[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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www.reutersreprints.com.

    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.

                                  
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