
    Welch the concerns auto manufacturers and auto dealers have with the
    bill. If additional compromises had to be made to get this bill across
    the finish line--what you see as the single most important, most
    immovable component of the bill?
        Answer. The most important component is the prohibition against
    renting or selling vehicles under a Federal safety recall, once the
    rental car company has received notice of the safety recall, until they
    are fixed.
                                     ______

      Response to Written Questions Submitted by Hon. Claire McCaskill to
                                 Mitch Bainwol
        Question 1. Concerns have been raised about a new Federal mandate
    for the grounding of vehicles creating a situation where automakers
    would be more susceptible to lawsuits from rental companies for loss of
    use. Mr. Bainwol and Ms. Faulkner: What if any obstacles exist for the
    automakers and rental car companies to address this liability issue
    contractually?
        Answer. While it may be possible for auto makers and rental car
    companies to address this issue when negotiating contracts that is not
    the only issue associated with mandating this change in the way recalls
    are handled by rental car companies and it certainly would come with
    costly side effects. First, forcing automakers and rental car companies
    to specifically address this issue will add cost elements in the
    purchase and rental of vehicles that will adversely impact consumers.
    While both industries will absorb some expenses, ultimately most of
    those costs will be pushed on to the consumer--some of whom will no
    doubt then be priced out of a rental vehicle or even out of the
    vacation they were looking to take. Second, such a system will not have
    uniform impacts on the various companies that are involved. Smaller
    auto companies or smaller rental companies will be disadvantaged in the
    negotiation process. Depending on the magnitude of the costs involved,
    these smaller businesses could potentially be pushed out of the market
    place entirely.
        While the accident that claimed the lives of the Houck sisters was
    indeed tragic, the rental car companies have adjusted their practices
    and no longer rent vehicles that are under a recall. This voluntary
    commitment by the major rental car companies effectively covers 96
    percent of the rental vehicles and we are not aware of another incident
    that has occurred over the past eight years. The call for Federal
    action to codify the current practices of the large rental car
    companies is simply not needed at this point, and if pursued will
    create unintended consequences for consumers, rental vehicle companies
    and automakers.

        Question 2. Mr. Bainwol and Ms. Faulkner: Are you aware of any
    instances in which a rental car company has sued an automaker for loss
    of use?
        Answer. The Alliance is unaware of any such litigation at this
    time, however, it is possible that the proposed bill would make such
    actions more likely.

        Question 3. In the hearing, the mechanism in place by which auto
    dealers are currently compensated by automakers for loss of use when a
    new car is grounded due to a recall was raised. It was stated that auto
    dealers receive 1 percent of value per month from automakers in such
    cases. It appears this framework exists through voluntary or
    contractual agreement between auto dealers and automakers. What is your
    position on creating such a compensation structure between automakers
    and rental companies (including auto dealers who rent cars) when loss
    of use occurs due to grounding?
        Answer. The auto industry remains committed to safety. One element
    of this commitment includes significant investment in order to research
    and test vehicles with the goal of ensuring that our customers receive
    safe and reliable products. Another element of this commitment is to
    respond quickly and proactively when an issue arises. In fact, of 586
    safety recalls last year, a staggering 444 were manufacturer initiated.
        A recall system that differentiates rental car companies from all
    other regular customers would create a tiered or class system with
    unintended and potentially costly consequences. We treat all of our
    vehicle purchase customers equally and ensure their safety equally. No
    legislation should attempt to bifurcate customers or prioritize one
    class of customer over another. Legislation that seeks to impose
    penalties for loss of use is inadvisable because it arbitrarily creates
    unnecessary expenses that will be very difficult to define and measure.
    Realistically, some portion of these needless added costs will be
    passed on to consumers.
        Automaker relationships with their franchise dealers are entirely
    different. The dealers are the sales arms for the companies, and as
    such financial arrangements with them are managed differently. Even so,
    when automakers provide repair parts to dealers for recalled vehicles,
    it is done to accommodate equally the dealer inventory of affected
    vehicles and the other customers who make arrangements to get the
    recalls repaired by those dealers. Furthermore, while there is a
    statutory mechanism in place that provides for auto makers to
    compensate dealers for unsold, new inventory subject to a recall, it is
    rarely the basis for any such transactions between the dealers and the
    automakers. It is not a good basis for creating some new process for
    dealing with these issues with vehicle purchase customers.
        Finally, when looking for any needed ``solutions'', we must keep
    the consumer in mind and ensure that they have the proper information
    in order to make the best decision for themselves and their families.
    By assuring prompt notification to the consumer of the recall, whether
    the consumer is the vehicle owner, leasee or a renter, the consumer is
    able to make the decision that best suits his or her needs. Instead of
    imposing higher costs on to the rental car process, allow consumers the
    right to decide what is best for them at that time.
                                     ______

       Response to Written Questions Submitted by Hon. Barbara Boxer to
                                 Mitch Bainwol
        Question 1. Dealers are already required by law to fix new cars
    under a safety recall before they're sold. Do manufacturers currently
    give dealers access to the repair parts first, before making parts
    available to repair cars owned by the general public?
        Answer. During a recall, owners are directed to take their vehicles
    to their local dealership or repair shop to be remedied at no cost. As
    a result, manufacturers send repair parts to these repair facilities to
    accomplish this process. So, it is true that dealerships get the repair
    parts needed to address the recall, but that is not done to provide
    those parts for dealer repairs to be done first. They may be the first
    vehicles repaired, but not because of some special consideration they
    are given. However, this question may be better answered by the dealers
    themselves.

        Question 2. It is my understanding that if my car is recalled for a
    safety defect, the manufacturer would pay to repair it. Does the Auto
    Alliance believe that protecting passenger safety is worth this cost to
    the manufacturers?
        Answer. Yes.

        Question 3. Do manufacturers ever have to address costly lawsuits
    for safety defects that injure or kill passengers? If we could get more
    defective vehicles off the road before they injure or kill someone,
    would that help manufacturers avoid the cost of such lawsuits?
        Answer. Although NHTSA data indicates that roughly 93 percent of
    vehicle crashes are the result of driver error, it is certainly true
    that auto manufacturers occasionally face law suits from plaintiffs
    alleging safety defects. As for the second question, it certainly is in
    the best interest of our reputation and our relationships with our
    customers to make sure that we do what we can to provide safe vehicles
    in the first place, and to remedy defects as quickly as possible.

        Question 4. Have the Alliance or its members opposed any prior
    efforts, legislative or administrative, to impose more stringent
    requirements on the safety recall system?
        Answer. The Alliance and its Members always work as constructively
    as possible on any legislative or administrative efforts to address
    recalls. We hope those efforts will result in provisions and actions
    that are reasonable, responsible and effective in addressing concerns.
                                     ______

      Response to Written Questions Submitted by Hon. Claire McCaskill to
                                 Peter K. Welch
        Question 1. Car companies also sell cars and auto dealers also rent
    cars. When rental companies sell cars they are regulated as auto
    dealers. Since many auto dealers also rent cars, and press accounts
    indicate it is a growing part of many dealers' business, why should the
    rental activities of an auto dealer be treated any differently from
    those of a rental car company?
        Answer. The primary business of franchised auto dealerships is to
    sell, lease and service vehicles. Franchised auto dealerships that
    provide rental or loaner vehicles do so primarily and incidentally as a
    service for their customers. We are unaware that rental car operations
    constitute a ``growing part'' for franchised auto dealerships.
        In contrast, the primary business of a rental car company is to
    rent vehicles to the general public.
        The largest multi-national rental car companies have hundreds of
    thousands of vehicles in their fleets. They have the legal and
    regulatory compliance resources necessary to devote to the regulatory,
    recordkeeping and inspection mandates set out in S. 921. Most
    franchised auto dealerships are small businesses as defined by the
    Small Business Administration who do not have dedicated legal or
    regulatory compliance resources. Under S. 921, however, a small
    business dealership with five loaner vehicles would have the same
    regulatory burden as a multi-national rental car company with several
    hundred thousand vehicles.

        Question 2. What percentage of auto dealers also rent cars?
        Answer. NADA estimates that less than half of all franchised
    dealerships directlyrent vehicles (as opposed to most new car dealers
    that maintain a number of ``loaner'' vehicles for use by servce
    customers). Dealerships that do not maintain rental fleets often
    partner with a rental car company to provide vehicle rental services
    for their customers.

        Question 3. What is the size of a typical auto dealer's rental
    fleet?
        Answer. NADA lacks data on this topic and thus cannot suggest a
    ``typical'' fleet size. For those dealers who do rent vehicles, the
    size of their rental fleet at a particular location is usually
    commensurate with the needs of their customers. Additionally, no dealer
    we are aware of has a rental fleet even one percent the size of the
    large multi-national rental car companies.

        Question 4. Is there a standard practice among auto dealers today
    to verify whether or not a vehicle is subject to an open safety recall
    before it is rented to a customer?
        Answer. Dealerships receive safety recall notices from the
    manufacturer(s) of those vehicles they sell new. Those notices detail
    which vehicles are covered by a recall, what the ``fix'' is likely to
    be, and when the parts necessary for the ``fix'' are likely to be
    available. Dealerships are then able to determine which, if any,
    vehicles in their rental fleet are subject to the recall. A dealership
    typically only receives recall notices for rental vehicles outside of
    the brand(s) it is franchised to sell if the vehicle is registered in
    the name of the dealership (this is the same type of notice that any
    registered owner of the vehicle would receive).

        Question 5. One idea that has been proposed by NADA is some sort of
    small-business carve-out. Based on Small Business Administration (SBA)
    definitions, an auto dealership with 200 or fewer employees is a small
    business and a rental car company with $35.5 million or less in annual
    revenue is a small business. Mr. Welch: Do you know how many auto
    dealers, or roughly what percentage, would be excluded from the bill's
    requirements under such an exemption?
        Answer. The average franchised auto dealership has 55 employees. An
    exclusion based on small businesses as defined by the SBA would exclude
    a majority of dealerships from the bill.

        Question 6. Mr. Welch and Ms. Faulkner: Are you aware of any other
    auto safety standards that include a small business exemption?
        Answer. National Highway Traffic Safety Administration (NHTSA)
    regulations generally focus on new motor vehicles up until the point
    they are bought by the ultimate purchasers. The National Traffic and
    Motor Vehicle Safety Act generally requires that franchised automobile
    dealerships not ``tamper'' with a new vehicle safety compliance.
        NHTSA routinely analyzes and accounts for the impact of its new
    rules on small businesses, and on businesses managing or producing
    small volumes of vehicles. For example, it is not unusual for
    adjustments to be made in the context of a rulemaking to accommodate
    final stage manufacturers of vehicles made in 2 or more stages,
    businesses that alter vehicles before first sale, and small volume
    manufacturers (SVMs). One such example involved accommodations made in
    the tire pressure monitoring rule (FMVSS 138). In addition, NHTSA
    reviews its existing rules for potential small business impacts. (See
    Docket No. NHTSA-2012-0155; Federal Motor Vehicle Safety Standards;
    Small Business Impacts of Motor Vehicle Safety).
        Importantly, NHTSA has excluded from its motor vehicle theft
    standard ``insurer reporting'' by all but the largest (50,000 vehicles
    and above) rental and leasing companies. 49 CFR Part 544. This
    exclusion is based on a recognition that the burden on smaller rental
    and leasing companies outweighs the benefit of imposing the mandate.
    Similarly, NHTSA's Early Warning Rules set reporting mandates tailored
    to the size of the reporting entity. 49 CRF 579.21-29.

        Question 7. In the hearing, the mechanism in place by which auto
    dealers are currently compensated by automakers for loss of use when a
    new car is grounded due to a recall was raised. It was stated that auto
    dealers receive 1 percent of value per month from automakers in such
    cases. It appears this framework exists through voluntary or
    contractual agreement between auto dealers and automakers. What is your
    position on creating such a compensation structure between automakers
    and rental companies (including auto dealers who rent cars) when loss
    of use occurs due to grounding?
        Answer. The ``1 percent'' compensation for new vehicles grounded
    due to a recall arises out of a statutory mandate. 49 USC
    Sec. 30116(b). Applying a similar regime to rental vehicles under
    recall would add another layer of complexity to the dealer-automaker
    financial relationship. As a practical matter, automakers may seek to
    recoup losses sustained due to a ``loss of use'' provision in the form
    of higher new vehicle prices.
                                     ______

       Response to Written Questions Submitted by Hon. Barbara Boxer to
                                 Peter K. Welch
        Question 1. What proportion of revenues do your members obtain from
    renting vehicles versus selling vehicles? I understand that this may
    vary from company to company, so please give a range and median.
        Answer. NADA does not have data on what proportion of total
    revenues franchised dealerships derive from renting vehicles to their
    customers and can only characterize such revenues as small and
    incidental.

        Question 2. How many rental vehicles do your members maintain in
    their fleets? Please give a range and median to account for differences
    among companies.
        Answer. NADA does not have data on the aggregate number of rental
    vehicles among America's 17,704 franchised auto dealers. For those
    dealers who do rent vehicles, the size of their rental fleet at a
    particular location is usually commensurate with the needs of their
    customers. Additionally, no dealer we are aware of has a rental fleet
    even one percent the size of the large multi-national rental car
    companies.

        Question 3. For your member companies that maintain rental fleets,
    what proportion of their rental vehicles are the same make and model?
    Please give a range and median to account for differences among
    companies.
        Answer. NADA has no empirical data on what proportion of a
    dealership's rental vehicles are the same make and model. It is safe to
    assume that for those dealerships who rent vehicles, the majority of
    vehicles they rent are the same brand(s) for which they hold a
    franchise.

        Question 4. Do your members currently rent out vehicles under a
    safety recall prior to repairing them? If so, how do they decide which
    customers get the defective cars?
        Answer. To our knowledge, NADA's members do not knowingly rent
    vehicles that are mechanically unsound or unsafe to operate.

        Question 5. Has NADA opposed any prior efforts, legislative or
    administrative, to impose more stringent requirements on the safety
    recall system?
        Answer. The last time Congress legislated in this area was in 2012,
    when Congress passed the conference report to H.R. 4348, the ``Moving
    Ahead for Progress in the 21st Century Act''. NADA supported this
    legislation. NADA did oppose previous iterations of this bill, as those
    versions contained a new tax on vehicles, or new government mandates
    that would have increased costs to consumers without a commensurate
    safety benefit. Additionally, NADA has in the past and will in the
    future look for opportunities to work with NHTSA to enhance the
    effectiveness of the existing safety recall system.