[Senate Hearing 114-249]
[From the U.S. Government Publishing Office]


                                                      S. Hrg. 114-249

                   UPDATE ON THE RECALLS OF DEFECTIVE
                      TAKATA AIR BAGS AND NHTSA'S
                         VEHICLE SAFETY EFFORTS

=======================================================================

                                 HEARING

                               BEFORE THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 23, 2015

                               __________

    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 FOURTEENTH CONGRESS

                             FIRST SESSION

                   JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi         BILL NELSON, Florida, Ranking
ROY BLUNT, Missouri                  MARIA CANTWELL, Washington
MARCO RUBIO, Florida                 CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire          AMY KLOBUCHAR, Minnesota
TED CRUZ, Texas                      RICHARD BLUMENTHAL, Connecticut
DEB FISCHER, Nebraska                BRIAN SCHATZ, Hawaii
JERRY MORAN, Kansas                  EDWARD MARKEY, Massachusetts
DAN SULLIVAN, Alaska                 CORY BOOKER, New Jersey
RON JOHNSON, Wisconsin               TOM UDALL, New Mexico
DEAN HELLER, Nevada                  JOE MANCHIN III, West Virginia
CORY GARDNER, Colorado               GARY PETERS, Michigan
STEVE DAINES, Montana
                    David Schwietert, Staff Director
                   Nick Rossi, Deputy Staff Director
                    Rebecca Seidel, General Counsel
                 Jason Van Beek, Deputy General Counsel
                 Kim Lipsky, Democratic Staff Director
              Chris Day, Democratic Deputy Staff Director
       Clint Odom, Democratic General Counsel and Policy Director
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 23, 2015....................................     1
Statement of Senator Thune.......................................     1
Statement of Senator Nelson......................................     3
    Report dated June 22, 2015 entitled ``Danger Behind the 
      Wheel: The Takata Airbag Crisis and How to Fix Our Broken 
      Auto Recall Process'' by Minority Staff Office of Oversight 
      and Investigations.........................................     4
Statement of Senator McCaskill...................................    64
    Written statement of the American Car Rental Association and 
      Consumers for Auto Reliability and Safety..................    65
Statement of Senator Klobuchar...................................    68
Statement of Senator Blumenthal..................................    71
Statement of Senator Markey......................................    73
Statement of Senator Peters......................................    75
Statement of Senator Heller......................................    77
Statement of Senator Daines......................................    78

                               Witnesses

Hon. Mark R. Rosekind, Ph.D., Administrator, National Highway 
  Traffic Safety Administration, U.S. Department of 
  Transportation.................................................    43
    Prepared statement...........................................    45
Hon. Calvin L. Scovel III, Inspector General, U.S. Department of 
  Transportation.................................................    48
    Prepared statement...........................................    51
Kevin M. Kennedy, Executive Vice President of North America, TK 
  Holdings Inc. (``Takata'').....................................    82
    Prepared statement...........................................    83
Scott Kunselman, Senior Vice President and Head of Vehicle Safety 
  and Regulatory Compliance, FCA US LLC..........................    88
    Prepared statement...........................................    89
Rick Schostek, Executive Vice President, Honda North America.....    90
    Prepared statement...........................................    92

                                Appendix

Response to written questions submitted to Hon. Mark R. Rosekind 
  by:
    Hon. John Thune..............................................   107
    Hon. Bill Nelson.............................................   109
Response to written question submitted to Hon. Calvin L. Scovel 
  III by:
    Hon. John Thune..............................................   112
Response to written questions submitted to Kevin M. Kennedy by:
    Hon. John Thune..............................................   113
    Hon. Bill Nelson.............................................   114
    Hon. Richard Blumenthal......................................   115
Response to written questions submitted to Scott Kunselman by:
    Hon. John Thune..............................................   116
    Hon. Roy Blunt...............................................   117
    Hon. Ron Johnson.............................................   118
    Hon. Bill Nelson.............................................   118
Response to written questions submitted to Rick Schostek by:
    Hon. John Thune..............................................   119
    Hon. Roy Blunt...............................................   121
    Hon. Ron Johnson.............................................   121
    Hon. Bill Nelson.............................................   121

 
                   UPDATE ON THE RECALLS OF DEFECTIVE.
                      TAKATA AIR BAGS AND NHTSA'S
                         VEHICLE SAFETY EFFORTS

                              ----------                              


                         TUESDAY, JUNE 23, 2015

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:06 a.m., in 
room SR-253, Russell Senate Office Building, Hon. John Thune, 
Chairman of the Committee, presiding.
    Present: Senators Thune [presiding], Blunt, Ayotte, Heller, 
Fischer, Moran, Gardner, Daines, Nelson, McCaskill, Klobuchar, 
Blumenthal, Markey, Booker, Manchin, and Peters.

             OPENING STATEMENT OF HON. JOHN THUNE, 
                 U.S. SENATOR FROM SOUTH DAKOTA

    The Chairman. Good morning. Welcome, everyone. This hearing 
will come to order.
    We have called this hearing for a very somber reason. Some 
defective airbags are hurting, rather than helping, people. We 
still haven't figured out exactly why, and we need to figure 
out how to prevent these issues from occurring in the future.
    This is a pivotal time in vehicle safety. It is welcome 
news that cars are generally safer than they have ever been. 
Advances in vehicle technologies and safety innovations, as 
well as robust safety initiatives, have reduced the number of 
deaths on the road. Still, tragically, more than 30,000 people 
die every year due to motor vehicle accidents.
    Airbags are one of the most important vehicle safety 
innovations, and that is why it is so alarming that tens of 
millions of cars have potentially defective airbags. Today, we 
will be asking witnesses for an update on recall and remedy 
efforts for Takata airbag inflators, which have been allegedly 
linked to 8 deaths and over 100 injuries.
    The large number of vehicles recalled covers 11 auto 
manufacturers. The complexity of the different types of 
inflators, the lack of an identified root cause to date, and 
the age of the vehicles affected have made remedying this 
problem exceedingly difficult. But these challenges do not 
excuse the responsibilities of auto manufacturers, suppliers, 
and the National Highway Traffic Safety Administration, NHTSA, 
from their shared obligation to ensure vehicles are safe.
    The first priority should be fixing the recalled vehicles 
as soon as possible. NHTSA has also taken an unprecedented 
role, inserting itself in overseeing this process. Takata and 
other alternative suppliers have ramped up production of 
replacement parts to increase supply, and the autos are seeking 
to contact affected vehicle owners and working with dealerships 
on swift repairs.
    Nevertheless, questions exist about whether the currently 
available replacements are truly safe. Takata is phasing out 
certain types of inflators, and testing is ongoing to determine 
the root cause or causes of the inflator defects. This testing 
will help to assess the scope of the recalls and safety of the 
replacement parts.
    These alarming recalls underscore the importance of clear 
and accurate information for consumers. NHTSA's dedicated 
Takata recall website is an important step, but recall fatigue 
and confusion are growing. The large number of vehicles 
involved has resulted in delays for some consumer notice, and 
the number of times the same vehicle may be subject to recall 
may further perplex consumers.
    As we all know, completing a recall is not easy. With an 
all-time record last year of nearly 64 million automobiles 
subject to recall, I appreciate that NHTSA and the auto 
industry are looking for ways to improve the process.
    Identifying safety problems early is another key issue for 
both the industry and NHTSA. I look forward to hearing more 
about the Inspector General's audit report, which raises 
serious questions about the agency's abilities in this area. 
The audit identifies many instances in which the agency 
repeatedly dropped the ball in handling issues related to 
General Motors' ignition switch defect.
    Weaknesses in NHTSA's ability to conduct accurate data 
analysis and provide necessary training and supervision call 
into question whether the agency can effectively identify and 
investigate potential safety problems and carry out its safety 
mission. These findings are especially disconcerting given the 
scale and complexity of the Takata defects.
    I am pleased to know that Administrator Rosekind has 
concurred with all 17 of the Inspector General's 
recommendations and has committed to implement them.
    There have been far too many troubling recalls throughout 
the agency's existence. That is why I have worked with Senator 
Nelson to pass our Motor Vehicle Safety Whistleblower Act. This 
legislation seeks to encourage employees to report safety 
concerns before they become larger problems and to prevent loss 
of life and serious injuries resulting from safety defects.
    Despite a long vacancy with a Senate-confirmed leader, 
under Administrator Rosekind's leadership, NHTSA has also been 
looking for ways to improve. There have been assessments of 
NHTSA and a plan for a path forward, but now is the time for 
accountability. The agency, automakers, their suppliers and 
dealers, and Congress must work together to reduce deaths and 
injuries on our Nation's roadways.
    This committee will continue to conduct oversight of the 
Takata recalls and NHTSA's vehicle safety efforts. I appreciate 
Takata's general cooperation with the Committee's requests to 
date. In fact, we just received another large production of 
documents from the company a few days ago. Some automakers are 
also producing documents to the Committee. And I am sure we 
will have more questions for NHTSA.
    It is also important for consumers to check to see if their 
vehicle is subject to this or any recall. NHTSA has a vehicle 
identification number, or VIN, lookup tool online at 
safercar.gov. If you determine your vehicle is subject to a 
recall, please schedule an appointment to get it fixed with 
your closest dealership as soon as possible.
    Now I am pleased to welcome Administrator Rosekind to his 
first appearance before the Committee since his confirmation as 
the NHTSA Administrator last December.
    I also want to welcome Inspector General Scovel back to the 
Committee and our auto witnesses for this, our second full 
committee hearing on this important issue.
    So I want to thank all of our witnesses for being here 
today. I look forward to your testimony.
    And we will start with this first panel with Mr. Rosekind, 
followed by Mr. Scovel.
    Mr. Rosekind, please proceed.
    Oh, I am sorry. Excuse me. I apologize. My mistake.
    The Senator from Florida, our distinguished Ranking Member, 
please make your opening statement before we proceed to the 
panel.

                STATEMENT OF HON. BILL NELSON, 
                   U.S. SENATOR FROM FLORIDA

    Senator Nelson. Thank you, Mr. Chairman.
    And, if I may, we have had an investigation done, ``Danger 
Behind the Wheel: The Takata Airbag Crisis and How to Fix Our 
Broken Auto Recall Process,'' done by our minority committee 
staff. If I may have that entered into----
    The Chairman. Without objection.
    Senator Nelson.--the record.
    [The report follows:]

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                           Table of Contents
Executive Summary

I. Background

II. Timeline of the Takata Airbag Crisis

III.  Media Reports and Takata's Internal Documents Raise Questions 
Regarding the Company's Knowledge of Serious Safety and Quality Control 
Issues as Early as 2001

IV.  Media Reports and Takata's Internal Documents Illustrate Takata's 
Efforts to Address the Impact of Moisture and Humidity on its Inflators

V.  Proposed Policy Changes to Quickly Detect and Address Future Auto 
Safety Defects

        A. NHTSA Improvements

                1.  Increase Civil Penalty Authority

                2.  Provide Enhanced and Independent Testing Capability

                3.  Improve Recall Completion Rates

                4.  Enact Whistleblower Legislation

        B.  Safety Measures NHTSA, Takata, and Auto Manufacturers 
        Should Undertake to Improve Recall Effectiveness

                1.  Increase Ability to Effectively Respond to Safety 
                Defects/Recalls

                2.  Offer Loaner/Rental Cars When Recalls Involve 
                Serious Safety Issues

VI. Conclusion

Appendices and Exhibits

Appendix I: Chronology of Takata Airbag Events

Appendix II: List of Vehicles Affected by Takata Airbag Recalls

Exhibit A: March 22--April 5, 2011 E-mail Thread with Subject: ``GPS 
audit''

Exhibit B: March 30, 2011 E-mail with Subject: ``Defects and defects 
and defects!!!!''

Exhibit C: March 31, 2011 E-mail with Subject: ``Reworking station 100 
parts to 120''
                                 ______
                                 
Executive Summary
    Following reports of serious injury and death from airbags 
manufactured by TK Holdings Inc. (Takata) in numerous makes and models 
of vehicles--and claims of a delayed response from Takata, the 
automakers, and regulators--the Senate Commerce Committee held a 
hearing in November 2014 to determine the scope, potential cause, and 
appropriate Congressional response to this serious safety issue. After 
the hearing, then Commerce Committee Chairman Jay Rockefeller and 
Senator Bill Nelson requested briefings and documents from Takata, 
automakers, and the National Highway Traffic Safety Administration 
(NHTSA). Among other things, the documents provided to the Committee by 
Takata detailed the airbag inflator production process, the types of 
propellant used in these inflators, inflator failure modes analyses, 
and the alleged deaths and injuries caused by defective Takata airbags. 
Earlier this year, Chairman John Thune and Ranking Member Nelson made 
two additional requests for documents, mainly pertaining to airbag 
inflator testing programs and internal Takata safety inspections. To 
date, Committee minority staff has reviewed more than 13,000 documents 
provided by Takata that total more than 90,000 pages.
    As further detailed in this report, it appears that Takata was 
aware, or should have been aware, of serious safety and quality control 
lapses in its manufacturing plants as early as 2001. Documents reviewed 
by Committee minority staff also indicate that Takata was informed of 
three serious incidents involving faulty inflators in the first half of 
2007. Nonetheless, the first recall was not issued until November 
2008--more than a year later.
    In addition, internal e-mails obtained by the Committee suggest 
that Takata may have prioritized profit over safety by halting global 
safety audits for financial reasons. The report also sheds light on 
Takata's effort to address the impact of moisture and humidity on its 
inflators, which has now been reported to play a role in causing 
inflator ruptures. Further, it appears that NHTSA, by not opening an 
investigation until June 11, 2014, failed to promptly investigate 
Takata's defective airbags. NHTSA conducted an investigation related to 
Takata airbag inflators in November 2009, but the investigation only 
dealt with the scope and timeliness of two previous recalls, and it was 
closed in May 2010.
    After more than 100 injuries and eight deaths allegedly caused by 
shrapnel from its rupturing airbags--over a period of more than 10 
years--Takata cannot identify a root cause of these ruptures. Yet, 
Takata is currently producing hundreds of thousands of replacement 
inflators each month that may not completely eliminate the risk of 
airbag rupture. Overall, the Committee minority staff's ongoing 
investigation reveals a pattern of failures and missteps that did not 
quickly or effectively respond to a serious safety defect.
    The recall process must be strengthened to address future defects 
that could cause serious injury or death. The Moving Ahead for Progress 
in the 21st Century Act (MAP-21), which was enacted in July 2012, took 
some important steps forward in this area by incentivizing employees to 
voluntarily share important safety information and protecting them from 
retaliation when they do so. Proposals that could strengthen NHTSA's 
ability to prevent and respond to future safety recalls include 
increasing the agency's civil penalty authority and expanding its 
ability to conduct independent testing. Steps must also be taken to 
improve recall completion rates and the automakers' ability to 
appropriately respond when recalls are necessary.
I. Background
    An airbag is a vehicle occupant restraint system that consists of a 
fabric cushion or envelope that opens rapidly in the event of a 
collision. When a crash is detected, a signal is sent to the inflator, 
which is composed of a steel canister that houses a propellant,\1\ and 
initiates a chemical reaction that causes the propellant to burn.\2\ 
The burning propellant emits a gas that rapidly inflates and deploys 
the fabric cushion.\3\ In some cases, the propellant in airbags 
manufactured by Takata burns too quickly.\4\ This can cause the 
inflator to rupture, shooting metal fragments of the inflator canister 
at the car's occupants.\5\
---------------------------------------------------------------------------
    \1\ Takata Saw and Hid Risk in Airbags in 2004, Former Workers Say, 
New York Times (Nov. 6, 2014).
    \2\ National Highway Traffic Safety Administration, Air Bag 
Deployment (online at www.safercar.gov/Vehicle%20Shoppers/Air%20Bags/
Air%20Bag%20Deployment).
    \3\ Takata, All About Airbags (online at www.takata.com/en/around/
airbag01.html).
    \4\ Car Industry Struggles to Solve Air Bag Explosions Despite Mass 
Recalls, Reuters (June 22, 2014).
    \5\ Id.
---------------------------------------------------------------------------
Figure I: Airbag Inflator and Parts\6\
---------------------------------------------------------------------------
    \6\ Takata Saw and Hid Risk in Airbags in 2004, Former Workers Say, 
supra n. 1.


    In July 1984, NHTSA amended Federal Motor Vehicle Safety Standard 
208 to phase in a requirement that cars offer automatic occupant 
protection, such as airbags or automatic seatbelts.\7\ In 1991, 
Congress passed the Intermodal Surface Transportation Efficiency Act, 
which required cars built after September 1, 1997, to have airbags for 
the driver and right front passenger.\8\
---------------------------------------------------------------------------
    \7\ 49 Fed. Reg. 28962 (July 17, 1984).
    \8\ Pub. L. No. 102-240 (1991).
---------------------------------------------------------------------------
    Since 1987, Takata has supplied automakers with airbags and has 
become one of the three largest airbag manufacturers worldwide.\9\ In 
1991, Takata began manufacturing airbag inflators in the U.S., and 
media reports suggest that in 2001 the company started using ammonium 
nitrate as the main ingredient in its propellant.\10\ Compared to its 
predecessor, tetrazole, ammonium nitrate allowed Takata to create 
smaller and cheaper airbag inflators that emit less toxic fumes, which, 
in turn, could reduce the risk of chemical burns or breathing problems 
when an airbag deploys.\11\ More than 14 years after the introduction 
of ammonium nitrate, however, this compound remains at the center of a 
safety crisis that has plagued Takata for more than a decade.
---------------------------------------------------------------------------
    \9\ Takata, Airbags (online at www.takata.com/en/products/
airbag.html); Special Report: Deadly Airbags Backfire on Firm that 
Crossed `Dangerous Bridge,' Reuters (Jan. 13, 2014). Autoliv and TRW 
are the other top three airbag manufacturers. Airbag Inflator Shortage 
Plagues Industry, Automotive News (Nov. 24, 2014).
    \10\ Takata's Switch to Cheaper Airbag Propellant Is at Center of 
Crisis, New York Times (Nov. 19, 2014).
    \11\ Id.
---------------------------------------------------------------------------
II. Timeline of the Takata Airbag Crisis
    In 2003, the first known incident of a rupturing Takata airbag 
inflator occurred in a BMW vehicle in Switzerland.\12\ Takata's 
investigation of the incident determined that the inflator, which was 
17 months old at the time of the incident, ruptured as a result of an 
``overloading of propellant in the assembly of the inflator.'' \13\ 
Takata stated that this was an isolated event and unrelated to 
subsequent incidents.\14\
---------------------------------------------------------------------------
    \12\ TK Holdings Inc., Defect Information Report, PSDI, PSDI-4, and 
PSDI-4K Driver Air Bag Inflators (May 18, 2015), at 3.
    \13\ Id.
    \14\ Takata Investigated Defective Air Bag Inflator as Early as 
2003, Reuters (Dec. 3, 2014).
---------------------------------------------------------------------------
    In 2004, the airbag in a 2002 Honda Accord ruptured in Alabama.\15\ 
Honda filed an early warning report with NHTSA, which was one of 245 
reports filed that year about incidents that resulted in injury or 
death.\16\ Takata tentatively concluded that a compromised seal on the 
inflator or an overloading of propellant into the inflator might have 
caused the rupture.\17\ Honda said it was assured by Takata in 2004 
that this incident was an anomaly.\18\ According to two former Takata 
employees interviewed by the New York Times, in the aftermath of this 
incident, Takata secretly conducted tests on 50 airbag inflators that 
were collected from vehicles sent to scrapyards.\19\ After two of these 
inflators cracked during testing, engineers began designing possible 
fixes in anticipation of a recall. The testing was suddenly shut down, 
however, and Takata executives ordered technicians to delete the 
testing data.\20\ In Takata's response to the Committee's request for 
more information about this testing, Takata stated that it never tested 
airbags recovered from scrapyards in 2004.\21\
---------------------------------------------------------------------------
    \15\ Takata Saw and Hid Risk in Airbags in 2004, Former Workers 
Say, supra n. 1; TK Holdings Inc., Defect Information Report, PSDI, 
PSDI-4, and PSDI-4K Driver Air Bag Inflators, supra n. 12, at 3.
    \16\ Air Bag Flaw, Long Known to Honda and Takata, Led to Recalls, 
New York Times (Sept. 11, 2014).
    \17\ TK Holdings Inc., Defect Information Report, PSDI, PSDI-4, and 
PSDI-4K Driver Air Bag Inflators, supra n. 12, at 3.
    \18\ Takata Saw and Hid Risk in Airbags in 2004, Former Workers 
Say, supra n. 1.
    \19\ Id.
    \20\ Id.
    \21\ Takata Narrative Response to Senate Commerce Committee (Dec. 
12, 2014) at 5.
---------------------------------------------------------------------------
    The next known incidents of rupturing inflators did not occur until 
three years later.\22\ According to a 2010 letter from Takata to NHTSA, 
in 2007, Honda reported three additional episodes to Takata that 
occurred during the first half of 2007 \23\--all involved 2001 Honda 
Civics.\24\ According to media reports, Honda settled with the victims 
for undisclosed sums of money.\25\
---------------------------------------------------------------------------
    \22\ Air Bag Flaw, Long Known to Honda and Takata, Led to Recalls, 
supra n. 16.
    \23\ Letter from Kazuo Higuchi, Senior Vice President, Takata, to 
George Person, Chief, Recall Management Division, Office of Defect 
Investigation, National Highway Traffic Safety Administration, at 5 
(Feb. 19, 2010) (online at www-odi.nhtsa.dot.gov/acms/cs/jaxrs/
download/doc/ACM13395661/INRL-RQ09004-39140P.pdf).
    \24\ Takata Response to Senate Commerce Committee, Exhibit A (Dec. 
12, 2014); Takata Response to Senate Commerce Committee, Exhibit B 
(Mar. 27, 2015).
    \25\ Air Bag Flaw, Long Known to Honda and Takata, Led to Recalls, 
supra n. 16.
---------------------------------------------------------------------------
    Takata determined that all three rupture incidents involved 
inflators that were assembled between October 31 and November 15, 2000, 
and all contained propellant tablets manufactured in the same 
months.\26\ Focusing on the short time-frame in which these inflators 
and propellant were produced, Takata theorized that two manufacturing 
processes, which overlapped during this period, led to elevated 
moisture levels in the propellant.\27\ It appears Takata believed these 
elevated propellant moisture levels during the manufacturing process, 
when combined with the thermal cycling in vehicles, ``could cause the 
propellant density to decline over time, and such a decline in density 
could lead to overly energetic combustion during deployment of the air 
bag.'' \28\ This analysis was shared with Honda in September 2007, but 
a recall was not issued until more than a year later.\29\
---------------------------------------------------------------------------
    \26\ Letter from Higuchi to Person, supra n. 23, at 5-6.
    \27\ Id. at 6.
    \28\ Id. at 6.
    \29\ Id. at 6.
---------------------------------------------------------------------------
    To test this hypothesis, Takata conducted additional testing on 
inflators recovered from salvage yards and inflators provided by Honda, 
but the analysis was inconclusive.\30\ After the conclusion of Takata's 
testing, the company learned of a fourth rupture incident.\31\ In 
October 2008, Takata recommended that Honda recall all vehicles 
equipped with propellant from the four suspect lots of inflators.\32\ 
The following month, in November 2008, Honda issued its first recall of 
vehicles with Takata airbags, which covered driver-side airbags in 
3,940 cars in the U.S.\33\
---------------------------------------------------------------------------
    \30\ Id. at 6-7 (TKH-SCS&T00002077-2078).
    \31\ Id. at 7 (TKH-SCS&T00002078).
    \32\ Id. at 7.
    \33\ This recall covered certain 2001 Honda Civics and Accords. 
Letter from William R. Willen, Managing Counsel, Product Regulatory 
Office, American Honda Motor Co., to Daniel C. Smith, Associate 
Administrator for Enforcement, National Highway Traffic Safety 
Administration (Nov. 11, 2008) (online at www-odi.nhtsa.dot.gov/acms/
cs/jaxrs/download/doc/ACM10641506/RCDNN-08V593-1511.pdf).
---------------------------------------------------------------------------
    Based on its testing of additional inflators, Takata shifted its 
focus from the assembly of the inflator to the production of the 
propellant.\34\ In 2009, Takata realized that its methodology for 
calculating propellant density in 2000 and 2001 could have led to 
invalid results.\35\ The density of the propellant in inflators 
recovered from Honda's November recall that were produced on Takata's 
Stokes press, a specific compression press used to form the propellant 
into tablets, was found to be low, which could leave the propellant 
``more susceptible to overly aggressive combustion.'' \36\ Takata also 
learned of additional malfunctions of inflators produced outside the 
range of the November 2008 recall.\37\
---------------------------------------------------------------------------
    \34\ Letter from Higuchi to Person, supra n. 23, at 8.
    \35\ Id. at 8-9 (TKH-SCS&T00002079-2080).
    \36\ National Highway Traffic Safety Administration, ODI Resume, 
Recall Query, Close Resume, RQ09-004 (Nov. 2, 2009-May 6, 2010) (online 
at www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/ACM13978206/INCLA-
RQ09004-5021.pdf).
    \37\ Letter from Higuchi to Person, supra n. 23, at 11 (TKH-
SCS&T00002082).
---------------------------------------------------------------------------
    Takata presented this information to Honda in June 2009 and 
recommended expanding the recall to include all vehicles containing 
propellant manufactured on the Stokes press through February 2001.\38\ 
The following month, Honda announced its decision to recall 
approximately 440,000 vehicles in the U.S. due to a potential defect in 
driver-side airbags.\39\ Takata explained to NHTSA that it did not 
provide any inflators that were the same or substantially similar to 
those covered by the two recalls to any auto manufacturer other than 
Honda.\40\ Among the nine alleged incidents of rupturing inflators that 
occurred in 2009, all involving Honda vehicles, were two incidents in 
which the shrapnel from the airbag inflator appears to have killed the 
driver of the car.\41\
---------------------------------------------------------------------------
    \38\ Id. at 11-12.
    \39\ This recall involved certain 2001 Honda Civics and Accords, 
certain 2002 Honda Accords, and certain 2002 Acura 3.2TLs. Letter from 
William R. Willen, Managing Counsel, Product Regulatory Office, 
American Honda Motor Co., to Daniel C. Smith, Associate Administrator 
for Enforcement, National Highway Traffic Safety Administration (July 
29, 2009) (online at www.autosafety.org/sites/default/files/
09V259%20Part%20573.pdf).
    \40\ Letter from Higuchi to Person, supra n. 23, at 2.
    \41\ Takata Response to Senate Commerce Committee, Exhibit A (Dec. 
12, 2014); Takata Response to Senate Commerce Committee, Exhibit B 
(Mar. 27, 2015).
---------------------------------------------------------------------------
    In November 2009, NHTSA opened an investigation related to Takata's 
rupturing airbags.\42\ The agency explained that it needed ``additional 
information from Honda and Takata to more fully evaluate the scope and 
timeliness'' of the previous recalls.\43\
---------------------------------------------------------------------------
    \42\ National Highway Traffic Safety Administration, ODI Resume, 
Recall Query, Opening Resume, RQ09-004 (Nov. 2, 2009).
    \43\ Id.
---------------------------------------------------------------------------
    The second Honda recall covered approximately 10,000 vehicles 
outside the range that Takata had identified as containing the 
potentially defective inflators--primarily inflators with propellant 
produced after February 28, 2001--to allow Takata to assess whether the 
second recall addressed all potentially dangerous inflators.\44\ 
Testing of these inflators determined that the density of some of the 
propellant that was manufactured outside the period covered by the 
existing recalls was also low.\45\ In February 2010, Honda issued 
another recall, which expanded its second recall to include all 
vehicles with driver-side inflators containing propellant manufactured 
on the Stokes press.\46\ In May 2010, NHTSA closed its investigation 
into rupturing Takata airbags after determining that Honda did not fail 
to make timely defect decisions and that the scope of the previous 
recalls was appropriate.\47\
---------------------------------------------------------------------------
    \44\ Letter from Higuchi to Person, supra n. 23, at 12.
    \45\ Letter from Higuchi to Person, supra n. 23, at 12 (TKH-
SCS&T00002083).
    \46\ Letter from Higuchi to Person, supra n. 23, at 13.
    \47\ NHTSA, Close Resume, RQ09-004, supra n. 36.
---------------------------------------------------------------------------
    In April 2011, Honda expanded its three previous recalls because it 
was unable to account for approximately 2,400 replacement inflators 
that may have been installed in vehicles covered by previous 
recalls.\48\ To capture the entire population of vehicles in which 
these replacements could have been installed, Honda recalled 833,277 
vehicles.\49\ In December 2011, this recall was expanded to include an 
additional 272,779 vehicles.\50\ Between 2011 and 2012, 16 additional 
alleged incidents occurred, although Takata may not have been aware of 
some of the incidents until years later.\51\
---------------------------------------------------------------------------
    \48\ Letter from Jay Joseph, Senior Manager, Product Regulatory 
Office, American Honda Motor Co., Inc., to Claude Harris, Acting 
Administrator for Enforcement, National Highway Traffic Safety 
Administration (Apr. 27, 2011) (online at www.autosafety.org/sites/
default/files/imce_staff_uploads/Honda%20Airbag%2011V-260.pdf).
    \49\ Id.
    \50\ Letter from Jay Joseph, Senior Manager, Product Regulatory 
Office, American Honda Motor Co., Inc., to Nancy Lewis, Acting 
Administrator for Enforcement, National Highway Traffic Safety 
Administration (Dec. 1, 2011) (online at www-odi.nhtsa.dot.gov/acms/cs/
jaxrs/download/doc/ACM19786131/RCDNN-11V260-5849.pdf).
    \51\ Takata Response to Senate Commerce Committee, Exhibit A (Dec. 
12, 2014); Takata Response to Senate Commerce Committee, Exhibit B 
(Mar. 27, 2015).
---------------------------------------------------------------------------
    Between February and March 2013, Takata learned of two 
manufacturing problems affecting the propellant tablets within certain 
passenger-side airbag inflators.\52\ Takata explained that one 
manufacturing issue occurred at its Moses Lake, Washington plant 
between April 13, 2000, and September 11, 2002, where some propellant 
tablets may not have been adequately compressed because the auto-reject 
function on the machine that pressed the propellant into tablets had 
been turned off by the machine operator.\53\ The other issue occurred 
at Takata's Monclova, Mexico plant between October 4, 2001, and October 
31, 2002, where some propellant tablets may have been exposed to 
moisture.\54\ Due to these manufacturing problems, Takata found that 
the propellant could potentially deteriorate, leading to over-
aggressive combustion, which could cause the inflator to rupture.\55\ 
At the time, Takata was aware of six ruptures--four in the U.S. and two 
in Japan.\56\ Takata informed NHTSA in April 2013 that, based on these 
two manufacturing problems, a defect may exist in certain passenger-
side airbag inflators in certain Honda, Toyota, Nissan, Mazda, GM, and 
BMW vehicles.\57\ In light of Takata's defect report, most of these 
automakers issued recalls, but NHTSA did not reopen its investigation 
into rupturing Takata airbags.\58\ In 2013, 18 additional alleged 
incidents occurred.\59\
---------------------------------------------------------------------------
    \52\ Letter from Kazuo Higuchi, Senior Vice President, TK Holdings, 
Inc., to Nancy Lewis, Associate Administrator of Enforcement, National 
Highway Traffic Safety Administration (Apr. 11, 2013) (online at www-
odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM436445/RCDNN-13E017-
5589.pdf).
    \53\ Id. An ``auto-reject'' function can ``detect and reject 
propellant wafers with inadequate compression by monitoring the 
compression load that had been applied.'' Id.
    \54\ Id.
    \55\ Id.
    \56\ Id.
    \57\ Id.
    \58\ Honda, Toyota, Nissan, Mazda, and BMW issued recalls. See 
Timeline--Takata Air Bag Recalls, Reuters (Nov. 25, 2014).
    \59\ Takata Response to Senate Commerce Committee, Exhibit A (Dec. 
12, 2014); Takata Response to Senate Commerce Committee, Exhibit B 
(Mar. 27, 2015).
---------------------------------------------------------------------------
    By May 2014, Takata was aware of six rupture incidents that 
occurred in vehicles in Florida and Puerto Rico that were not covered 
by previous recalls.\60\ In June 2014, Takata notified automakers that 
some of its traceability records were incomplete, meaning Takata 
``could not identify with absolute certainty the propellant lots from 
which the propellant wafers in a specific inflator were taken.'' \61\ 
As a result, it was possible that propellant wafers had been stored at 
the Monclova plant for up to three months before being used in 
inflators.\62\ Based on these conclusions, Takata recommended expanding 
the recall of vehicles with certain passenger-side airbag inflators, 
which led five automakers to expand their 2013 recalls and one 
automaker to issue a new recall.\63\
---------------------------------------------------------------------------
    \60\ Letter from Mike Rains, Government Affairs Specialist, TK 
Holdings, Inc., to Frank Borris, Director, Office of Defects 
Investigation, National Highway Traffic Safety Administration (June 11, 
2014) (online at www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/
UCM457251/INLE-PE14016-59600.pdf).
    \61\ TK Holdings Inc., Defect Information Report, SPI Passenger Air 
Bag Inflators (May 18, 2015) at 4.
    \62\ Id.
    \63\ Id. The automakers who expanded existing recalls include 
Toyota, Honda, Nissan, Mazda, and BMW; Subaru issued a new recall.
---------------------------------------------------------------------------
    Also in June 2014, officials from NHTSA's Office of Defects 
Investigation (ODI) requested that Takata support field actions--
essentially regional recalls--of suspect inflators in vehicles 
registered in humid areas.\64\ Even though, according to Takata, there 
was no evidence identifying a particular safety defect in inflators not 
recalled at the time, Takata agreed to support the requested regional 
recalls of driver-side and passenger-side airbag inflators in vehicles 
in Florida, Puerto Rico, Hawaii, and the Virgin Islands.\65\ Takata 
identified that certain Honda, Toyota, Nissan, Mazda, Ford, Chrysler, 
and BMW vehicles contained the inflators.\66\ Later that month, Takata 
determined that certain Subaru and Mitsubishi vehicles also contained 
the suspect inflators, increasing the number of automakers impacted by 
the potential defect to nine.\67\
---------------------------------------------------------------------------
    \64\ Letter from Rains to Borris, supra n. 60.
    \65\ Id. Takata agreed to support regional recalls replacing 
driver-side airbags manufactured between January 1, 2004, and June 30, 
2007, and passenger-side airbags manufactured between June 2000 and 
July 31, 2004.
    \66\ Id.
    \67\ Letter from Mike Rains, Government Affairs Specialist, TK 
Holdings, Inc., to Frank Borris, Director, Office of Defects 
Investigation, National Highway Traffic Safety Administration (June 25, 
2014) (online at www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/
UCM457659/INLE-PE14016-59647.pdf).
---------------------------------------------------------------------------
    On June 11, 2014, after receiving complaints of three Takata airbag 
ruptures \68\--and then learning from Takata of three additional 
ruptures \69\--NHTSA's ODI opened an investigation ``in order to 
collect all known facts from the supplier and the vehicle manufacturers 
that it believes may have manufactured vehicles equipped with inflators 
produced during the same period as those that have demonstrated rupture 
events.'' \70\ Because all six incidents occurred in the high absolute 
humidity climates of Florida and Puerto Rico, Takata theorized that 
humidity, in conjunction with potential manufacturing issues, might 
influence the stability of the propellant as it ages and thus 
contribute to the possibility of a rupture.\71\
---------------------------------------------------------------------------
    \68\ The three ruptures include a driver-side airbag rupture in a 
2005 Honda Civic (report received Aug. 2013), a passenger-side airbag 
rupture in a 2003 Toyota Corolla (report received Mar. 2014), and a 
driver-side airbag rupture in a 2005 Mazda 6 (report received Apr. 
2014). National Highway Traffic Safety Administration, ODI Resume 
Investigation: PE 14-016 (June 11, 2014) (online at www-
odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM456824/INOA-PE14016-
9724.PDF).
    \69\ Id. The three rupture incidents occurred in the following: a 
passenger-side airbag in a 2004 Nissan Sentra; a driver-side airbag in 
a 2006 Dodge Charger; and a passenger-side airbag in a 2002 Toyota 
Corolla.
    \70\ Id.
    \71\ Letter from Rains to Borris, supra n. 60.
---------------------------------------------------------------------------
    On October 22, 2014, NHTSA released a consumer advisory urging 
owners of certain vehicle models made by the now ten affected 
automakers to respond to recall notices, some sent out 18 months prior, 
and act immediately to replace defective Takata airbags.\72\ The 
advisory noted that, from 2013 to 2014, approximately 7.8 million 
vehicles were recalled as a result of faulty Takata airbags.\73\ David 
Friedman, NHTSA Deputy Administrator, stated, ``Responding to these 
recalls, whether old or new, is essential to personal safety and it 
will help aid our ongoing investigation into Takata airbags and what 
appears to be a problem related to extended exposure to consistently 
high humidity and temperatures.'' \74\
---------------------------------------------------------------------------
    \72\ NHTSA originally issued an alert on October 20, 2014, but this 
alert included erroneous entries of vehicle models. NHTSA released an 
updated consumer advisory on October 22, 2014. National Highway Traffic 
Safety Administration, Consumer Advisory: Vehicle Owners with Defective 
Airbags Urged to Take Immediate Action (Oct. 22, 2014) (online at 
www.nhtsa.gov/About+NHTSA/Press+Releases/Vehicle-owners-with-defective-
airbags-urged-to-take-immediate-action). See also NHTSA Releases 
Updated Takata Airbag Recalled Cars List, But It Still Has Errors, 
AutoBlog (Oct. 22, 2014).
    \73\ Consumer Advisory: Vehicle Owners with Defective Airbags Urged 
to Take Immediate Action, supra n. 72. Auto manufactures covered under 
the recalls include Toyota, Honda, Mazda, BMW, Nissan, Mitsubishi, 
Subaru, Chrysler, Ford and General Motors.
    \74\ Id.
---------------------------------------------------------------------------
    On October 29, 2014, Deputy Administrator Friedman sent letters to 
the ten affected automakers urging them to ``take aggressive and 
proactive action to expedite [their] remedy of the recalled vehicles 
and to supplement Takata's testing with [their] own.'' \75\ He also 
asked for information on the steps the automakers were taking to 
expedite production of replacements, including by obtaining additional 
airbag 1suppliers, urging and incentivizing dealers to repair vehicles, 
and encouraging consumers to bring in vehicles for repair.\76\
---------------------------------------------------------------------------
    \75\ See e.g., Letter from David J. Friedman, Deputy Administrator, 
National Highway Traffic Safety Administration to Jay Joseph, Assistant 
Vice President, American Honda Motor Co. (Oct. 29, 2014) (online at 
www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM465685/INIM-
PE14016-14351.pdf).
    \76\ Id.
---------------------------------------------------------------------------
    The next day, NHTSA issued a Special Order to Takata demanding 
information on the defective airbags.\77\ The Special Order listed 36 
requests, which covered documents that refer to manufacturing 
conditions and process changes, communications between Takata and its 
rivals as well as its customers, and a list of known deaths and 
injuries. The Special Order also requested documents cited in an 
October 17, 2014, Reuters article, including a March 2011 e-mail from 
Takata supervisor Guillermo Apud with the subject ``Defectos y defectos 
y defectos!!!!'' \78\
---------------------------------------------------------------------------
    \77\ National Highway Traffic Safety Administration, Special Order 
Directed to TK Holdings, Inc. (Oct. 30, 2014) (online at www-
odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM465855/INLM-PE14016-
60576.pdf). A Special Order is issued pursuant to 49 U.S.C. 
Sec. 30166(g). It is equivalent to a subpoena and requires that the 
response be signed under oath by a responsible officer of the company.
    \78\ Id. See also U.S. Regulator to Takata: Give Us Faulty Air-Bag 
Documents, Reuters (Oct. 30, 2014).
---------------------------------------------------------------------------
    On November 18, 2014, NHTSA called for a national recall of certain 
driver-side airbags after learning of a rupture incident in a vehicle 
outside the existing regional recalls.\79\ NHTSA also issued a General 
Order to Takata and the ten affected automakers demanding a detailed 
report and production of documents related to the testing of Takata 
inflators outside the regional recall areas.\80\ NHTSA also issued a 
second Special Order to Takata, which compelled the company to provide 
documents and information related to the propellant within its 
inflators.\81\ NHTSA's press release acknowledged Takata's public 
concession that it had changed the chemical mix of its propellant in 
newly-designed inflators.\82\ Honda agreed to expand its recalls and 
replace defective inflators nationwide.\83\
---------------------------------------------------------------------------
    \79\ National Highway Traffic Safety Administration, USDOT Calls 
for National Recall of Defective Takata Driver Side Air Bags (Nov. 18, 
2014) (online at www.nhtsa.gov/About+NHTSA/Press+Releases/DOT-calls-
for-national-recall-of-takata-driver-air-bags).
    \80\ National Highway Traffic Safety Administration, General Order 
Directed to Manufacturers, PE14-016 Air Bag Inflator Rupture (Nov. 18, 
2014).
    \81\ National Highway Traffic Safety Administration, Second Special 
Order Directed to TK Holdings, Inc., PE14-016 (Nov. 18, 2014).
    \82\ USDOT Calls for National Recall of Defective Takata Driver 
Side Air Bags, supra n. 79.
    \83\ Honda to Replace Airbags Throughout U.S., New York Times (Nov. 
18, 2014).
---------------------------------------------------------------------------
    On November 21, 2014, the Senate Commerce Committee held a hearing 
to examine the Takata airbag defects and the recall process.\84\ 
Hiroshi Shimizu, Senior Vice President of Global Quality Assurance, 
testified on behalf of Takata and apologized for the injuries and 
deaths caused by rupturing Takata airbags. At the hearing, Mr. Shimizu 
was unable to provide answers to important questions, including 
questions regarding the chemical compounds used in Takata's airbags and 
the current production and safety testing of replacement airbags.\85\ 
Because Mr. Shimizu's testimony left so many questions unanswered, then 
Chairman Rockefeller and Senator Nelson sent a letter to Takata 
requesting documents and information regarding the company's defective 
airbags.\86\
---------------------------------------------------------------------------
    \84\ Senate Committee on Commerce, Science, and Transportation, 
Examining Takata Airbag Defects and the Vehicle Recall Process, 113th 
Cong. (2014).
    \85\ Id. See also Frustrated Senators Blast Takata, Signal More 
Safety Legislation, Automotive News (Nov. 23, 2014).
    \86\ Letter from Chairman John D. Rockefeller, IV and Senator Bill 
Nelson to Shigehisa Takada, Chairman and Chief Executive Officer, 
Takata Corporation (Nov. 24, 2014).
---------------------------------------------------------------------------
    On November 26, 2014, NHTSA sent Takata a Recall Request Letter 
formally demanding that Takata acknowledge the existence of a defect 
and issue a national recall for certain driver-side airbag 
inflators.\87\ Based on reports of ruptures outside the geographic 
areas covered under the regional recalls, NHTSA believed that an 
``unreasonable risk posed by subject driver's side airbag inflators may 
exist outside of the areas with high absolute humidity and therefore 
would not be mitigated by the current regional recall.'' \88\ On 
December 2, 2014, Takata responded to NHTSA's Recall Request Letter 
stating that it firmly believed that the data and currently available 
information did not support a nationwide recall.\89\
---------------------------------------------------------------------------
    \87\ Letter from Frank S. Borris II, Director, Office of Defects 
Investigation, National Highway Traffic Safety Administration, to Kazuo 
Higuchi, Senior Vice President, TK Holdings, Inc. (Nov. 26, 2014) 
(online at www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM467335/
INRM-PE14016-60978.pdf).
    \88\ Id. at 3.
    \89\ Letter from Mike Rains, Director of Product Safety, TK 
Holdings Inc., to Frank Borris, Director, Office of Defects 
Investigation, National Highway Traffic Safety Administration (Dec. 2, 
2014) (online at www.autosafety.org/sites/default/files/
imce_staff_uploads/Takata's%20
Dec%20%202%20response%20to%20NHTSA's%20Nov%20%2026%20RRL.pdf).
---------------------------------------------------------------------------
    By December 2014, more than 11 million vehicles in the U.S. had 
been recalled, and five deaths were linked to the defective Takata 
airbags.\90\ In addition to Honda, four auto manufacturers responded to 
the pressure from NHTSA to expand their Takata airbag-related recalls 
nationwide.\91\
---------------------------------------------------------------------------
    \90\ Honda to Expand Airbag Recall Nationwide as Takata Resists, 
New York Times (Dec. 3, 2014).
    \91\ Honda, Mazda, BMW, Chrysler, and Ford expanded their recalls. 
See Id.; Mazda Says U.S. Recalls Over Takata Air Bags to be Expanded 
Nationwide, Reuters (Dec. 9, 2014); BMW Joins in Expansion of Takata 
Airbag Recalls, New York Times (Dec. 22, 2014); Chrysler Recalls 2.9 
Million U.S. Vehicles with Takata Airbags, Car and Driver (Dec. 19, 
2014); Ford Recall of Takata Airbags to Extend Nationwide, New York 
Times (Dec. 18, 2014).
---------------------------------------------------------------------------
    Also in the same month, the automakers affected by the Takata 
airbag recalls formed a consortium to conduct an independent 
investigation into the root cause of the airbag ruptures. The 
consortium's ten members include Honda, Toyota, Fiat-Chrysler, BMW, 
Mazda, Ford, Subaru, Mitsubishi, General Motors, and Nissan.\92\ In 
February 2015, the group of automakers appointed former NHTSA Acting 
Administrator David Kelly as the project manager and coordinator and 
selected aerospace and defense technology company Orbital ATK to lead 
the review and testing of Takata inflators.\93\ The automakers hope 
that this industry-wide testing initiative will supplement Takata's own 
testing and provide answers to questions surrounding the defective 
airbags.\94\
---------------------------------------------------------------------------
    \92\ Automakers Choose Aerospace Firm to Run Takata Airbag Tests, 
Automotive News (Feb. 26, 2015).
    \93\ Automakers Select Orbital ATK to Lead Independent Review of 
Takata Airbag Inflators, Reuters (Feb. 26, 2015).
    \94\ Id.
---------------------------------------------------------------------------
    In February 2015, NHTSA announced a $14,000 per day fine against 
Takata for failing to fully respond to NHTSA's Special Orders regarding 
Takata's defective airbags.\95\ According to NHTSA, Takata was not 
``being forthcoming with the information that it is legally obligated 
to supply'' as well as not being ``cooperative in aiding NHTSA's 
ongoing investigation of a potentially serious safety defect.'' \96\ 
NHTSA also warned Takata that an incomplete response to the Special 
Orders and civil penalties could be referred to the Department of 
Justice, which could take action in Federal court to compel Takata to 
fully respond.\97\ Takata responded by stating that the company had 
provided the agency with almost 2.5 million pages of documents and that 
it strongly disagreed with NHTSA's characterization of the company's 
cooperation.\98\
---------------------------------------------------------------------------
    \95\ Each Special Order is subject to a civil penalty of $7,000 per 
day. Because, according to NHTSA, Takata was in violation of two 
Orders, it was fined $14,000 per day. See 49 U.S.C. Sec. 30165(a)(3); 
49 C.F.R. Sec. 578.6(a)(3). Letter from O. Kevin Vincent, Chief 
Counsel, National Highway Traffic Safety Administration, to Steven G. 
Bradbury, Counsel, Takata, Re: Failure to Fully Respond to Special 
Orders in NHTSA's Investigation in PE14-016, Takata Airbag Inflator 
Rupture (Feb. 20, 2015) (online at www.nhtsa.gov/staticfiles/
communications/pdf/Takata-civil-penalty-demand-02202015.pdf); see also 
NHTSA to Fine Takata $14K a Day for Failing to `Fully Cooperate' in 
Airbag Probe, Automotive News (Feb. 20, 2015).
    \96\ Letter from Vincent to Bradbury, supra n. 95.
    \97\ Id.
    \98\ Takata Responds to U.S. DOT and NHTSA Statements, Business 
Wire (Feb. 20, 2015).
---------------------------------------------------------------------------
    On February 25, 2015, NHTSA issued a Preservation Order requiring 
Takata to preserve inflators recovered from recalled vehicles.\99\ 
According to the Order, Takata is prohibited from destroying or 
damaging recovered inflators except for testing purposes and is 
required to implement a control plan for the ``inspection, testing, or 
analysis of those inflators.'' \100\ Takata is also required to set 
aside ten percent of the inflators for private plaintiffs and must 
submit a protocol for third-party testing.\101\ NHTSA will have access 
to all testing data from Takata, as well as all other independent 
testing data, while also reserving the right to collect inflators for 
its own testing.\102\ In conjunction with announcing the Order, 
Secretary of Transportation Anthony Foxx revealed that NHTSA upgraded 
its investigation to an Engineering Analysis, a formal step in the 
defect investigation process which signals a belief in the existence of 
a safety defect.\103\
---------------------------------------------------------------------------
    \99\ National Highway Traffic Safety Administration, U.S. 
Transportation Secretary Foxx Announces Order to Preserve Defective 
Takata Air Bag Inflators for Ongoing Federal Investigation (Feb. 25, 
2015) (online at www.nhtsa.gov/About+NHTSA/Press+Releases/2015/takata-
ordered-to-preserve-defective-air-bag-inflators).
    \100\ National Highway Traffic Safety Administration, Preservation 
Order and Testing Control Plan (Feb. 25, 2010) (online at www-
odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM477397/INOT-EA15001-
1908.pdf).
    \101\ Id.
    \102\ Id.
    \103\ U.S. Orders Takata to Preserve Evidence in Air-Bag Probes, 
Bloomberg (Feb. 25, 2015).
---------------------------------------------------------------------------
    On April 23, 2015, NHTSA published the Protocol submitted by 
Takata, as demanded by the Preservation Order, to ``establish a 
framework under which the ten vehicle manufacturers[,] . . . private 
parties to civil litigation, or a consortium of the [automakers] or 
private parties may apply for and potentially receive Takata inflators 
for testing provided they satisfy certain legal and safety 
requirements.'' \104\ Under the Protocol, automakers or private 
plaintiffs must submit an application that identifies the number of 
requested inflators and, if the applicant desires a specific category 
of inflators, also identifies the inflators by type, automaker, state 
from which the inflators were obtained, and vehicle year and model. 
Takata will then determine whether it has a sufficient supply of 
inflators in the relevant classification to fulfill the request. If a 
request will cause Takata's supply of inflators within a classification 
to fall below a specified minimum,\105\ Takata will deny or modify the 
request, unless the party making the request has written approval from 
NHTSA to receive the inflators.\106\
---------------------------------------------------------------------------
    \104\ Takata, Protocol Under NHTSA Preservation Order (Apr. 23, 
2015) (online at www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/
UCM477398/INOT-EA15001-1909.pdf).
    \105\ Id. The Protocol explains that Takata will not provide 
inflators for testing if fulfilling the request ``would reduce the 
number of inflators that have been set aside in any classification 
below 70 percent of the number of inflators then remaining in the 
relevant set-aside at the time the request is fulfilled.''
    \106\ Id.
---------------------------------------------------------------------------
    On May 13, 2015, Toyota announced the recall of approximately 
637,000 vehicles in the U.S., and Nissan announced the recall of 
approximately 263,000 vehicles in the U.S.\107\ According to Toyota's 
Defect Information Report (DIR) filed with NHTSA, Toyota tested 
recovered recalled inflators and found that there was ``insufficient 
air sealing at the initiator seal ring'' in some of the inflators.\108\ 
Because the inflators were not airtight, moisture could potentially 
intrude over time.\109\
---------------------------------------------------------------------------
    \107\ See Toyota, Part 573 Safety Recall Report 15V-286 (May 13, 
2015) (online at www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/
UCM478670/RCLRPT-15V286-6231.PDF); Toyota, Part 573 Safety Recall 
Report 15V-285 (May 13, 2015) (online at www-odi.nhtsa.dot.gov/acms/cs/
jaxrs/download/doc/UCM478665/RCLRPT-15V285-2813.PDF); Toyota, Defect 
Information Report 15V-284 (May 13, 2015) (online at www-
odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM478820/RCORRD-15V284-
0712.pdf); Nissan, Defect Information Report 15V-287 (May 14, 2015) 
(online at www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM479142/
RCORRD-15V287-3274.pdf).
    \108\ Toyota, Defect Information Report 15V-284, supra n. 107.
    \109\ Toyota and Nissan Recall 6.5 Million More Vehicles Over 
Takata Airbags, New York Times (May 14, 2015).
---------------------------------------------------------------------------
    On May 18, 2015, Takata filed four DIRs with NHTSA and entered into 
a Consent Order.\110\ The DIRs estimated that more than 17 million 
driver-side inflators and more than 16 million passenger-side inflators 
have been installed in vehicles in the U.S. as both original and remedy 
parts.\111\ In the DIRs, Takata explained ``that a defect related to 
motor vehicle safety may arise in some of the subject inflators.'' 
\112\ Takata's explanation of the defect in one type of passenger-side 
airbag inflator states as follows:
---------------------------------------------------------------------------
    \110\ National Highway Traffic Safety Administration, Consent 
Order, EA15-001 Air Bag Inflator Rupture (May 18, 2015) (online at 
www.safercar.gov/staticfiles/safercar/recalls/consent-order-takata-
05182015.pdf).
    \111\ National Highway Traffic Safety Administration, Department of 
Transportation Announces Steps to Address Takata Airbag Defects (May 
19, 2015). The driver-side airbag inflator DIR notes that the defect 
potentially affects 17.6 million inflators. TK Holdings Inc., Defect 
Information Report PSDI, PSDI-4, and PSDI-4K, supra n. 12, at 2. The 
DIRs for passenger-side airbag inflators note that 16.2 million 
inflators may be affected by the defect. TK Holdings Inc., Defect 
Information Report SPI, supra n. 61, at 2 (7.7 million); TK Holdings 
Inc., Defect Information Report PSPI-L Passenger Air Bag Inflators (May 
18, 2015) at 2 (5.2 million); TK Holdings Inc., Defect Information 
Report PSPI Passenger Air Bag Inflators, at 1 (3.3 million).
    \112\ TK Holdings Inc., Defect Information Report SPI, supra n. 61, 
at 3. Takata's three other DIRs offer a similar explanation of the 
defect. See also TK Holdings Inc., Defect Information Report PSDI, 
PSDI-4, and PSDI-4K, supra n. 12, at 3; TK Holdings Inc., Defect 
Information Report PSPI-L, supra n. 111, at 2; TK Holdings Inc., Defect 
Information Report PSPI supra n. 111, at 2.

        The propellant wafers in some of the subject inflators may 
        experience an alteration over time, which could potentially 
        lead to over-aggressive combustion in the event of an air bag 
        deployment. Depending on the circumstances, this potential 
        condition could create excessive internal pressure when the air 
        bag is deployed, which could result in the body of the inflator 
        rupturing upon deployment. Based upon Takata's investigation to 
        date, the potential for such ruptures may occur in some of the 
        subject inflators after several years of exposure to persistent 
        conditions of high absolute humidity. In addition, Takata's 
        test results and investigation indicate that this potential for 
        rupturing may also depend on other factors, including vehicle 
        design factors and manufacturing variability. . . . In the 
        event of an inflator rupture, metal fragments could pass 
        through the air bag cushion material, which may result in 
        injury or death to vehicle occupants.\113\
---------------------------------------------------------------------------
    \113\ TK Holdings Inc., Defect Information Report SPI, supra n. 61, 
at 3. See also TK Holdings Inc., Defect Information Report PSDI, PSDI-
4, and PSDI-4K, supra n. 12, at 3; TK Holdings Inc., Defect Information 
Report PSPI-L, supra n. 111, at 2; TK Holdings Inc., Defect Information 
Report PSPI, supra n. 111, at 2.

In addition, in certain passenger-side airbag inflators, Takata is 
aware of an issue with the inflators' tape seals, which could allow 
leaks that increase the potential for moisture to seep into the 
inflators.\114\
---------------------------------------------------------------------------
    \114\ TK Holdings Inc., Defect Information Report SPI, supra n. 61, 
at 3.
---------------------------------------------------------------------------
    The DIRs also reveal Takata's preliminary conclusions from testing 
and investigation conducted by Takata and an independent research firm, 
Fraunhofer ICT. Based on testing thus far, Takata has reached some 
preliminary conclusions:

        It appears that the inflator ruptures have a multi-factor root 
        cause that includes the slow-acting effects of a persistent and 
        long term exposure to climates with high temperatures and high 
        absolute humidity. Exposure over a period of several years to 
        persistent levels of high absolute humidity outside the 
        inflator, combined with the effects of thermal cycling, may 
        lead to moisture intrusion in some inflators by means of 
        diffusion or permeation. Fraunhofer ICT has identified the 
        possibility in these climates for moisture intrusion into the 
        inflator over time and a process by which the moisture may 
        slowly increase the porosity of the propellant within the 
        inflator. Fraunhofer ICT's analysis also indicates that the 
        design of the inflator and the grain (shape) of the propellant 
        can affect the likelihood that the porosity change will occur, 
        as can manufacturing variability. The results of the Fraunhofer 
        ICT research to date are consistent with the geographic 
        location and age of the inflators that have ruptured in the 
        field and in Takata's testing. Takata's testing also indicates 
        that the design of the vehicle and the design of the air bag 
        module are associated with differences in outcomes.\115\
---------------------------------------------------------------------------
    \115\ TK Holdings Inc., Defect Information Report SPI, supra n. 61, 
at 6. See also TK Holdings Inc., Defect Information Report PSDI, PSDI-
4, and PSDI-4K, supra n. 12, at 4-5; TK Holdings Inc., Defect 
Information Report PSPI-L, supra n. 111, at 5; TK Holdings Inc., Defect 
Information Report PSPI, supra n. 111, at 4-5.

    Takata's DIRs describe prioritizing the replacement of defective 
inflators in four phases, generally based upon the risk that exists as 
a result of geographic location and age of the inflators.\116\ In 
addition, pursuant to the Consent Order, Takata plans to continue its 
testing of the defective inflators.\117\ Under the Consent Order, 
NHTSA's investigation will remain open and may involve meeting with 
Takata employees, conducting depositions of Takata employees, 
requesting information, and reviewing all test results and data.\118\ 
The Order also explains that NHTSA will not be seeking civil penalties 
beyond those that are applicable before May 18, 2015.\119\
---------------------------------------------------------------------------
    \116\ See TK Holdings Inc., Defect Information Report PSDI, PSDI-4, 
and PSDI-4K, supra n. 12, at 5; TK Holdings Inc., Defect Information 
Report SPI, supra n. 61, at 7; TK Holdings Inc., Defect Information 
Report PSPI-L, supra n. 111, at 5-6; TK Holdings Inc., Defect 
Information Report PSPI, supra n. 111, at 5-6.
    \117\ TK Holdings Inc., Defect Information Report PSPI-L, supra n. 
111, at 5.
    \118\ National Highway Traffic Safety Administration, Consent 
Order, EA15-001 Air Bag Inflator Rupture (May 18, 2015) at 3-4.
    \119\ Id. at 3.
---------------------------------------------------------------------------
    On May 19, 2015, NHTSA announced the events of the previous day, 
including the expansion of the number of vehicles to be recalled due to 
defective Takata airbag inflators.\120\ According to NHTSA, the recalls 
include nearly 34 million vehicles, potentially becoming the largest 
recall of any consumer product in U.S. history.\121\ However, according 
to news reports, the number of vehicles affected may be less than half 
the approximately 34 million initially estimated by NHTSA.\122\
---------------------------------------------------------------------------
    \120\ National Highway Traffic Safety Administration, Department of 
Transportation Announces Steps to Address Takata Airbag Defects (May 
19, 2015) (online at www.nhtsa.gov/About+NHTSA/Press+Releases/DOT-
action-on-takata-air-bag-defects).
    \121\ Id. See also Flawed Takata Air Bags in 34 Million Vehicles 
Lead to Biggest Recall in History, Washington Post (May 19, 2015).
    \122\ Exclusive: Confusion Clouds Count of Cars Hit by Takata Air 
Bag Recall, Reuters (June 10, 2015).
---------------------------------------------------------------------------
    To prioritize and organize the various auto manufacturers' recalls, 
on May 22, 2015, NHTSA filed a notice of intent to open a coordinated 
remedy program for the replacement of defective Takata airbag 
inflators.\123\ The goal of the notice is to consider whether--and, if 
so, how--NHTSA will exercise its authority to organize and prioritize 
the recall and remedy programs. Specifically, as part of this 
proceeding, NHTSA requests comments on how to order sourcing of the 
replacement inflators, whether NHTSA should order the manufacturers to 
prioritize certain regions or vehicles, and whether NHTSA should order 
re-replacements for replacement inflators if Takata cannot demonstrate 
that its replacements are safe.\124\
---------------------------------------------------------------------------
    \123\ National Highway Traffic Safety Administration, Notice of 
Intent to Open a Coordinated Remedy Program Proceeding for the 
Replacement of Certain Takata Air Bag Inflators, 80 Fed. Reg. 29791 
(May 22, 2015) (Notice) (online at www.federalregister.gov/a/2015-
12449).
    \124\ Id.
---------------------------------------------------------------------------
    On June 1, 2015, Honda announced a recall of driver-side airbag 
inflators in approximately 5.1 million vehicles, including 10 different 
Honda and Acura models.\125\ The recall covered inflators that were 
installed at the time of manufacture as well as replacement inflators 
that had been installed as part of prior recalls of Takata 
inflators.\126\
---------------------------------------------------------------------------
    \125\ Honda, Part 573 Safety Recall Report 15V-320 (June 1, 2015) 
(online at www-odi.nhtsa.dot.gov/acms/cs/jaxrs/download/doc/UCM479494/
RCLRPT-15V320-0154.PDF).
    \126\ Id.
---------------------------------------------------------------------------
    On June 5, 2015, NHTSA published a Notice of Coordinated Remedy 
Program Proceeding for the Replacement of Certain Takata Air Bag 
Inflators in the Federal Register.\127\ NHTSA explained that the agency 
is ``considering issuing one or more administrative orders that would 
coordinate remedy programs associated with defective Takata air bag 
inflators.'' \128\ Coordination of the remedy programs could include 
acceleration, prioritization, organization, and/or phasing of the 
remedy programs.\129\
---------------------------------------------------------------------------
    \127\ National Highway Traffic Safety Administration, Notice of 
Coordinated Remedy Program Proceeding for the Replacement of Certain 
Takata Air Bag Inflators, 80 Fed. Reg. 32197 (June 5, 2015) (online at 
www.federalregister.gov/a/2015-13756).
    \128\ Id.
    \129\ Id.
---------------------------------------------------------------------------
    According to Takata's responses to the Committee, as of the end of 
January 2015, Takata's defective airbags had allegedly caused over 100 
injuries and six deaths, with many of these alleged incidents occurring 
in Florida, followed by Puerto Rico, Texas, and California.\130\ In 
addition, on June 12, 2015, Honda confirmed a seventh death resulting 
from a Takata airbag that ruptured in a 2005 Honda Civic on April 5, 
2015, in Lafayette, Louisiana.\131\ Most recently, on June 19, 2015, 
Honda confirmed an eighth death, which occurred in September 2014 as a 
result of a rupturing airbag in a rented 2001 Honda Civic in Los 
Angeles.\132\ In Takata's recent filings with NHTSA, the company 
reported 84 known rupture incidents.\133\
---------------------------------------------------------------------------
    \130\ Takata Response to Senate Commerce Committee, Exhibit A (Dec. 
12, 2014); Takata Response to Senate Commerce Committee, Exhibit B 
(Mar. 27, 2015).
    \131\ Honda Confirms 7th Death from Takata Airbags, Automotive News 
(June 12, 2015); Statement from American Honda Motor Co., Inc., 
Confirmed Fatality Related to the Rupture of a Takata Airbag Inflator 
in Lafayette, Louisiana (June 12, 2015).
    \132\ Honda Reports Eighth Death From Exploding Takata Air Bags, 
Associated Press (June 19, 2015); Statement from American Honda Motor 
Co., Inc., Re: Confirmed Fatality Related to the Rupture of a Takata 
Airbag Inflator in Los Angeles, CA on September 7, 2014 (June 19, 
2015).
    \133\ TK Holdings Inc., Defect Information Report SPI, supra n. 61; 
TK Holdings Inc., Defect Information Report PSDI, PSDI-4, and PSDI-4K, 
supra n. 12; TK Holdings Inc., Defect Information Report PSPI-L, supra 
n. 111; and TK Holdings Inc., Defect Information Report PSPI, supra n. 
111.
---------------------------------------------------------------------------
Figure II: Piece of Metal Shrapnel From A Takata Airbag \134\
---------------------------------------------------------------------------
    \134\ Law Office of Jason Turchin (online at 
www.floridapersonalinjuryattorneysblog.com/2015/04/2003-honda-civic-
airbag-rupture-victim-retains-airbag-attorney-jason-turchin.html).


    Piece of metal shrapnel recovered from the neck of a Florida 
resident after the airbag ruptured in his 2003 Honda Civic on March 20, 
2015.
Figure III: Airbag Cushion With Holes Caused By Shrapnel \135\
---------------------------------------------------------------------------
    \135\ Images provided to the Committee minority staff by Jason 
Turchin, Esq.


III. Media Reports and Takata's Internal Documents Raise Questions 
        Regarding the Company's Knowledge of Serious Safety and Quality 

        Control Issues as Early as 2001
    Media reports and internal Takata documents reviewed by Committee 
minority staff, including audit and engineering reports, internal 
presentations, and e-mails, raise questions regarding Takata's 
commitment to ensuring the highest standards of quality controls. A 
Reuters investigation suggests that quality issues date back to 2001, 
when engineers in Takata's Monclova, Mexico facility identified a range 
of problems that included rust and faulty inflator welding, which they 
said could have caused inflators to fail.\136\ In 2002, the plant 
tracked 60 to 80 defects per one million inflators shipped by Takata, 
which is six to eight times above the company's quality control limit, 
according to an internal presentation.\137\
---------------------------------------------------------------------------
    \136\ Takata Engineers Struggled to Maintain Air Bag Quality, 
Documents Reveal, Reuters (Oct. 17, 2014).
    \137\  Id.
---------------------------------------------------------------------------
    A New York Times review of internal Takata documents, e-mails, 
photos, videos, and regulatory filings uncovered instances of employees 
raising concerns that transportation mishaps were resulting in the 
delivery of wet or damaged airbag units to car manufacturers.\138\ One 
manager wrote an e-mail to colleagues in which he complained that 
quality checks that existed to ensure the inflators stayed dry, such as 
hosing down trucks to check for leaks, were being ignored.\139\ ``The 
whole situation makes me sick,'' he wrote.\140\ In addition, footage 
from closed-circuit television showed forklifts dropping stacks of 
airbag inflators, which at times were not properly examined to ensure 
they were not damaged, according to former quality-control 
managers.\141\ In 2005, a U.S. consulting firm found a pattern of bad 
welding, and, according to engineering presentations, on at least three 
occasions between 2005 and 2006, Takata engineers identified leaks in 
inflators made in Monclova.\142\
---------------------------------------------------------------------------
    \138\ Takata Saw and Hid Risk in Airbags in 2004, Former Workers 
Say, supra n. 1.
    \139\ Id.
    \140\ Id.
    \141\ Id.
    \142\ Takata Engineers Struggled to Maintain Air Bag Quality, 
Documents Reveal, supra n. 136.
---------------------------------------------------------------------------
    According to a Reuters report based on interviews with 21 current 
and former Takata employees and consultants, managers within Takata 
raised concerns that workers were breaking quality rules to increase 
the output of inflators.\143\ Employees also expressed concerns over 
the pressures placed on them by managers.\144\ For example, Alejandro 
Perez, a former Takata facility manager, told Reuters the pressure to 
restart and make up for lost production after a March 2006 explosion at 
the Monclova plant was unrelenting, particularly from managers based in 
the U.S. who had been flown to Mexico.\145\
---------------------------------------------------------------------------
    \143\ Special Report: Plant with Troubled Past at Center of Takata 
Air Bag Probe, Reuters (Nov. 20, 2014).
    \144\ Id.
    \145\ Id.
---------------------------------------------------------------------------
    Takata workers also explained that employees were encouraged to 
meet certain quotas of inflators.\146\ ``If you didn't make it, you 
would be behind and they wouldn't pay you a productivity bonus,'' 
according to Jose Sanchez, a former Takata employee who made inflators 
from 2004 to 2010.\147\
---------------------------------------------------------------------------
    \146\ Id.
    \147\ Id.
---------------------------------------------------------------------------
    Workers at Takata's Moses Lake plant, which also manufactured 
inflators, told a similar story of managers who emphasized output 
quotas, especially as demand for cars and SUVs grew.\148\ Two former 
quality control managers at Takata's main distribution center in Texas 
told the New York Times that a series of quality problems were 
encountered as Takata tried to fulfill the increasing demand for its 
airbags.\149\
---------------------------------------------------------------------------
    \148\ Id.
    \149\ Takata Saw and Hid Risk in Airbags in 2004, Former Workers 
Say, supra n. 1.
---------------------------------------------------------------------------
    Production facilities would resist taking back potentially damaged 
or wet inflators as Takata struggled to meet this increased 
demand.\150\ As automakers cut costs by implementing ``just-in-time'' 
production, meaning parts were only to arrive at assembly plants on an 
as-needed basis, pressure was placed on Takata to meet tight delivery 
schedules.\151\ Workers were told that if an automaker was forced to 
delay production due to a late shipment, the parts supplier would be 
fined tens of thousands of dollars for every minute of lost 
production.\152\ ``That put a lot of pressure and incentive on us to 
never miss a shipment,'' one of the former managers told the New York 
Times.\153\ ``I'd argue, `what if my daughter bought the car with the 
bad airbag?' But the plant would tell us, `Just ship it.' ''\154\
---------------------------------------------------------------------------
    \150\ Id.
    \151\ Id.
    \152\ Id.
    \153\ Id.
    \154\ Id.
---------------------------------------------------------------------------
    In April 2009, engineers reportedly scrambled to fix a flaw in a 
machine in Monclova that pressed the propellant into tablets.\155\ 
According to a June 2009 internal presentation reviewed by the New York 
Times, ``inflaters tested from multiple propellant lots showed 
aggressive ballistics.'' \156\ In March 2011--after three Takata airbag 
recalls had already been issued by one automaker \157\--Guillermo Apud, 
a supervisor at the Monclova plant, sent an e-mail with the subject 
``Defectos y defectos y defectos!!!!'' \158\
---------------------------------------------------------------------------
    \155\ Id.
    \156\ Id.
    \157\ National Highway Traffic Safety Administration, Recall 08V-
593 (Nov. 14, 2008); National Highway Traffic Safety Administration, 
Recall 09V-259 (July 8, 2009); National Highway Traffic Safety 
Administration, Recall 10V-041 (Feb. 11, 2010).
    \158\ Takata Engineers Struggled to Maintain Air Bag Quality, 
Documents Reveal, supra n. 136.
---------------------------------------------------------------------------
    In the full e-mail, which was reviewed by Committee minority staff, 
Mr. Apud explained that an automaker had reported receiving an 
improperly welded inflator and that 38 complete inflators had to be 
thrown out that day due to incorrect assembly.\159\ He wrote, ``We 
cannot be faced with findings/defects of this sort and NOT do 
ANYTHING'' \160\ and ``A part that is not welded = one life less, which 
shows we are not fulfilling the mission.'' \161\ A follow-up e-mail 
from a Takata quality engineer \162\ reiterated Apud's concerns: ``We 
are in a very critical situation because of the most recent problems 
that we have detected on the line. Situations like this can give rise 
to a Recall.'' \163\ According to Reuters, after this incident, 
inspections at the plant were tightened.\164\
---------------------------------------------------------------------------
    \159\ Takata Response to Senate Commerce Committee (Mar.13, 2015) 
(TKH-SCS&T00045772_T0001).
    \160\ Takata Response to Senate Commerce Committee (Mar. 13, 2015) 
(TKH-SCS&T00045772_T0002).
    \161\ Takata Engineers Struggled to Maintain Air Bag Quality, 
Documents Reveal, supra n. 136.
    \162\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00011507).
    \163\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060737_T0002).
    \164\ Takata Engineers Struggled to Maintain Air Bag Quality, 
Documents Reveal, supra n. 136.
---------------------------------------------------------------------------
    Nonetheless, according to media reports, serious lapses in quality 
control continued. In April 2011, Apud told fellow Takata supervisors 
that chewing gum had been found in an inflator, which he described as 
one of several ``grave problems'' in the Monclova plant's inflator 
production.\165\ The following month, Apud reprimanded employees for 
attempting to fix defective parts on the inflator assembly line--a 
practice Takata had prohibited in order to reduce the likelihood of 
faulty parts being shipped to automakers.\166\ He wrote, ``Rework on 
the line is PROHIBITED!!!!'' \167\ ``We can't have leaders/materials 
people/operators REWORKING material left and right without ANY control, 
this is why we have defect upon defect,'' he continued.\168\ ``We need 
to change NOW!'' \169\
---------------------------------------------------------------------------
    \165\ Takata Engineers Struggled to Maintain Air Bag Quality, 
Documents Reveal, supra n. 136.
    \166\ Plant with Troubled Past at Center of Takata Air Bag Probe, 
supra n. 143.
    \167\ Id.
    \168\ Id.
    \169\ Id.
---------------------------------------------------------------------------
    According to Reuters, in 2012, Takata workers in Monclova used the 
wrong parts when assembling inflators, according to documents Takata 
and automakers filed with NHTSA.\170\ More than 1350,000 vehicles from 
three automakers were later recalled due to that defect.\171\ According 
to the explanation Takata provided to regulators in Japan, the mistake 
was possible because parts bins were kept too close together.\172\
---------------------------------------------------------------------------
    \170\ Id.
    \171\ Id.
    \172\ Id.
---------------------------------------------------------------------------
    E-mails reviewed by Committee minority staff also indicate that--
due to financial reasons--Takata's global safety audits were halted 
from 2009 until 2011.\173\ In a March 2011 e-mail, a Takata senior vice 
president in charge of inflators \174\ asked the global director of 
inflator and propellant safety \175\ when he planned to audit inflator 
operations at the Monclova and Moses Lake plants.\176\ When the safety 
director replied that the plan was to audit North America in the fall, 
the vice president said, ``Don't wait till Fall'' and advised him to 
complete the audits soon, adding, ``Please help.'' \177\ The safety 
director replied, ``I would like to perform a mini audit at Moses Lake 
(Propellant and Assembly), Monclova (Assembly and Propellant Handling/
Storage not CAP), and Monterrey (Steering wheels)'' and proposed dates 
in April and May 2011 to avoid conflicts with other scheduled 
audits.\178\
---------------------------------------------------------------------------
    \173\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060922).
    \174\ Takata Response to Senate Commerce Committee (Mar. 13, 2015) 
(TKH-SCS&T00050595).
    \175\ Takata Response to Senate Commerce Committee (Mar. 13, 2015) 
(TKH-SCS&T00050617).
    \176\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060924).
    \177\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060923).
    \178\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060922-TKH-SCS&T00060923).
---------------------------------------------------------------------------
    The Takata global safety director was then dispatched from the U.S. 
to Monclova in May 2011.\179\ A couple weeks before his visit, an e-
mail was sent by the advanced product quality planning coordinator 
\180\ instructing employees to close a series of items raised in prior 
audits: ``All items in red must be closed this week without fail, as 
the time period for the same has already expired.'' \181\ The day 
before the safety director from the U.S. arrived, the facility 
conducted its own audit, which detected several quality concerns, 
including scales with disconnected cables, energetic material on the 
floor, and dispensers for energetic material on unidentified 
lines.\182\ These items were highlighted in an e-mail to Monclova 
employees prior to the Takata global safety director's audit.\183\
---------------------------------------------------------------------------
    \179\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060913); Plant with Troubled Past at Center of Takata Air 
Bag Probe, supra n. 143.
    \180\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00021010).
    \181\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060731_T0005).
    \182\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060731_T0003).
    \183\ Id.
---------------------------------------------------------------------------
    Despite this preparation, an audit report dated May 16-18, 2011, 
from the Takata safety director faulted the plant for not properly 
closing bags of ammonium nitrate and for storing scrapped or 
contaminated propellant near good material, allowing for the 
possibility of a mix-up.\184\ The audit report also explained that 
materials dating back to 2007 were found in the staging area, even 
though this area was intended for 24-hour storage of materials and not 
for long-term storage.\185\ In addition, the audit found several 
instances of propellant on the assembly line floor.\186\ 
Notwithstanding these findings, the safety director noted that the 
audit report would not be shared with Takata's headquarters in 
Tokyo.\187\
---------------------------------------------------------------------------
    \184\ Takata Response to Senate Commerce Committee (Mar. 13, 2015) 
(TKH-SCS&T00045775); Plant with Troubled Past at Center of Takata Air 
Bag Probe, supra n. 143.
    \185\ Takata Response to Senate Commerce Committee (Mar. 13, 2015) 
(TKH-SCS&T00045775).
    \186\ Takata Response to Senate Commerce Committee (Mar. 13, 2015) 
(TKH-SCS&T00045776).
    \187\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060725); Plant with Troubled Past at Center of Takata Air 
Bag Probe, supra n. 143.
---------------------------------------------------------------------------
    The same U.S. safety director conducted a follow-up audit of the 
Monclova plant in November 2011.\188\ E-mails exchanged among employees 
of the plant in the lead-up to his visit discussed plant audit 
questions that needed to be addressed before the auditor arrived, 
including the question of whether a central safety committee 
exists.\189\ A week before the director arrived, a superintendent of 
environmental health and safety \190\ wrote that ``NO safety committee, 
as such, has been formed.'' \191\ He continued, ``It can be made up by 
the Inflators managers, and we can mention the weekly staff meeting as 
evidence of meetings.'' \192\ The inflator assembly quality 
manager\193\ replied, ``This is how we are going to answer and what we 
are going to have as support for a safety audit? GPS [Global 
Pyrotechnic Safety]? We need compelling responses and evidence so that 
there is no doubt and they don't start asking for this and that . . .'' 
\194\ The follow-up audit report, dated November 10-11, 2011, 
identified 14 tasks intended to improve concerns identified in the 
audit. For example, the audit report noted that, in the assembly area, 
various metal parts were found in an area open to the elements and that 
improvement was needed to separate and protect the parts from 
weather.\195\
---------------------------------------------------------------------------
    \188\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060839).
    \189\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00064854_T0002).
    \190\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00065182_T0001).
    \191\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00064854_T0001).
    \192\ Id.
    \193\ Takata Response to Senate Commerce Committee (Mar. 13, 2015) 
(TKH-SCS&T00052964).
    \194\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00064854_T0001).
    \195\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00060839).
---------------------------------------------------------------------------
    Furthermore, a document from 2013 shows that Takata's Monclova 
plant was not properly following the procedures that govern how changes 
are made to some aspects of the manufacturing process.\196\ Changes in 
the inflator assembly lines were implemented without receiving the 
prior approval of directors of quality, engineering, and safety, 
despite policies that required their approval.\197\ The document 
outlined updates to internal safety policies that were intended to end 
the practice.\198\ Had Takata implemented more robust safety programs, 
including outside auditing and verification, it is possible that these 
serious production issues might have been addressed much earlier.
---------------------------------------------------------------------------
    \196\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00044269).
    \197\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00044271-44273).
    \198\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00044269-44270).
---------------------------------------------------------------------------
IV. Media Reports and Takata's Internal Documents Illustrate Takata's 
        Efforts to Address the Impact of Moisture and Humidity on its 
        Inflators
    Takata has attempted to understand the precise roles of moisture 
and humidity in the stability of its ammonium nitrate-based propellant 
for more than a decade--and questions still remain today. As reported 
by the New York Times, Takata's patent applications demonstrate 
Takata's general knowledge of moisture's effect on the stability of 
ammonium nitrate. For example, in an October 2006 patent application, 
Takata explained that moisture could seep into the propellant during 
the manufacturing process as well as once the inflator was installed in 
a car.\199\ Similar concerns were raised in another patent application 
in December 2013, with Takata engineers cautioning that temperature 
changes inside the airbag inflator might cause the propellant to ``lose 
density especially in the presence of moisture or humidity.'' \200\
---------------------------------------------------------------------------
    \199\ Airbag Compound has Vexed Takata for Years, New York Times 
(Dec. 9, 2014).
    \200\ Id.
---------------------------------------------------------------------------
    Documents provided to the Committee by Takata show that the company 
frequently made adjustments in order to control moisture in the 
propellant during the manufacturing process. For example, Takata 
changed the moisture specification, which is the amount of allowable 
moisture present in the propellant,\201\ for one version of its 
propellant tablets in 2010 and 2014. Based on an internal presentation 
outlining process changes for this propellant from 2000 through 2014, 
it appears that Takata did not change moisture specification from 2000 
through 2009.\202\ In 2010, however, Takata changed the moisture 
specification from a maximum of 0.20 percent to a maximum of 0.12 
percent.\203\ In 2014, at Honda's request, Takata again changed the 
moisture specification--this time from 0.12 percent to 0.07 
percent.\204\
---------------------------------------------------------------------------
    \201\ See Takata Response to Senate Commerce Committee (Feb. 3, 
2015) (TKH-SCS&T00045446).
    \202\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00045419-45443).
    \203\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00045446).
    \204\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00045456).
---------------------------------------------------------------------------
    Takata also made changes to control the humidity in the 
manufacturing environment. For example, according to an internal Takata 
presentation, the company changed the humidity specification at the 
propellant loading station for the driver-side inflator on at least 
three occasions between 2001 through 2010.\205\ Takata described that 
the reason for one of the changes was ``to minimize the effects of 
moisture absorption on propellant.'' \206\ In addition, in 2011, Takata 
began controlling the humidity in the entire plant by installing high 
capacity dehumidifiers, instead of controlling the humidity at each 
propellant loading station.\207\ These process changes illustrate 
Takata's efforts to regulate moisture and humidity during the 
manufacturing process of its airbag inflators.
---------------------------------------------------------------------------
    \205\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00008072-TKH-SCS&T00008095). In 2001, Takata changed the 
humidity specification from 30 percent to 42 percent. Takata Response 
to Senate Commerce Committee (Feb. 3, 2015) (TKH-SCS&T00008072). In 
2004, Takata changed the humidity specification from 42 percent to 35 
percent. Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00008082). In 2010, Takata changed the humidity specification 
from 35 percent to 30 percent. Takata Response to Senate Commerce 
Committee (Feb. 3, 2015) (TKH-SCS&T00008095).
    \206\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00008082).
    \207\ Takata Response to Senate Commerce Committee (Feb. 3, 2015) 
(TKH-SCS&T00008098).
---------------------------------------------------------------------------
    Currently, Takata continues to attempt to understand the impact of 
exposure to moisture over the life of the inflator. Analysis by 
Fraunhofer ICT, a research institute with expertise in airbag and 
pyrotechnic technology that was hired by Takata to test various aspects 
of its inflators and propellants, suggests that long-term exposure to a 
climate of persistent high heat and humidity is a significant factor in 
explaining the airbag ruptures.\208\ Ongoing testing has identified an 
O-ring seal as the possible point at which water is entering the 
inflator.\209\
---------------------------------------------------------------------------
    \208\ TK Holdings Inc., Defect Information Report PSDI, PSDI-4, and 
PSDI-4K, supra n. 12.
    \209\ Takata Air-Bag Problems Linked to Several Factors, Wall 
Street Journal (June 2, 2015).
---------------------------------------------------------------------------
    Significant questions still remain, however. For example, it is not 
known why the same inflator can perform differently depending on the 
make and model of the vehicle in which it was installed.\210\ In 
addition, even when an inflator is subjected to all variables that, 
according to the testing, appear to play a role in causing a rupture 
event, some of these inflators nonetheless perform properly.\211\ These 
unanswered questions are particularly troubling in light of the fact 
that Takata continues to produce hundreds of thousands of replacement 
inflators each month, with plans to increase production to one million 
inflators per month by September 2015.\212\ Nonetheless, Takata and 
NHTSA agree that, due to the critical role of time in degrading the 
propellant, it is best to continue replacing the old, defective 
inflators as quickly as possible--even though there is a distinct 
possibility that some of these replacements will eventually also be 
recalled.\213\
---------------------------------------------------------------------------
    \210\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00064623).
    \211\ Takata Response to Senate Commerce Committee (Mar. 23, 2015) 
(TKH-SCS&T00064697).
    \212\ House Committee on Energy and Commerce, Testimony of Kevin 
Kennedy, Executive Vice President of North America, TK Holdings Inc., 
Hearing on An Update on the Takata Airbag Ruptures and Recalls (June 2, 
2015).
    \213\ Briefing by NHTSA to Bipartisan Commerce Committee Staff 
(June 17, 2015); Briefing by Takata to Bipartisan Commerce Committee 
Staff (June 18, 2015).
---------------------------------------------------------------------------
V. Proposed Policy Changes to Quickly Detect and Address Future Auto 
        Safety Defects
    Over the past 20 years, Congress has periodically scrutinized 
NHTSA's vehicle safety authority in the wake of high-profile vehicle 
defects that led to the needless deaths of American drivers. Twice 
Congress has responded with legislative reform efforts with the Senate 
Commerce Committee playing a leading role. In 2000, Congress passed the 
Transportation Recall Enhancement, Accountability, and Documentation 
(TREAD) Act in response to the Firestone tire recall that caused at 
least 174 deaths and over 700 injuries.\214\ Subsequently, in 2012, 
Congress again legislatively addressed NHTSA's regulatory authority 
with provisions in the comprehensive surface transportation 
reauthorization legislation--the Moving Ahead for Progress in the 21st 
Century Act (MAP-21)--with many of those provisions stemming from the 
lessons learned from sudden unintended acceleration defects in Toyota 
vehicles.\215\
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    \214\ Pub. L. No. 106-414 (2000); Inside the Ford/Firestone Fight, 
Time (May 29, 2001).
    \215\ Pub. L. No. 112-141 (2012); National Highway Traffic Safety 
Administration, RQ10003 Summary (Feb. 16, 2010-Mar. 1, 2011) (online at 
www-odi.nhtsa.dot.gov/cars/problems/defect/
results.cfm?action_number=RQ10003&SearchType=QuickSearch&summary=true).
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    While these laws were significant and helpful, they stopped short 
of reforms that would have provided NHTSA with sufficient resources and 
authority to better detect and address dangerous vehicle safety 
defects. The holes in the current NHTSA regulatory and enforcement 
process, combined with the failure of certain manufacturers to maintain 
robust internal safety and quality control programs, have manifested in 
several large recalls--including those involving defective GM ignition 
switches and Takata airbags.
    To that end, this report recommends numerous policy proposals to 
better enable NHTSA to protect the public from vehicle defects. Many of 
these proposals have been part of previously introduced bills--some in 
bills favorably reported by the Committee and some even in Senate-
passed legislation. In addition, some of these proposals have been 
proffered by the Administration in its Fiscal Year (FY) 2015 budget, 
which provides a comprehensive transportation proposal known as the 
Generating Renewal, Opportunity, and Work with Accelerated Mobility, 
Efficiency, and Rebuilding of Infrastructure and Communities throughout 
America (GROW AMERICA) Act. Furthermore, NHTSA should adopt reforms on 
its own in order to address deficiencies within ODI.
A. NHTSA Improvements
1. Increase Civil Penalty Authority

    The Takata airbag recalls confirm the urgent need for stronger 
enforcement mechanisms for NHTSA, including civil penalty authority 
that can sufficiently deter safety violations. In 2014, NHTSA issued 
over $126 million in civil penalties, which surpassed the total amount 
collected by the agency in its 43-year history.\216\ Despite the record 
year, NHTSA's civil penalty authority is currently capped at $35 
million,\217\ severely limiting its ability to seek fines that are 
commensurate with, for instance, the seriousness of failing to report 
defects in a timely manner. The low cap has repeatedly demonstrated an 
inability to deter automakers from committing grave safety violations. 
This lack of deterrence is particularly apparent when companies fail to 
report important defect information to NHTSA as required under Section 
30118 of the National Traffic and Motor Vehicle Safety Act 
(NTMVSA).\218\ For example, NHTSA's ``record'' $35 million fine of GM 
represented a miniscule fraction of the company's annual revenue of 
$156 billion.\219\ In contrast, it is worth noting--and it is telling--
that when Toyota agreed to pay a record fine of $1.2 billion for 
concealing information on sudden unintended acceleration, the auto 
giant did so in a settlement with the Department of Justice for 
violations of the Wire Act--not for violations of Section 30118 of 
NTMVSA.\220\
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    \216\ See, e.g., NHTSA's fines of Honda ($70 million for failing to 
both submit early warning reports and warranty claims); Hyundai Motor 
America ($17.35 million for failing to issue a recall in a timely 
manner); and General Motors Company ($35 million for failing to issue a 
recall in a timely manner). National Highway Traffic Safety 
Administration, NHTSA Issues More Fines in 2014 Than in Agency's Entire 
History (Jan. 8, 2015) (online at www.nhtsa.gov/About+NHTSA/
Press+Releases/2015/DOT-fines-Honda-$70-million).
    \217\ 49 U.S.C. Sec. 30165. The $35 million maximum limit was 
increased from $15 million by MAP-21. See Pub. L. No. 112-141, 
Sec. 31203 (2012).
    \218\ 49 U.S.C. Sec. 30118 (2000).
    \219\ See General Motors Company, 2014 Annual Report, at 22 (2014) 
(online at www.gm.com/content/dam/gmcom/COMPANY/Investors/
Stockholder_Information/PDFs/2014_GM_Annual_Report.pdf).
    \220\ See Department of Justice, Justice Department Announces 
Criminal Charge Against Toyota Motor Corporation and Deferred 
Prosecution Agreement with $1.2 Billion Financial Penalty (Mar. 19, 
2014) (online at www.justice.gov/opa/pr/justice-department-announces-
criminal-charge
-against-toyota-motor-corporation-and-deferred).
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    Over the past several years, lawmakers have proposed increasing or 
eliminating this cap. A Senate bill introduced in the 111th Congress 
would have increased the cap to $300 million,\221\ and legislation 
reported out of the Commerce Committee in the 112th Congress would have 
increased the cap to $250 million.\222\ The Senate-passed version of 
MAP-21 adopted the Committee-reported increase of $250 million before 
it was reduced to the current $35 million in Conference with the 
House.\223\ In the 113th Congress, a bill introduced in the Senate 
would have eliminated the cap,\224\ and a bill introduced in the House 
would have increased the cap to $200 million.\225\ The GROW AMERICA Act 
also would increase the limit on NHTSA's civil penalties to $300 
million.\226\ Substantially increasing or eliminating NHTSA's civil 
penalty cap is critical to making NHTSA a stronger and more effective 
regulator.
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    \221\ S. 3302, 111th Cong. (2010).
    \222\ S. 1449, 112th Cong. (2011).
    \223\ S. 1813, 112th Cong. (2012).
    \224\ S. 2559, 113th Cong. (2014).
    \225\ H.R. 4364, 113th Cong. (2014).
    \226\ Department of Transportation, Generating Renewal, 
Opportunity, and Work with Accelerated Mobility, Efficiency, and 
Rebuilding of Infrastructure and Communities throughout America Act 
Sec. 4110 (2014).
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2. Provide Enhanced and Independent Testing Capability

    Improving NHTSA's ability to conduct enhanced and independent 
testing would also greatly further motor vehicle safety. While Takata 
and the automakers have the responsibility to identify the root cause 
of the airbag ruptures, their regulator should have the ability to 
conduct its own independent tests to verify their findings. 
Furthermore, according to a new report issued by the Department of 
Transportation Inspector General's office (DOTIG), NHTSA's ability to 
aggressively and prophylactically identify and address defects before 
they cause greater harm is hampered by deficiencies in how ODI 
operates.\227\ Specifically, the DOTIG report found that ODI lacks (1) 
protocols and procedures to collect data that is accurate and useful, 
(2) the ability to statistically analyze data in order to discern 
trends that indicate the existence of safety defects, and (3) protocols 
that govern the conditions for conducting investigations. The report 
made 17 recommendations that ODI should adopt to address these 
deficiencies.\228\ Furthermore, NHTSA is plagued by a chronic lack of 
resources. Currently, the agency is underfunded and outmanned--only 51 
employees are responsible for analyzing an overwhelming amount of data 
and conducting appropriate investigations therefrom.\229\ The 
President's FY 2016 budget request proposes an overall NHTSA budget of 
$908 million, a nine percent increase from the agency's current budget 
of $830 million.\230\ This includes increasing ODI's budget to $31.3 
million, up from $11 million in FY 2015, which would allow for the 
hiring of an additional 57 personnel.\231\ Coupled with meaningful 
internal reforms, the increased budget for ODI would enhance NHTSA's 
``ability to monitor data, find defects sooner, and strengthen [its] 
ability to conduct investigations of vehicles with suspected defects.'' 
\232\
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    \227\ Department of Transportation, Office of Inspector General, 
Inadequate Data and Analysis Undermine NHTSA's Efforts to Identify and 
Investigate Vehicle Safety Concerns (June 18, 2015).
    \228\ Id.
    \229\ Auto Regulator Has 51 People Tracing 250 Million Cars, 
Bloomberg (Mar. 26, 2015).
    \230\ See Department of Transportation, Budget Estimates Fiscal 
Year 2015, National Highway Traffic Safety Administration (2015) 
(online at www.business.cch.com/plsd/FY2016-NHTSA-CBJ-Final.pdf).
    \231\ Id. See also Department of Transportation, U.S. 
Transportation Secretary Anthony Foxx Unveils President's Bold $94.7 
Billion Investment in America's Infrastructure Future (Feb. 2, 2015) 
(online at www.dot.gov/briefing-room/us-transportation-secretary-
anthony-foxx-unveils-president%E2%80%99s-bold-947-billion).
    \232\ Id.; National Highway Traffic Safety Administration, U.S. 
Transportation Secretary Foxx Calls on Congress to Authorize New 
Enforcement Tools for NHTSA and Levis Fine on Takata (Feb. 20, 2015) 
(online at www.nhtsa.gov/About+NHTSA/Press+Releases/2015/DOT-wants-new-
enforcement-tools-for-nhtsa-and-fines-takata).
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3. Improve Recall Completion Rates

    Recall notifications are only effective when consumers act on the 
notices by actually bringing their vehicles to an authorized dealership 
to have them repaired. However, achieving high recall completion rates 
has proven to be a challenge. Secretary of Transportation Anthony Foxx 
has stated, ``Recalls are only successful and can only save lives if 
they end up getting the cars fixed, but we know that 20 percent of 
vehicles that are recalled--and possibly more than that--go 
unrepaired.'' \233\ A 2011 Government Accountability Office study found 
significant variation in recall completion rates: in any given year, 
some manufacturers have completion rates as low as 23 percent, while 
others have completion rates as high as 96 percent.\234\ By the end of 
2014, of the 17 million vehicles that had been recalled for defective 
Takata airbags, reports suggested that only around 2 million vehicles--
a mere 11 percent of those recalled--had been repaired.\235\ In April 
2015, NHTSA hosted a workshop with industry, safety advocates, policy 
makers, and researchers on improving recall completion rates. At the 
workshop, NHTSA Administrator Mark Rosekind said, ``Getting to 100 
percent is going to be a real challenge, but it has to be our ambition. 
And until the day we hit that mark, we have to think of new ways to get 
there.'' \236\
---------------------------------------------------------------------------
    \233\ National Highway Traffic Safety Administration, U.S. DOT 
Hosts Workshop to Boost Recall Completion Rates (Apr. 28, 2015) (online 
at www.nhtsa.gov/About+NHTSA/Press+Releases/2015/nhtsa-retooling-
recalls-workshop-04282015).
    \234\ Government Accountability Office, Auto Safety: NHTSA Has 
Option to Improve the Safety Defect Recall Process, at 25 (June 2011).
    \235\ The Unsolved Mystery of the Exploding Air Bags, USA Today 
(Apr. 27, 2015).
    \236\ DOT Aims to Follow Record Recall Fines with Record Repair 
Rate, Politico Pro (Apr. 28, 2015).
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    Lawmakers in recent years have attempted to bolster recall 
effectiveness by introducing legislation that would prohibit used car 
dealers and rental car companies from selling, leasing, or renting out 
vehicles subject to an open recall.\237\ Under current law, no such 
prohibition exists, constituting a major loophole in ensuring the 
safety of cars on the Nation's roads and highways.\238\ The GROW 
AMERICA Act also proposes closing this loophole.\239\ Secretary Foxx 
stated, ``Every vehicle under an open safety recall should be repaired 
as soon as possible.. . .Requiring rental car agencies and used car 
dealers to fix defective vehicles before renting is a common-sense 
solution that would make our roads safer.'' \240\ In September 2014, 
the Senate Commerce Committee favorably reported S. 921, the Raechel 
and Jacqueline Houck Safe Rental Car Act, which would have closed this 
loophole for rental cars.\241\
---------------------------------------------------------------------------
    \237\ See, e.g., S. 3302, 111th Cong. (2010); S. 2559, 113th Cong. 
(2014); and S. 921, 113th Cong. (2012).
    \238\ U.S. Transportation Secretary Foxx Calls on Congress to 
Authorize New Enforcement Tools for NHTSA and Levis Fine on Takata, 
supra n. 233.
    \239\ Department of Transportation, Generating Renewal, 
Opportunity, and Work with Accelerated Mobility, Efficiency, and 
Rebuilding of Infrastructure and Communities throughout America Act 
Sec. 4109 (2014). Previous proposals have also required that used car 
dealers notify purchasers of any outstanding safety recalls. See S. 
3302, 111th Cong. (2010) and S. 2559, 113th Cong. (2014).
    \240\ U.S. Transportation Secretary Foxx Calls on Congress to 
Authorize New Enforcement Tools for NHTSA and Levis Fine on Takata, 
supra n. 233.
    \241\ S. 921, 113th Cong. (2014). On June 19, 2015, Honda confirmed 
that the 2001 Honda Civic involved in the eighth death caused by a 
rupturing Takata airbag inflator was a rental car. Statement from 
American Honda Motor Co., Inc., Re: Confirmed Fatality Related to the 
Rupture of a Takata Airbag Inflator in Los Angeles, CA on September 7, 
2014, supra n. 132.
---------------------------------------------------------------------------
    Numerous other ideas have been proposed to improve recall 
completion rates, including requiring consumers to fix open recalls 
before they are able to register their vehicles or renew their 
registrations.\242\ Another idea is for auto manufacturers to provide 
direct in-vehicle notification to owners or lessees of open recalls.
---------------------------------------------------------------------------
    \242\ See S. 617 (2015).
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4. Enact Whistleblower Legislation

    As noted earlier, the Takata airbag recalls--as well as other high-
profile safety recalls--highlight the need for stronger incentives for 
companies to report safety defects to NHTSA as soon as they become 
aware of them. In addition to increasing civil penalties for violations 
of Section 30118 of NTMVSA, bolstering incentives and protections for 
whistleblowers would also increase the likelihood that NHTSA receives 
critical safety information in a timely manner. Revealing information 
on the various issues surrounding the Takata airbag defects has often 
come from former Takata employees who have spoken to media sources in 
the aftermath of the crisis--often on the condition of anonymity.\243\ 
NHTSA has also urged potential whistleblowers to contact the 
Administration.\244\
---------------------------------------------------------------------------
    \243\ See, e.g., Takata Saw and Hid Risk in Airbags in 2004, Former 
Workers Say, supra n. 1; Exclusive: U.S. Federal Safety Regulators Seek 
Takata Whistleblowers, Reuters (Jan. 29, 2015).
    \244\ Exclusive: U.S. Federal Safety Regulators Seek Takata 
Whistleblowers, supra n. 244.
---------------------------------------------------------------------------
    Currently, MAP-21 provides whistleblower protections for employees 
of manufacturers, part suppliers, and dealerships by protecting them 
from discrimination or retaliation for engaging in certain protected 
activities, including providing information relating to any motor 
vehicle defect, noncompliance, or any violation to the Secretary of 
Transportation or an employer.\245\
---------------------------------------------------------------------------
    \245\ Pub. L. No. 112-141 Sec. 30171; 49 U.S.C. Sec. 30171.
---------------------------------------------------------------------------
    In January 2015, Commerce Committee Chairman John Thune and Ranking 
Member Bill Nelson introduced the Motor Vehicle Safety Whistleblower 
Act (S. 304), which would enhance the protections in MAP-21 by 
incentivizing employees and contractors to voluntarily provide 
information to NHTSA.\246\ Under the bill, the Secretary of 
Transportation is authorized to share with the whistleblower up to 30 
percent of any fines exceeding $1 million that NHTSA recovers as a 
result of the information that is reported. To help improve automobile 
safety, S. 304 incentivizes whistleblowers to report violations and 
provides the necessary protections for such actions. On April 28, 2015, 
the Senate passed S. 304.
---------------------------------------------------------------------------
    \246\ S. 304. The Bill is cosponsored by Senators Heller, 
McCaskill, Klobuchar, Ayotte, Moran, and Blumenthal. On February 26, 
2015 the Commerce Committee considered the bill and ordered to be 
reported favorably, modified by a substitute amendment.
---------------------------------------------------------------------------
B. Safety Measures NHTSA, Takata, and Auto Manufacturers Should 
        Undertake to Improve Recall Effectiveness
    Short of additional legislation, NHTSA and private stakeholders can 
also do a better job of effectuating recalls. Specifically, NHTSA 
should consider using its existing authority to accelerate the 
availability of replacement parts to the public and should further 
modify its public database to make it more user friendly. Lastly, auto 
manufacturers should make loaner cars more readily available to 
consumers affected by lengthy recalls.
1. Increase Ability to Effectively Respond to Safety Defects/Recalls

    The defective Takata airbag crisis highlights the need for 
improvements in the auto industry's ability to effectively respond to 
recalls. As of June 2015, Takata explained that production of 
replacement inflators had increased from approximately 350,000 to 
700,000 per month.\247\ At this rate of production, it would take 
Takata more than three years to produce replacement inflators for all 
recalled vehicles. By September 2015, Takata plans to be manufacturing 
one million inflators per month,\248\ but the slow pace at which Takata 
initially produced replacements, which has led to reports of customers 
being told that parts are not available,\249\ underscores the need for 
better planning for recalls, especially large recalls.
---------------------------------------------------------------------------
    \247\ Testimony of Kevin Kennedy, Hearing on An Update on the 
Takata Airbag Ruptures and Recalls (June 2, 2015), supra n. 213.
    \248\ Id.
    \249\ See, e.g., Takata Air Bag Recall Stalls in Wisconsin Over 
Lack of Parts, Journal Sentinel (Mar. 30, 2015).
---------------------------------------------------------------------------
    Section 30120 of NTMVSA grants NHTSA the authority to improve the 
efficacy of recalls by expanding the sources of replacement parts and/
or the number of authorized repair facilities.\250\ Granted under the 
TREAD Act, NHTSA can use this authority if it determines that the 
``manufacturer's remedy program is not likely to be capable of 
completion within a reasonable time.'' \251\ Thus far, NHTSA has opted 
not to use its 30120 authority to accelerate the availability of 
replacements for defective Takata airbags, but it should not hesitate 
to do so if such an initiative would further public safety.
---------------------------------------------------------------------------
    \250\ 49 U.S.C. Sec. 30120.
    \251\ 49 C.F.R. 573.14(b).
---------------------------------------------------------------------------
    Furthermore, the lack of accurate information available to 
consumers raises serious concerns when it comes to industry and the 
government's readiness. To promote transparency and accountability, 
MAP-21 mandated that recall information be available on the Internet. 
Consumers are now able to search by vehicle make and model or enter 
their Vehicle Identification Number (VIN) into NHTSA's vehicle safety 
database at www.safercar.gov to see if their vehicle is subject to a 
recall.\252\ The Takata airbag recalls have demonstrated that this 
search tool needs to be strengthened. NHTSA's VIN search tool wrongly 
informed some consumers that their vehicles had either already been 
repaired or were not subject to a recall.\253\ Moreover, in October 
2014, the overwhelming demand for NHTSA's website caused it to 
crash.\254\ Bills introduced in Congress to improve NHTSA's vehicle 
safety database include measures aimed at: improving website 
organization and functionality; allowing for data to be searched, 
aggregated, and downloaded; and improving searchability of specific 
vehicles and issues through standardization of commonly used search 
terms.\255\ However, NHTSA is capable of taking these steps on its own 
accord. Even without a legislative directive, the agency should take 
the initiative to make its database more user friendly and effective 
for consumers.
---------------------------------------------------------------------------
    \252\ Pub. L. No. 112-141 Sec. 31301.
    \253\ NHTSA Updates Recall Website After Cars.com Probe, Cars.com 
(Apr. 23, 2015).
    \254\ National Highway Traffic Safety Administration, U.S. 
Department of Transportation Unveils New, Free, Online Search Tools for 
Recalls Using Vehicle Identification Number (Aug. 20, 2014) (online at 
www.nhtsa.gov/About+NHTSA/Press+Releases/2014/New-free-online-search-
tool-for-recalls-using-VIN-released); see also Demand Crashes Air Bag 
Recall Web Site Safercar.gov, Washington Post (Oct. 21, 2014). In 
addition, Honda's VIN search tool, which allows consumers to determine 
whether a car is subject to recall, was providing false information in 
the months after millions of vehicles were recalled. Owners whose cars 
were subject to multiple recalls were only informed of the most recent 
recalls, and earlier recalls were shown as completed. See Senate 
Committee on Commerce, Science, and Transportation, Examining Takata 
Airbag Defects and the Vehicle Recall Process, 113th Cong. (Nov. 20, 
2014).
    \255\ See S. 2559, 113th Cong. (2014); H.R. 1181.
---------------------------------------------------------------------------
2. Offer Loaner/Rental Cars When Recalls Involve Serious Safety Issues

    At the November 2014 Commerce Committee hearing regarding the 
defective Takata airbags, Senator Nelson called on automakers to 
provide loaner vehicles or rental cars to consumers who could not get 
their vehicles immediately fixed due to the unavailability of 
replacement parts.\256\ In March 2015, Honda launched a multimillion-
dollar ad campaign to urge owners of vehicles affected by the Takata 
airbag recalls to get their vehicles fixed.\257\ The advertisements, 
printed in English and Spanish, promised consumers a rental car or 
loaner vehicle free-of-charge. To keep drivers and passengers safe when 
vehicles are subject to a recall, automakers should provide rental or 
loaner vehicles, especially in cases in which the defect in question 
poses a serious safety hazard or in which replacement parts are 
unavailable.
---------------------------------------------------------------------------
    \256\ Senator Bill Nelson Statement, Senate Committee on Commerce, 
Science, and Transportation, Examining Takata Airbag Defects and the 
Vehicle Recall Process, 113th Cong. (Nov. 20, 2014).
    \257\ New Honda Ads: Fix Your Airbags, AutoBlog (Mar. 14, 2015).
---------------------------------------------------------------------------
VI. Conclusion
    Thus far, the Committee minority staff's ongoing investigation 
reveals a series of failures by both Takata and NHTSA to timely address 
a defect that has now mushroomed into a recall crisis. Had Takata 
maintained a more robust culture of safety, it is likely that many of 
these defects could have been discovered much sooner. Similarly, had 
NHTSA promptly undertaken more aggressive steps to investigate the 
Takata airbag ruptures, it is possible that this defect could have been 
addressed years earlier.
    To restore consumer confidence in the safety of vehicles, it is 
imperative that Congress take action to enhance NHTSA's regulatory and 
enforcement authorities. Similarly, automakers and part suppliers must 
redouble their internal safety efforts. As this report shows, it is not 
enough to merely conduct safety audits after problems are detected. 
Rather, safety must be built-in as a core component of a manufacturer's 
internal culture.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Senator Nelson. And thank you for your cooperation on this.
    And you will recall, Mr. Chairman, last year we actually 
the started the hearings on these airbag defects. And the news 
was not good. At that point, last November, we had five deaths 
and dozens of injuries that were ties to the defective Takata 
airbags.
    And we had testimony from an Air Force lieutenant, 
Lieutenant Stephanie Erdman. She suffered severe facial 
injuries and almost lost one of her eyes when her airbag 
exploded after a relatively minor accident in the Florida 
panhandle near Eglin Air Force Base.
    But since then, the recalls have ramped up, appropriately, 
but unfortunately the tragedies have continued. January, this 
year, Houston, a man killed by a Takata airbag that exploded in 
his vehicle after a minor accident. And then April, a 22-year-
old was involved in an accident, Lafayette, Louisiana. The 
wreck was serious, but, as you can see--look at this airbag.
    And do we have the pictures of the lady?
    That is the one from Florida, isn't it? OK. Hold that back. 
Hold that one back.
    You can see--now, this is a normal airbag deployed. This is 
the front of what would be facing the driver in the steering 
wheel. And, of course, it deploys. And if it deploys normally, 
it is supposed to look like that. OK?
    This is what happened in this case that I just referenced 
in Louisiana. That is blood. But look at the tear in the 
airbag. You can see that it obviously has been punctured. And 
instead of it being like that, the shrapnel in the inflator--
which is this device which is in the steering wheel, underneath 
the steering wheel, and this explodes, sending hot gas out and 
inflating the airbag. Well, when it is defective, it explodes 
with such force that it actually breaks open the metal, and the 
metal goes out. And then, of course, instead of the airbag 
saving lives, it is killing people.
    Let me show you. That is a piece of metal that actually 
came out on this lady, and this lady is in Miami last July. 
Look how big that is. Now, that hit her, and thank goodness it 
hit her there in a relatively superficial wound that is a 
permanent scar. But what if it had hit her there? Or what if it 
had hit her there? That is the piece that hit her.
    This is deadly serious business. Just last Friday, we 
learned of the eighth death, southern California, conclusively 
tied to a defective Takata airbag. And some of these victims' 
families got recall notices--got recall notices after their 
loved ones were killed. And in addition to the eight deaths, 
this committee has learned of allegations of well over 100 
serious injuries.
    Now, I got into this thing because there was a woman killed 
in Orlando. This was a year ago. That is how I got into it. 
When the police got to the car, they thought it was a homicide. 
They thought somebody had slashed her throat. And only 
afterwards did they find out that, in fact, this is what it 
was.
    And then I got into it because of a firefighter that lives 
in the Orlando area. He won't be a firefighter again because he 
lost his eye now.
    And so I could go on and on about these incidents just in 
Florida alone, but the bottom line is we need to get these cars 
fixed. And we have been talking about this since last year.
    Dr. Rosekind has been a breath of fresh air, and you have 
taken numerous actions to speed up the Takata recall process, 
but NHTSA still faces deep challenges.
    For one thing, as no doubt you will point out, it is 
underfunded. It lacks the necessary funding to make sure that 
automakers--and the sticks, as well as the carrots, it lacks to 
get the automakers to be forthcoming about the recalls.
    And, by the way, this isn't the only thing. We are not just 
picking on Takata. Look how many deaths occurred from the GM 
defective steering ignition switches. GM hid a defect for over 
a decade, and at least 114 people died. This is awful. And for 
that, NHTSA could only fine GM a measly $35 million, and that 
is less than one-hundredth of a percent of what GM makes in a 
quarter.
    And NHTSA also appears to have serious internal and 
managerial issues. These challenges were detailed in this 
Department of Transportation Office of Inspector General report 
released yesterday that revealed serious problems in NHTSA's 
Office of Defects Investigation, especially related to the 
handling of the GM crisis last year.
    And so I can tell you, this Senator is going to fight for 
additional funding for NHTSA, but there also has to be 
accountability. And the IG report found severe deficiencies in 
NHTSA's ability to effectively collect and analyze safety data 
as well as conduct investigations. The agency lacks proper 
protocols and procedures. And staff, apparently, are 
inadequately trained to do their job. We need accountability.
    And I look forward, Doctor, to hearing how you intend to 
respond to this report that has now been put in the record and 
how you continue to modernize the agency.
    And, finally, I look forward to hearing from the 
representatives of Takata.
    Yesterday, the staff issued a report detailing its initial 
findings in a months-long investigation of Takata. And for 
years, it is obvious that Takata did not put safety first. It 
appears that Takata knew, or should have known, as early as 
2001--that is 14 years ago--that there were serious safety and 
quality lapses in its airbag production process.
    And you would think that they would have stepped up their 
safety efforts at these plants after discovering these issues. 
No. And, by the way, there are eight people dead. Instead, 
internal e-mails suggest they actually suspended global safety 
audits from 2009 to 2011 for cost-cutting reasons.
    And now the same company responsible for this disaster is 
the one making nearly all of the replacement airbags for most 
of the recalled vehicles. That doesn't sit well with a lot of 
Americans. And I think Takata has some serious explaining to 
do.
    So for everyone involved--NHTSA, to automakers, to the 
suppliers--we need to improve as fast as possible. And we need 
to get the recall completed but also make sure that the safety 
issues are spotted sooner so that dangerous vehicles are 
identified and fixed faster in order to do what we are supposed 
to do, which is help keep consumers safe.
    Mr. Chairman, if I sound that I am invested in this issue--
when I saw the pictures of that woman in Orlando with her neck 
lacerated, I am invested. When I talked to that firefighter, 
with his little boy with him, that will never be a firefighter 
again because he doesn't have an eye, I am invested.
    So thank you for calling this hearing.
    The Chairman. Thank you, Senator Nelson.
    We will now proceed to our panel and start with 
Administrator Rosekind.
    Please proceed. Thanks.

           STATEMENT OF HON. MARK R. ROSEKIND, Ph.D.,

         ADMINISTRATOR, NATIONAL HIGHWAY TRAFFIC SAFETY

       ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION

    Mr. Rosekind. Chairman Thune, Ranking Member Nelson, and 
members of the Committee, thank you for the opportunity to 
provide an update on NHTSA's efforts to address vehicle safety 
defects, including defective Takata airbags.
    The recall of defective Takata airbags may represent the 
largest national consumer safety recall in history, and it is 
certainly one of the most complicated.
    All of NHTSA's actions are targeted at achieving one goal, 
the only acceptable goal: a safe airbag in every American 
vehicle.
    On May 19, Secretary Foxx and NHTSA took a significant step 
toward this goal and announced that Takata, at the agency's 
insistence, had filed four defect reports, launching national 
recalls of an estimated 33.8 million defective airbag 
inflators.
    The 11 affected auto manufacturers have now made available 
individual Vehicle Identification Numbers so that vehicle 
owners can go to safercar.gov and use NHTSA's VIN lookup tool 
to determine if their vehicle is under recall.
    Affected consumers should contact their dealers to arrange 
a replacement airbag as soon as possible. Consumers may also 
request a free loaner or rental vehicle from the dealer while 
they wait for a replacement airbag.
    After reviewing automaker filings, our current estimate is 
that there are about 34 million defective airbags in 32 million 
affected vehicles.
    NHTSA has issued a consent order to Takata that, among 
other things, gives NHTSA the ability to ensure the adequacy of 
the remedy. For the first time ever, NHTSA is using authority 
provided by the TREAD Act and other authorities for a 
coordinated remedy program to prioritize and organize recall 
and remedy efforts.
    Late last week, NHTSA sent information requests to all of 
the affected automakers, Takata, and other potential suppliers 
of replacement parts, seeking information as part of our 
coordinated remedy program.
    In addition, we have had initial discussions with the 
affected companies on a protective order that would allow these 
companies to share confidential business information with NHTSA 
and one another so that confidentiality concerns do not 
interfere with our safety efforts.
    In a separate action, NHTSA is in the process of 
determining whether Fiat Chrysler Automobiles is in violation 
of the Safety Act's requirements to remedy safety defects 
adequately and within a reasonable time. NHTSA has scheduled a 
July 2nd hearing to examine 22 recalls that affect more than 11 
million vehicles.
    At NHTSA, we are determined to use every tool available to 
protect the traveling public, and one critical tool is self-
evaluation. At the urging of Secretary Foxx, with the full 
support of NHTSA's staff and leadership, and before I arrived, 
NHTSA was involved in tough self-examination after one of the 
most challenging years in the agency's history.
    On June 5, NHTSA released two reports that are essential in 
our efforts to improve our own effectiveness. The first report, 
``NHTSA's Path Forward,'' provides the results of a year-long 
due diligence review of our defect investigation process. Our 
review found weaknesses in processes for identifying and 
addressing defects. We are addressing those weaknesses with 
improvements already underway and within existing resources.
    The second report is a workforce assessment that details 
how the President's Fiscal Year 2016 budget request 
specifically requests NHTSA's mission needs. In addition, the 
report examines NHTSA's workforce, given the 265 million 
vehicles we monitor, compared to the safety investigation 
workforces in other modes of transportation. It provides one 
possible path toward matching NHTSA's workforce to those 
challenges.
    At Secretary Foxx's request, the Department of 
Transportation's Inspector General performed an audit of 
NHTSA's investigation of the GM ignition switch defect. NHTSA 
thanks Inspector General Scovel and his staff for their 
diligence. Their report is a helpful contribution to our 
efforts, and we have concurred with all 17 of the report's 
recommendations.
    To give you a sense of NHTSA's commitment to improving 
efforts to identify and address safety defects, to date we have 
implemented or initiated 44 separate changes to improve our 
effectiveness. That includes efforts to address 10 of the 17 
recommendations from the IG's audit that were underway before 
the audit's release.
    Two factors outside the scope of the IG's audit are 
essential to NHTSA achieving its mission. The first is GM's 
concealment of critical safety information from NHTSA. If I 
could sum up our process improvements in a single phrase, it 
would be, ``Question assumptions.'' Question the information 
NHTSA gets from industry, and question our own assumptions.
    The second factor also outside the scope of the Inspector 
General's audit is available resources. The same 51 people 
managing the Takata recall include 8 that analyze 80,000 
consumer complaints; 8 others oversee more than 1,200 recall 
campaigns now underway; and 16 others continue to investigate 
scores of potential defects.
    The agency must accomplish this task with a defects 
investigation budget that, when adjusted for inflation, is 23 
percent lower than 10 years ago. The President's Fiscal Year 
2016 budget request would provide the people and technology 
needed to keep Americans safe.
    Secretary Foxx has proposed the GROW AMERICA Act, which 
would provide stable increased funding and important safety 
authorities to help NHTSA in our mission. It is clear that gaps 
in available personnel and authority represent known safety 
risks. The members of this committee and your colleagues in 
Congress can help NHTSA address those risks and keep the 
traveling public safe.
    Thank you for this opportunity to testify, and I look 
forward to your questions.
    [The prepared statement of Mr. Rosekind follows:]

Prepared Statement of Mark R. Rosekind, Ph.D., Administrator, National 
       Highway Traffic Safety Administration, U.S. Department of 
                             Transportation
    Chairman Thune, Ranking Member Nelson, and members of the 
Committee, thank you for the opportunity to provide an update on 
NHTSA's efforts to address vehicle safety defects, including defective 
Takata air bags.
    Let me first address Takata. The recall of defective Takata air 
bags may represent the largest national consumer recall in history. It 
is certainly one of the most complicated.
    You and the American people should know: Air bags save lives. 
Frontal air bags saved 2,388 lives in 2013 alone and 39, 886 lives 
since 1987. We need to make sure that people trust their air bags. All 
of our actions are targeted at achieving our goal, the only acceptable 
goal: a safe air bag in every American vehicle.
    On May 19, Secretary Foxx and NHTSA took a significant step toward 
ensuring that air bags in all vehicles are safe. As part of NHTSA's 
ongoing investigation, NHTSA announced that Takata, at the agency's 
insistence, had filed four Defect Information Reports (DIR) covering an 
estimated 33.8 million defective air bag inflators. This action 
launched national recalls for all of the named air bag inflators and 
significantly expanded the universe of vehicles with Takata air bag 
inflators that were subject to recall.
    The 11 affected auto manufacturers have scoured their records and 
state registrations to determine exactly which vehicles are affected, 
and have provided NHTSA with specific make and model information. As 
they have provided that information, NHTSA has posted updates on a 
special website within safercar.gov, informing consumers about make and 
model information. We strongly encourage vehicle owners to check their 
VIN numbers on Safercar.gov to see if their vehicle is included in the 
expansion. In fact, this is a good practice for all vehicle owners to 
engage in regularly, at least weekly.
    Automakers are legally responsible for informing consumers, via a 
mailed notice, that their vehicle is subject to a recall. In addition, 
under the Consent Order announced on May 19 Takata must, within 60 
days, provide NHTSA with plans for how it, alone and in concert with 
automakers, will use traditional media, new media and individual 
contacts to inform consumers and boost completion rates.
    On May 19 and 20, after the Department of Transportation/NHTSA 
announcement, more than 1.5 million people conducted VIN lookup 
searches on Safercar.gov, including nearly 1 million on May 20 alone. 
At one point, Safercar.gov was the most visited website in the Federal 
Government.
    Understandably, consumers will want to know what this expanded 
recall means for them and what actions they should take. If a vehicle 
has an open recall, consumers should call their dealer to arrange for a 
replacement air bag as soon as one is available. Because of the size 
and scope of the recall, a replacement may not be immediately 
available. In order to mitigate and control the risk, and to organize 
and prioritize the availability of replacement air bags, NHTSA is 
taking steps to coordinate the remedy process among Takata, the auto 
manufacturers, and other air bag suppliers--something NHTSA has never 
done before in its history.
    In the meantime, consumers whose air bags are under recall may 
continue to drive their vehicles and should stay in contact with their 
dealers in order to replace their air bag as soon as replacements are 
available. Consumers may also check with the dealer for a free loaner 
or rental vehicle, as offered by some auto manufacturers, while they 
wait for a replacement air bag.
    The four defective air bag inflator models and affected automakers 
included in these recalls are as follows:
Expanded Recalls
    The first DIR Takata filed declares a defect in all PSDI, PSDI-4, 
and PSDI-4K model driver inflators. Five automakers are affected 
(Honda, BMW, Chrysler, Ford, and Mazda). Takata estimates that this 
recall covers 17.6 million inflators, 9.7 million of which are already 
subject to prior recalls and safety campaigns.
    The second DIR declares a defect in all SPI model passenger 
inflators made between 2000 and 2008. Eight automakers are affected 
(Chrysler, Ford, GM, Daimler Trucks, Mitsubishi, Nissan, Subaru, and 
Toyota). Takata estimates the recall covers 7.7 million inflators, 2.8 
million of which are already under recall.
    The third DIR covers PSPI-L model passenger inflators in cars 
manufactured by Honda and Toyota. Model years vary by automaker. GM is 
also affected because it sold the Toyota-made Pontiac Vibe. Takata 
estimates 5.2 million inflators are covered, 1.1 million of which are 
already under recall.
    The fourth DIR covers PSPI model passenger inflators in certain 
Honda models. Takata estimates this covers 3.3 million inflators, 2.1 
million of which are already subject to prior recall.
    As you know, it is the responsibility of individual automakers to 
remedy defective components. Takata's filing of Defect Information 
Reports has led to subsequent DIR filings by each of the affected 
automakers. After receiving those filings, reviewing them and asking 
for clarifications from the automakers, our current estimate is that 
there are about 32 million defective inflators on American roads that 
must be replaced.
    It is important to note that this number is an estimate, and will 
be refined as automakers gather additional information. We know that 
there are almost certainly vehicles that are counted twice, because 
they are equipped with two inflators--driver and passenger-side--that 
must be replaced. In addition, we know that some inflators will have to 
be replaced more than once. We do not yet know how many vehicles are in 
that category because Takata and automakers have not yet provided us in 
all cases with information to establish that they have identified a 
remedy that is safe for the lifetime of the vehicle--information NHTSA 
is seeking as part of our coordinated remedy process. We have asked all 
the affected automakers to provide us with a comprehensive list of 
makes, models and model years affected by the Takata recalls, and have 
provided that list to the public through the Takata microsite on 
safercar.gov.
Coordinated Remedy
    To deal with the extraordinary complexity of the Takata recall, 
NHTSA is using all of the tools at its disposal to prioritize and 
organize these national recalls, and to ensure the adequacy of the 
remedy. In addition to the defect notifications, NHTSA has issued a 
Consent Order to Takata. This Consent Order, among other things, gives 
NHTSA oversight into the company's testing, requires the company's full 
cooperation with NHTSA's investigation, and, importantly, gives NHTSA 
the ability to ensure the adequacy of the remedy so that there will be 
a safe air bag in every vehicle.
    Additionally, NHTSA has begun its own testing for oversight and to 
verify if the remedy is effective.
    Fifteen years ago, Congress provided authority in the TREAD Act 
that gives NHTSA the ability to address the challenges and 
circumstances now faced in this recall. For the first time ever, NHTSA 
is using this authority, in conjunction with other authority under the 
Safety Act, to open a coordinated remedy proceeding to prioritize and 
organize vehicle manufacturers' recall and remedy programs related to 
the defective Takata air bag inflators.
    On Friday, May 22, 2015, the Federal Register published NHTSA's 
notice of intent to open this proceeding. A supplementary notice 
published on June 5 opened a docket for public comment on a variety of 
issues related to the replacement of the air bag inflators. NHTSA will 
obtain relevant information from any and all sources regarding the 
availability and implementation of remedy parts and programs in a 
process that will be public and transparent. NHTSA also plans to hold a 
series of meetings to collect additional information from Takata, auto 
manufacturers, and air bag suppliers.
    It is NHTSA's expectation that this process will provide the 
necessary data on which to develop a plan to prioritize and organize 
replacement inflators.
Root Cause
    By now, everyone had hoped to have a more clear understanding of 
the root cause of these air bag inflator failures. There are several 
factors that, based on incidents in the field and from lab test data, 
are known to lead to an increased risk of an inflator rupture.
    Prolonged exposure to persistent levels of high absolute humidity 
outside the inflator, combined with the effects of thermal cycling, may 
lead to moisture intrusion in some inflators over time. As a result of 
moisture intrusion, the propellant wafers in some of the subject 
inflators may experience an alteration over time, which could lead to 
over-aggressive combustion in the event of an air bag deployment.
    Takata is also aware of a potential issue with internal tape seal 
leaks in some inflators that could also be a source of moisture 
intrusion. Takata's test results and investigation indicate that the 
potential for rupturing may also depend on other factors, including 
vehicle design factors and manufacturing variability.
    So while NHTSA's analysis of the data shows that prolonged exposure 
to hot, humid climates is associated with greater risk, the full story 
is not yet known and a definitive root cause has not been identified. 
In my recent experience as a Member of the National Transportation 
Safety Board, I know there may not be a single root cause, and we may 
in fact never know the root cause. But Boeing did not wait to find a 
remedy for the lithium battery in its 787 Dreamliner despite not 
knowing the root cause of the fire and smoke incidents that grounded 
the fleet. NHTSA must act to protect the driving public and ensure 
their air bags are safe. That is why NHTSA is taking aggressive action 
to keep people safe on the road now, rather than waiting, perhaps 
indefinitely, to determine the root cause.
Fiat Chrysler recall issues
    In addition to our efforts regarding Takata, NHTSA is in the 
process of determining whether Fiat Chrysler Automobiles is in 
violation of the Safety Act's requirements to remedy safety defects 
adequately and within a reasonable time. NHTSA has scheduled a July 2 
hearing as part of that process. That hearing will examine 22 recalls 
that affect more than 10 million vehicles, and will evaluate the 
timeliness and effectiveness of remedies and the adequacy of the 
company's consumer notifications.
    In each of those 22 recalls, NHTSA has significant concerns about 
Fiat Chrysler's performance. On June 18, NHTSA published a notice in 
the Federal Register that outlines those concerns. They include slow 
repairs on vehicles responsible for loss of control and fatal fires; 
remedy repairs that failed to prevent dangerous roof liner fires; and 
failure in at least eight cases to notify owners of recalls in a timely 
fashion, including recalls of Takata air bags for which Fiat Chrysler 
to date still has not provided notification to owners. The company also 
has on several occasions provided NHTSA with inaccurate or incomplete 
information on defects and communications with owners and dealers.
    Based on information gathered from the public and from Fiat 
Chrysler, NHTSA will make a final determination as to whether Fiat 
Chrysler has failed to meet its obligations under the Safety Act, and 
take any actions that are appropriate based on that determination.
Internal reviews and the Inspector General's audit
    At NHTSA, as I have said repeatedly, we are determined to use every 
tool available to protect the traveling public. And one critical tool 
is self-evaluation. While we are focused on holding the entities we 
regulate accountable, we have also looked for every way we can find to 
improve our own performance.
    That is not something new. Before I arrived, at the urging of 
Secretary Foxx and with the full support of NHTSA's staff and 
leadership, NHTSA was involved in tough self-examination after one of 
the most challenging years in the agency's history. NHTSA's approach to 
Takata, Fiat Chrysler and the scores of other defect-related issues we 
deal with every day has been informed by the lessons learned in that 
process.
    On June 5, NHTSA released two reports that are essential elements 
in our efforts to improve our performance. In addition, we announced 
two initiatives--one involving some of the top safety experts in the 
country, the other tapping NHTSA's internal strengths--to help us turn 
the lessons of our self-scrutiny into concrete safety gains.
    The first internal report, ``NHTSA's Path Forward,'' provides the 
results of a year-long due diligence review of our defect investigation 
process in the wake of the GM ignition switch investigation. Our review 
found weaknesses in our process for identifying and addressing defects, 
and we are making changes to address those weaknesses. The report 
addresses six major process improvements to do a better job of holding 
the industry and ourselves accountable. With small exceptions, all of 
these improvements are under way and we intend to make them within 
existing resources. Whatever resources are provided to our agency, we 
are committed to doing better with what we have.
    The second report is a workforce assessment that stems from a 2011 
recommendation by the Department of Transportation's Inspector General 
in the wake of the Toyota unintended acceleration case. At the heart of 
that recommendation was the question of whether NHTSA had enough staff 
with sufficient expertise to assess defects in an increasingly complex 
U.S. vehicle fleet. As we have said since its release, the President's 
2016 budget request for NHTSA reflects the lessons of the GM 
investigation, and this workforce assessment provides significant 
detail on how the FY16 budget request would help us complete our 
mission. But in addition, the report examines NHTSA's defects 
investigation workforce in light of the size of the fleet we monitor, 
the scope of the safety risk to the American public, and in light of 
safety investigation workforces in other modes of transportation, and 
provides one possible path, in what would be a several-year process, 
toward matching NHTSA's workforce to those challenges.
    When we released our internal reports, we made two additional 
announcements on initiatives that will help us improve our performance.
    The first is the creation of an outside Systems Safety Team to help 
us implement our enhanced systems safety approach. In Drs. Joe Kolly, 
Vic Lebacqz and Jim Bagian, we have three of the most respected safety 
professionals in the world to help us implement our improvements.
    Complementing this external team is an internal effort designed to 
tackle our toughest safety challenges. That effort will use multi-
disciplinary teams from across NHTSA to address safety risks or 
problems that cut across our various lines of work.
    In addition to our own efforts, the Department of Transportation's 
Inspector General has, at Secretary Foxx's request, performed an audit 
of NHTSA's investigation of the GM ignition switch defect. Let me take 
this opportunity to thank Inspector General Scovel and his staff for 
their diligence. We believe the report is a helpful contribution to our 
efforts to better identify and address safety defects, and we have 
concurred with all 17 of the report's recommendations. In fact, many of 
the Inspector General's findings reinforce the findings of our internal 
examinations. We will aggressively implement the Inspector General's 
recommendations, and anticipate implementation of all 17 
recommendations within one year, with the understanding that at least 
two recommendations may require rulemaking, which could extend that 
timeline.
    Two factors outside the scope of the Inspector General's audit are 
essential to achieving NHTSA's mission. The first is a hard lesson from 
the GM experience, in which, as GM has acknowledged, the company 
concealed critical safety information from NHTSA that would have 
radically changed the agency's understanding of its ignition switch 
affected air bag deployment. While GM's deception was not within the 
scope of the Inspector General's audit, NHTSA cannot ignore the fact 
that manufacturers may seek to intentionally deceive us. If I could sum 
up our process improvements in a single phrase, it would be: question 
assumptions. Question the information we get from industry, and 
question our own assumptions.
    The second factor, also outside the scope of the Inspector 
General's audit, is available resources. Fixing problems such as the 
Takata recalls and Fiat Chrysler's recall performance is a monumental 
task. Yet the agency must manage this enormous and necessary task with 
its existing people, technology, and authorities. NHTSA must accomplish 
this task with a defects investigation budget of $10.6 million, a 
figure that, when adjusted for inflation, is actually 23 percent lower 
than its budget 10 years ago.
    We need your support to help us protect the safety of the American 
traveling public. The President has submitted a budget request that 
would fund significant improvements in NHTSA's defect investigation 
efforts, providing the people and technology needed to keep Americans 
safe. Secretary Foxx has proposed the GROW AMERICA Act, which would 
provide stable, increased funding for our agency and important safety 
authorities to help us in our mission, such as raising the maximum 
civil penalty to $300 million.
    At NHTSA, we address safety risks every day. In my judgment as a 
safety professional, gaps in our available personnel, technology and 
authority are a known risk. I urge the members of the Committee and 
your colleagues in Congress to help us address that risk and keep the 
traveling public safe on America's roadways. Thank you for this 
opportunity to testify and I look forward to your questions.

    The Chairman. Thank you, Administrator Rosekind.
    Mr. Scovel?

STATEMENT OF HON. CALVIN L. SCOVEL III, INSPECTOR GENERAL, U.S. 
                  DEPARTMENT OF TRANSPORTATION

    Mr. Scovel. Chairman Thune, Ranking Member Nelson, members 
of the Committee, thank you for inviting me to discuss NHTSA's 
vehicle safety oversight.
    As you know, strong oversight is critical for taking timely 
action against vehicle defects, such as GM's faulty ignition 
switch. As of this month, this defect has been linked to more 
than 110 fatalities and 220 injuries.
    Airbag nondeployments prompted NHTSA's Office of Defects 
Investigation to look at certain GM vehicles as early as 2007, 
but ODI ultimately determined an investigation was not 
warranted. We now know that the faulty ignition switch can 
unexpectedly disable the vehicle's power steering, power 
brakes, and airbags.
    Today, I will discuss the weaknesses we identified relating 
to ODI's procedures for collecting and analyzing vehicle safety 
data and for determining which issues warrant further 
investigation. I will also show how the weaknesses we 
identified affected ODI's handling of the GM ignition switch 
defect.
    We identified three areas of weakness in NHTSA's vehicle 
safety procedures that undermine its efforts to identify and 
investigate vehicle safety concerns.
    First, ODI lacks the procedures needed to collect complete 
and accurate vehicle safety data. The use of ODI's early 
warning aggregate data is limited due to the inconsistencies in 
how manufacturers categorize safety incidents. ODI guidance 
specifies 24 categories for reporting potential defects related 
to an average of over 15,000 vehicle components, leaving 
manufacturers to use broad discretion when reporting these 
data.
    Consumer complaints, ODI's primary source for identifying 
safety concerns, similarly lack information to correctly 
identify the vehicle systems involved, due in large part to the 
lack of guidance to consumers. Further, ODI does not adequately 
verify manufacturers' data or take timely action to enforce 
manufacturers' compliance with reporting requirements.
    Second, ODI does not follow standard statistical practices 
in analyzing early warning reporting data. Consequently, it 
cannot identify statistically significant trends or outliers 
that may indicate a safety issue should be pursued.
    In addition, despite the volume of consumer complaints, 
which averaged roughly 330 a day in 2014, ODI relies on one 
initial screener in the first phase of its two-tiered screening 
process. This process leaves the office vulnerable to a single 
point of failure, and it runs the risk that complaints with 
potential safety significance may not be selected for further 
review. Inadequate training and supervision of screeners 
further increase this risk.
    Third, ODI emphasizes investigating issues that are most 
likely to result in recalls, which has blurred the line between 
pre-investigative and investigative duties. Investigative 
duties, such as research and engineering analysis work, are 
being performed during the pre-investigative phase, often by 
screeners who are not trained to carry out these 
responsibilities.
    In addition, stakeholders within ODI have not reached 
consensus on the amount and type of information needed to open 
investigations. And ODI does not always document the 
justifications for its decisions not to investigate potential 
safety issues. This lack of transparency and accountability in 
ODI's investigation decisions further undermines NHTSA's 
efforts to identify needed recalls and other corrective 
actions.
    These three procedural weaknesses impeded ODI's handling of 
the GM ignition switch defect. From 2003 through 2013, GM 
submitted over 15,000 non-dealer field reports and about 2,000 
death and injury reports on vehicles that would ultimately be 
subject to the ignition switch recall.
    However, inconsistently miscategorized reports may have 
masked potential safety defect trends. For example, GM did not 
assign a component code to a death and injury report--not 
airbags, not electrical, not ignition--even though a state 
trooper's report indicated that the ignition switch was 
involved in the accident and a possible cause of airbag 
nondeployment.
    In addition, at least 12 GM non-dealer field reports 
categorized by GM under ``airbags'' and that may have been 
related to the ignition switch defect were not reviewed before 
the recall because NHTSA's analytical tools could not read the 
report format used by GM, a fact ODI staff did not note until 
after the recall.
    ODI staff also missed opportunities to connect the GM 
ignition switch defect to airbag nondeployments. For example, 
ODI employees overlooked documentation on a fatal accident 
involving a 2005 Cobalt that linked the ignition switch defect 
to the vehicle's airbag nondeployment, including a state 
trooper's accident investigation report and a NHTSA special 
crash investigation report.
    Calls for investigation were similarly overlooked. For 
example, in 2007, NHTSA's Associate Administrator for 
Enforcement noted that an investigation proposal, quote, 
``looks like one we want to jump on and learn as much as we can 
quickly.'' While a screener was assigned to monitor the issue, 
the Defects Assessment Division Chief did not reassign 
responsibility after the screener left NHTSA in 2008.
    In 2010, an ODI screener suggested revisiting the 2007 
investigation proposal on airbag nondeployments because of new 
consumer complaints. However, the airbag investigator 
identified a downward rate of consumer complaints for the 
vehicles, so the screener decided that the issue did not 
present enough of a safety trend to warrant proposing another 
investigation.
    According to ODI staff, there were no discussions of the 
ignition switch defect that, in fact, caused airbag 
nondeployment prior to GM's February 2014 recall. In hindsight, 
ODI officials told us that they did not understand the safety 
consequences of the ignition switch defect and had a flawed 
understanding of airbag technology.
    NHTSA has committed to taking aggressive action to 
implement the 17 recommendations we made to strengthen vehicle 
safety oversight. According to the Administrator, extensive 
changes to the agency's processes have been implemented, and 
more are underway.
    OIG's audits and investigations support NHTSA's vehicle 
safety oversight mandate. Our agents played a critical role in 
the multiagency criminal probe of Toyota and continue to 
actively pursue allegations of criminal conduct related to 
vehicle safety. Our auditors are currently assessing NHTSA's 
actions to implement recommendations we made in 2011 and plan 
to report our findings later this year.
    Mr. Chairman, with your permission, I would like briefly to 
address those who have been injured and the families of those 
who have been lost in crashes involving GM's defective ignition 
switches.
    When testifying before this committee last year, I promised 
you that my staff and I would work relentlessly to determine 
what NHTSA knew of the defect, when it knew it, and what 
actions NHTSA took to address it. Our audit report issued last 
week and my testimony today fulfill that promise. I offer you 
again my deepest sympathy.
    This concludes my prepared statement. I would be happy to 
answer any questions that you, Mr. Chairman, and other 
committee members may have.
    [The prepared statement of Mr. Scovel follows:]

  Prepared Statement of Hon. Calvin L. Scovel III, Inspector General, 
  National Highway Traffic Safety Administration, U.S. Department of 
                             Transportation
NHTSA's Efforts to Identify Safety-Related Vehicle Defects
    Chairman Thune, Ranking Member Nelson, and Members of the 
Committee:

    Thank you for inviting me to this important hearing on your ongoing 
efforts to examine the National Highway Traffic Safety Administration's 
(NHTSA) vehicle safety oversight program. In April 2014, I testified at 
this Committee's hearing \1\ on the General Motors Corporation's (GM) 
delay in recalling 8.7 million vehicles \2\ for a faulty ignition 
switch--a defect, which as of this month, has been linked to more than 
110 fatalities and 220 injuries--and committed to determining what 
NHTSA knew of this safety defect, when the Agency knew it, and what 
actions were taken to address it. In addition, the Secretary of 
Transportation requested that we examine NHTSA's current safety defect 
investigation processes and make recommendations for improvement.
---------------------------------------------------------------------------
    \1\ Identifying and Investigating Vehicle Safety Defects (OIG 
Testimony CC-2014-015), Apr. 2, 2014. OIG testimonies and reports are 
available on our Website: www.oig.dot.gov.
    \2\ Recalled vehicles include Chevrolet Cobalts and HHRs, Saturn 
Ions and Skys, and Pontiac G5s and Solstices that were manufactured 
between 2003 and 2011.
---------------------------------------------------------------------------
    My testimony today highlights our findings, which we recently 
reported \3\--specifically, our assessment of the procedures NHTSA's 
Office of Defects Investigation (ODI) uses to (1) collect vehicle 
safety data, (2) analyze the data and identify potential safety issues, 
and (3) determine which issues warrant further investigation.
---------------------------------------------------------------------------
    \3\ Inadequate Data and Analysis Undermine NHTSA's Efforts To 
Identify and Investigate Vehicle Safety Concerns (OIG Report No. ST-
2015-063), June 18, 2015.
---------------------------------------------------------------------------
Summary
    ODI lacks the procedures needed to collect complete and accurate 
vehicle safety data. Notably, ODI guidance specifies 24 categories for 
reporting potential vehicle defects related to an average of over 
15,000 vehicle components, leaving manufacturers to use broad 
discretion in reporting early warning data. Further, ODI does not 
adequately verify the data manufacturers submit. Consumer complaints--
ODI's primary source for identifying safety concerns--similarly lack 
information to correctly identify the vehicle systems involved.
    When analyzing early warning reporting data, ODI does not follow 
standard statistical practices. Consequently, it cannot differentiate 
outliers and trends that represent random variation from those that are 
statistically significant. In addition, ODI does not thoroughly screen 
consumer complaints or adequately train or supervise its staff in 
screening complaints. Collectively, these weaknesses have resulted in 
significant safety concerns being overlooked.
    ODI's process for determining when to investigate potential safety 
defects further undermines efforts to identify needed recalls and other 
corrective actions. ODI emphasizes investigating issues that are most 
likely to result in recalls, which has led to considerable 
investigative duties being performed during the pre-investigative 
phase, often by screeners who are not trained to carry out these 
responsibilities. In addition, ODI does not always document the 
justifications for its decisions not to investigate potential safety 
issues and does not always make timely decisions on opening 
investigations.
Background
    ODI is responsible for reviewing vehicle safety data, identifying 
and investigating potential vehicle safety issues, and requiring and 
overseeing manufacturers' vehicle and equipment recalls (see table 1). 
NHTSA reports that it has influenced, on average, the recall of nearly 
9 million vehicles every year since 2000.

            Table 1.--ODI's Vehicle Safety Oversight Process
------------------------------------------------------------------------
                               Number
            Phase                of               Description
                               Staff
------------------------------------------------------------------------
Pre-Investigation                  13  ODI collects and analyzes vehicle
                                        safety data to identify and
                                        select potential safety issues
                                        for further investigation.
------------------------------------------------------------------------
Investigation                      20  ODI investigates the potential
                                        safety issue to determine
                                        whether a recall is warranted.
------------------------------------------------------------------------
Recall management                   8  ODI ensures that manufacturer
                                        recalls comply with statutory
                                        requirements.
------------------------------------------------------------------------
Source: OIG analysis

    ODI's pre-investigative phase includes four key elements:

   Collect and analyze early warning reporting data. The 
        Transportation Recall Enhancement, Accountability, and 
        Documentation (TREAD) Act \4\ of 2000 authorized NHTSA to 
        require manufacturers to report on a variety of early warning 
        data. This data includes property damage claims, consumer 
        complaints, warranty claims, and field reports from incidents 
        involving certain vehicle components and conditions defined in 
        NHTSA regulations.\5\ In addition, manufacturers are required 
        to report all death and injury claims and notices. ODI's Early 
        Warning Division staff \6\ are responsible for verifying that 
        manufacturers submit these data, prioritizing the data using 
        statistical tests, and identifying and referring potential 
        safety trends to the Defects Assessment Division for further 
        analysis.
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    \4\ Pub. L. 106-414.
    \5\ Title 49, Code of Federal Regulations (CFR), Part 579.
    \6\ The Early Warning Division currently has four staff including 
two safety defects analysts, one statistician, and one safety defects 
engineer.

   Collect and analyze consumer complaints. ODI receives 
        consumer complaints through a variety of sources including 
        letters, vehicle safety hotline calls, and submissions through 
        NHTSA's safercar.gov Website. ODI's Defects Assessment Division 
        screens all complaints and forwards ones with potential safety 
        significance for additional review.\7\
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    \7\ The Defect Assessment Division currently has nine staff 
including eight screeners and a Division Chief.

   Identify potential safety issues. If a potential safety 
        issue is identified, the Defects Assessment Division researches 
        and analyzes available safety data and prepares an 
        investigation proposal for ODI's investigative division chiefs 
        to review.\8\
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    \8\ ODI has three investigative divisions: the Vehicle Control 
Division, Vehicle Integrity Division, and the Medium and Heavy Duty 
Vehicle Division.

   Select potential safety issues to investigate. ODI's 
        investigative division chiefs review investigation proposals 
        and recommend to the Director of ODI whether to open an 
        investigation, decline an investigation, or refer the proposal 
---------------------------------------------------------------------------
        to the Defects Assessment Panel for further review.

    In October 2011, we reported on NHTSA's vehicle safety oversight 
and made 10 recommendations for improving ODI's processes for 
identifying and addressing safety defects.\9\ As of May 29, 2013, ODI 
had taken action to address nine recommendations; at the end of April 
2015, NHTSA completed a workforce assessment, our remaining 
recommendation. We are conducting a separate audit to assess these 
actions and plan to report our findings later this year.
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    \9\ Process Improvements Are Needed for Identifying and Addressing 
Vehicle Safety Defects, (OIG Report Number MH-2012-001), Oct. 6, 2011. 
OIG reports are available on our Website at www.oig.dot.gov.
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ODI Lacks Effective Procedures for Collecting Complete and Accurate 
        Vehicle Safety Data
    ODI lacks effective guidance and verification procedures to obtain 
complete and accurate early warning reporting data and take timely 
action to correct identified inaccuracies and omissions. ODI received 
some early warning reporting data and consumer complaints related to 
the GM ignition switch defect more than a decade before GM notified ODI 
of the recall.
ODI Lacks Detailed Guidance and Verification Processes to Obtain 
        Complete and 
        Accurate Early Warning Reporting Data
    The TREAD Act and related regulations require vehicle and equipment 
manufacturers to report quarterly to NHTSA on a variety of early 
warning reporting data that could indicate a potential safety defect. 
Such data include warranty and property damage claims, consumer 
advisories, and foreign recalls of vehicles substantially similar to 
ones sold in the United States.
    Regulations specify 24 broad vehicle codes that manufacturers 
assign to reported early warning safety data. However, ODI notes that 
an average vehicle may have over 15,000 components, and categorizing 
them can be open to interpretation. For example, ODI staff told us that 
a manufacturer could assign one of three vehicle codes to a malfunction 
of an air bag component located in a seat: air bags, seats, or 
electrical system. Additionally, the regulations allow manufacturers to 
decide if an incident not included in the 24 defined codes should be 
reported, with the exception of incidents related to death and injury 
claims, which must be reported.
    Despite this complexity, ODI does not provide detailed guidance to 
help ensure manufacturers appropriately interpret and apply the 
codes.\10\ ODI investigative chiefs and vehicle safety advocates told 
us that ODI's early warning aggregate data are ultimately of little use 
due to the inconsistencies in manufacturers' categorizations of safety 
incidents.
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    \10\ According to ODI staff, such guidance would require additional 
rulemaking.
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    According to ODI staff and a January 2008 report issued by the 
Volpe National Transportation Systems Center,\11\ non-dealer field 
reports \12\ are the most important source of early warning reporting 
data because they can provide a specific, technical basis for launching 
investigations. However, lacking guidance on what information should be 
reported, manufacturers submit reports of varying usefulness. For 
example, one manufacturer's non-dealer field reports include detailed 
information--such as the technician's analysis of the condition, root 
cause analysis, corrective actions taken, and whether the action 
resolved the condition--while another manufacturer's reports contain 
brief descriptions of consumers complaints.
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    \11\ In 2006, ODI initiated an evaluation of its early warning 
reporting system, with support from Volpe.
    \12\ Non-dealer field reports are communications between consumers, 
authorized service facilities, and manufacturers regarding the failure, 
malfunction, lack of durability, or other performance problem related 
to a vehicle or vehicle part.
---------------------------------------------------------------------------
    ODI staff check that manufacturers submit early warning reporting 
data on time and may request underlying documentation for aggregate 
data--particularly if they identify an anomaly in the data--and for 
death and injury data. However, ODI staff noted that their requests for 
such documentation have declined, from an average of 23 annually 
between 2006 and 2009 to an average of 4 annually between 2010 and 
2014, as a result of their increased workload.
    Moreover, ODI does not verify that manufacturers' early warning 
reporting data are complete and accurate. Although ODI has the 
authority to inspect manufacturers' records for compliance with early 
warning reporting requirements,\13\ NHTSA officials told us the Agency 
has never used this authority. In addition, the ODI has no processes in 
place for systematically assessing the quality of early warning 
reporting data or internal guidance on using oversight tools to enforce 
data reporting requirements. The Agency also has not established best 
practices for providing early warning reporting data and does not 
periodically review manufacturers' early warning reporting procedures. 
Instead, the Director of ODI told us ODI relies on the ``honor 
system.'' However, according to ODI staff, manufacturers routinely 
miscategorize safety incidents. For example, staff told us that some 
manufacturers avoid using the word ``fire'' in non-dealer field reports 
and instead use phrases such as ``strange odor'' to avoid categorizing 
an incident as fire-related. Miscategorizations such as these 
compromise ODI's efforts to quickly identify potential safety defect 
trends.
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    \13\ Title 49 United States Code (U.S.C.) Section 30166 establishes 
NHTSA's subpoena power and its authority to inspect manufacturers' 
records and require recordkeeping to assess compliance with early 
warning reporting requirements.
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    Yet even in cases where ODI suspects noncompliance, it has not 
taken prompt enforcement action. For example:

   ODI officials told us they were aware that a vehicle 
        manufacturer was ``conservative'' in reporting early warning 
        reporting data. According to a November 2014 audit prepared for 
        the manufacturer, two ODI employees called the manufacturer's 
        officials in late 2011 or early 2012 to ask about 
        inconsistencies between previously reported early warning 
        reporting data and reported death and injury incidents 
        pertaining to an air bag recall.\14\ However, ODI took no 
        enforcement action to address this issue until the manufacturer 
        self-reported the omission of about 1,700 death and injury 
        claims in October 2014. NHTSA subsequently required the 
        manufacturer to describe its procedures for complying with 
        early warning reporting requirements and provide the Agency 
        with supporting documentation for all third-party audits of its 
        reporting.
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    \14\ The manufacturer officials did not follow up with ODI to 
provide a full explanation of the inconsistencies.

   In November 2004, ODI discovered that a major recreational 
        vehicle manufacturer did not report required death and injury 
        data and other early warning reporting data. However, ODI did 
        not take action until nearly a decade later, when the office 
        opened an investigation into the manufacturer's reporting 
        following a suspected recall noncompliance issue. During the 
        investigation, the manufacturer stated that it failed to report 
        the early warning reporting data because of internal 
        miscommunications and a software failure.
ODI Does Not Provide Sufficient Guidance to Consumers on the Type of 
        Information To Include When Submitting Complaints
    ODI relies primarily on consumer complaints--most of which are 
submitted through NHTSA's safercar.gov Website--to identify potential 
safety defects. The online complaint form requires consumers to select 
up to 3 affected parts from a drop-down list of 18 options, such as air 
bags and electronic stability control. Additionally, the Website 
provides a text field for consumers to describe the incidents 
underlying their complaints.
    ODI's initial screener estimates that 50 to 75 percent of 
complaints incorrectly identify the affected parts, and roughly 25 
percent do not provide adequate information to determine the existence 
of safety concerns. These data quality issues occur in part because ODI 
does not provide consumers with detailed guidance on submitting 
complaints. For example, safercar.gov does not define the 18 affected 
parts categories--some of which may be unfamiliar to consumers, such as 
``adaptive equipment.'' Furthermore, safercar.gov does not allow 
consumers to submit, or encourage them to retain, supporting 
documentation (such as photographs or police reports), which ODI's 
screeners and management have indicated are valuable in identifying 
potential safety concerns. In contrast, the U.S. Consumer Product 
Safety Commission's complaint Website (saferproducts.gov) allows 
consumers to upload as many as 25 documents or photos related to their 
complaints.
ODI Received Early Warning and Consumer Complaint Data Related to GM's 
        Ignition Switch Defect
    From 2003 through 2013, GM submitted about 15,600 non-dealer field 
reports and about 2,000 death and injury reports on vehicles subject to 
the ignition switch recall. A 2011 ODI analysis of early warning 
reports for 22 vehicles with potential air bag issues ranked the 2005 
to 2010 Chevrolet Cobalt models fourth for fatal incidents and second 
for injury incidents involving air bags.\15\
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    \15\ In addition to the Cobalt, ODI analyzed consumer complaints 
and death and injury data categorized as air bag-related for 21 other 
passenger vehicles from GM and other manufacturers.
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    However, GM's categorization of early warning reporting data 
related to the faulty ignition switch may have masked potential trends. 
Specifically, GM assigned different codes to non-dealer field reports 
describing ignition switch problems. For example, GM assigned the 
``Engine and Engine Cooling'' code to a non-dealer field report on a 
2005 Chevrolet Cobalt that concluded a minor impact to the ignition key 
could easily cause the engine to shut off. In another case, GM assigned 
the ``Electrical'' code to a non-dealer field report on a 2006 Pontiac 
Solstice that described the vehicle ignition system turning off several 
times while driving when his knee hit the key ring.
    Moreover, underlying documentation did not support GM's 
categorization of the early warning reporting data. NHTSA regulations 
require manufacturers to identify each vehicle system or component that 
allegedly contributed to incidents related to death and injury claims 
and notices.\16\ Documentation underlying a death and injury report 
related to a fatal accident involving a 2005 Chevrolet Cobalt included 
a Wisconsin State trooper's report indicating that the ignition switch 
and air bags were both involved in the accident. However, GM 
categorized the death and injury report as not involving any of the 
systems, components, or conditions defined in regulations.
---------------------------------------------------------------------------
    \16\ 49 CFR Sec. Sec. 579.21(b)(1)-(2).
---------------------------------------------------------------------------
    Some consumer complaints were also miscategorized or lacked 
sufficient detail to link them to the ignition switch defect.\17\ For 
example:
---------------------------------------------------------------------------
    \17\ From January 1, 2003, through February 7, 2014, ODI received 
9,266 complaints involving the vehicles subject to the GM ignition 
switch recall--including 72 complaints indicating at least 1 injury and 
3 complaints indicating at least 1 fatality. The majority of these 
complaints involved the 2005 to 2010 Chevrolet Cobalt and the 2003 to 
2007 Saturn Ion.

   ODI contractors used the codes ``Unknown or Other'' and 
        ``Exterior Lighting: Headlights: Switch'' when entering a 
        September 2003 complaint into Artemis--ODI's primary database 
        for storing data used to identify and address potential safety 
        defects. However, the complaint described engine shutoffs in a 
        2003 Saturn Ion when the driver's knee accidently hit the car 
        keys, so the incident that should have been coded as 
---------------------------------------------------------------------------
        ``Electrical Systems: Ignition: Switch''

   A June 2005 complaint related to an accident involving a 
        2005 Chevrolet Cobalt did not specify whether the accident 
        occurred on or off the road, or whether the impact was to the 
        front, side, or back of the vehicle--essential details to ODI's 
        analysis of air bag non-deployment in these vehicles. Instead, 
        the complaint only stated that an accident had destroyed the 
        vehicle and injured one person and that the air bags did not 
        deploy.
Weak Data Analyses and Reviews Undermine ODI'S Efforts to Identify 
        Vehicle Defects
    ODI does not follow standard statistical practices when analyzing 
early warning reporting data, conduct thorough reviews of consumer 
complaints, or provide adequate supervision or training for staff 
responsible for reviewing these data and complaints. As a result, it 
cannot reliably identify the most statistically significant safety 
issues to pursue. In the case of GM, ODI missed multiple opportunities 
to link the ignition switch defect to air bag non-deployments because 
ODI staff lacked technical expertise and did not consider all available 
information.
ODI Does Not Follow Standard Statistical Practice When Analyzing Early 
        Warning Reporting Data
    ODI uses four statistical tests to analyze aggregate early warning 
reporting data (such as consumer complaints, warranty claims, and 
property damage claims)--as well as a fifth test to analyze non-dealer 
field reports (see table 2).

 Table 2.--ODI's Statistical Tests for Analyzing Early Warning Reporting
                                  Data
------------------------------------------------------------------------
    Statistical test                        Description
------------------------------------------------------------------------
Crow-AMSAA                Trend analysis used to analyze aggregate data
------------------------------------------------------------------------
Mahalanobis distance      Test used to analyze aggregate data
------------------------------------------------------------------------
Probability measure       Test used to analyze aggregate data
------------------------------------------------------------------------
Logistic regression       Regression test used to analyze death and
                           injury aggregate data
------------------------------------------------------------------------
CRM-114                   Filter used to analyze non-dealer field
                           reports
------------------------------------------------------------------------
Source: OIG analysis

    While the statistical experts we consulted \18\ note that 
conducting multiple tests provides a sound basis for analysis, ODI does 
not follow standard statistical practices when implementing tests of 
aggregate data. Specifically, ODI does not consistently identify a 
model (a set of assumptions) for the aggregate data to establish a base 
case--that is, what the test results would be in the absence of safety 
defects. Without a base case, ODI cannot differentiate outliers that 
represent random variation from trends that are statistically 
significant and indicate a safety issue should be pursued.
---------------------------------------------------------------------------
    \18\ The statistical experts we consulted with are from academia 
and research institutes.
---------------------------------------------------------------------------
    ODI has missed opportunities to update and improve its statistical 
methods for analyzing early warning reporting data. For example:

   ODI does not regularly assess the performance of its 
        aggregate data tests. According to the statistical experts, 
        out-of-sample testing--a standard statistical assessment 
        practice--would allow ODI to determine whether potential safety 
        issues identified in one portion of its aggregate data turn up 
        in the remaining portion. However, ODI performed out-of-sample 
        testing on only one aggregate data test and only when the test 
        was first implemented. ODI also conducted out-of-sample tests 
        on non-dealer field reports, but it has not done so since 2009.

   Despite recent developments in data analytics, ODI has not 
        updated its statistical tests from initial implementation in 
        2006 through 2009, so it has not taken advantage of recent 
        methodological advances. Although ODI has periodically 
        recalibrated some of its tests using current data, it has not 
        updated the analytical methodologies it uses.

   Volpe conducted the only external review of ODI's aggregate 
        data tests since their implementation. According to its January 
        2008 report, Volpe reported that the review's scope was limited 
        because of concerns about the informational burden on ODI and 
        manufacturers. As a result, Volpe was unable to reach any 
        conclusions about the tests' effectiveness. ODI has not 
        requested any other external reviews of its statistical tests.

    ODI similarly lacks procedures to promote timely screening of early 
warning reporting data. For example, ODI's Early Warning Division staff 
review non-dealer field reports based on the results they receive from 
a statistical test; however, there is no process for ensuring that all 
non-dealer field reports are included in the universe from which the 
sample is drawn. ODI has overlooked non-dealer field reports for months 
or even years if, for example, manufacturers submit the reports in 
formats that ODI's statistical test cannot process.
    In addition, advanced screeners, who are responsible for proposing 
safety defect investigations, told us that they are less likely to rely 
on early warning reporting data because of the data's lack of 
timeliness. The information in early warning reporting data can be 
delayed by months because manufacturers submit the reports quarterly.
ODI Does Not Thoroughly Screen Consumer Complaints
    In 2014, ODI received nearly 78,000 consumer complaints--or roughly 
330 complaints each day. Despite the volume of complaints, ODI's two-
tiered screening process leaves the office vulnerable to a single point 
of failure and the risk that complaints with potential safety 
significance may not be selected for further review.
    Currently, one employee reviews all submitted consumer complaints, 
determines which complaints have potential safety implications, and 
forwards those complaints to eight advanced screeners who perform more 
in-depth reviews. Determinations of whether complaints warrant further 
review are made within a matter of seconds--in part because the initial 
screener spends roughly half of the day carrying out other work 
responsibilities. According to the initial screener and our independent 
verification, about 10 percent of complaints are forwarded to advanced 
screeners for in-depth reviews,\19\ leaving no assurance that the 
remaining 90 percent of complaints receive additional review. ODI 
recently completed a workforce assessment to determine the number of 
staff required to meet ODI's objectives and determine the most 
effective mix of skill sets, a recommendation we made in 2011.
---------------------------------------------------------------------------
    \19\ We independently verified that, in 1 week of review, the 
initial screener forwarded about 10 percent of complaints to advanced 
screeners.
---------------------------------------------------------------------------
    ODI also lacks formal guidance for screening complaints. The 
initial screener relies on professional experience and judgment, as 
well as informal guidance and precedent to determine which complaints 
to forward to the advanced screeners. He noted that some complaint 
categories automatically warrant further analysis--including most air 
bag non-deployments and seatbelt issues--and that he prioritizes 
incidents that occur suddenly, with little warning for the consumer. He 
also noted that he assigns lower priority to engine, transmission, and 
vehicle body issues and generally does not forward certain incidents 
that most likely do not lead to investigations, such as sharp door 
edges. The initial screener does not forward complaints he believes are 
covered by existing recalls.
    Like the initial screener, ODI's eight advanced screeners have 
access to a variety of data sources--such as technical service 
bulletins and special crash investigation reports--and have the 
authority to reach out to consumers and perform field inspections to 
augment their research. However, three advanced screeners said they 
rely mainly on consumer complaints to identify safety concerns, and 
four advanced screeners said they only occasionally use other sources 
of data. While screeners are encouraged to query all complaints for 
issues in their areas of concentration, four screeners told us they do 
not consistently do this--in some cases because it takes too much time. 
Advanced screeners also have access to early warning reporting data; 
however, four advanced screeners told us that they are less likely to 
rely on these data because they are untimely. Two screeners were also 
concerned about the early warning reporting data's lack of usefulness 
because they felt the data provided no significant additional detail.
    In 2013, ODI began requiring advanced screeners to annotate the 
complaints they review by documenting the condition that led to the 
incident and their reasons for deciding not to pursue potential issues. 
According to the Defects Assessment Division Chief, the annotations are 
intended to identify and correct inconsistencies and inaccuracies in 
complaints--and thereby enable ODI to properly link them to relevant 
safety concerns--and provide a record of review. However, an ODI 
internal audit found that roughly half the complaints were incorrectly 
annotated or lacked critical information. Additionally, we analyzed 
annotations for complaints received in the fourth quarter of 2013 and 
found that about 57 percent of the complaints that screeners determined 
did not warrant further review lacked justifications. Advanced 
screeners told us that annotating complaints is time consuming.
ODI's Pre-Investigation Staff Lack the Training and Supervision to 
        Effectively 
        Analyze Vehicle Safety Data
    NHTSA has not adequately prepared ODI staff who review early 
warning reporting data and consumer complaints to carry out their 
responsibilities. For example:

   ODI staff charged with interpreting statistical test results 
        for early warning reporting data told us they have no training 
        or background in statistics.

   Three screeners assigned to analyze air bag incidents lacked 
        training in air bags. One screener who was originally hired to 
        review child seat restraint issues was assigned in 2008 to 
        review air bag issues--without any air bag training and without 
        an engineering or automotive background.

   Screeners told us that training to maintain professional 
        certifications--such as the Automotive Service Excellence 
        certification for automotive mechanics--must be completed on 
        their own time and generally at their own expense.

   Screeners also noted that ODI lacked the funding to allow 
        them to attend training to stay abreast of the latest 
        developments in vehicle technology.

    In addition, ODI has not established an adequate supervisory review 
process to evaluate the quality of screeners' work in identifying 
potential safety issues. For example, the Defects Assessment Division 
Chief characterized his oversight of the initial complaint screener's 
work as ``minimal'' and acknowledged that he does not provide much 
guidance to the initial screener. Advanced screeners agreed that 
supervisory review is often informal and that the Defects Assessment 
Division Chief does not regularly review their complaint annotations. 
In addition, ODI staff told us that their data analysis and screening 
efforts were generally not reviewed and that they received little 
feedback on the quality of their work.
    Inadequate training and supervisory review have led to deficient 
analyses of early warning reporting and complaint data. For example, 
the developer of one statistical test that ODI uses to analyze early 
warning reporting data stated that the test should produce the same 
results every time for the same data input in the same order. However, 
ODI staff told us that different test runs produce different results, 
and management has not considered this to be a problem.
ODI Staff Overlooked Documentation Pointing to the GM Ignition Switch 
        Defect
    In their reviews of non-dealer field reports and death and injury 
and special crash investigation reports, ODI staff missed opportunities 
to connect the GM ignition switch defect to air bag non-deployments. 
For example, ODI employees overlooked documentation on a fatal accident 
involving a 2005 Chevrolet Cobalt that linked the ignition switch 
defect to the vehicle's air bag non-deployment:

   A Wisconsin State Trooper's report that identified the 
        ignition switch defect as a possible cause of air bag non-
        deployment during the accident.

   Event data recorder data \20\ that showed the vehicle's 
        power mode status had been in the ``accessory'' position during 
        the accident--a key indicator of the ignition switch defect.
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    \20\ An event data recorder is a device installed in a vehicle to 
record technical vehicle and occupant information for a brief period of 
time (seconds, not minutes) before, during, and after a crash.

   A NHTSA special crash investigation report that concluded 
        the vehicle's air bags failed to deploy possibly due to ``power 
        loss due to movement of the ignition switch just prior to the 
---------------------------------------------------------------------------
        impact.''

    Between the second quarter of 2012 and the fourth quarter of 2013, 
ODI received 13 non-dealer field reports on the 2005 to 2010 Chevrolet 
Cobalts that GM categorized as air bag-related and that we determined 
may be related to the ignition switch defect.\21\ However, ODI staff 
reviewed only one of these non-dealer field reports before the February 
2014 recall. According to ODI staff, they did not review the majority 
of these reports because in the second quarter of 2012, GM began using 
a new file format for most of their document submissions, which could 
not be read by the statistical test ODI uses to analyze these reports. 
ODI staff acknowledged that they did not notice the reports were not 
analyzed until after the recall.
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    \21\ To determine which non-dealer field reports were related to 
the ignition switch recall, we limited this analysis to vehicle models, 
model years, facts, and circumstances that would make an incident 
eligible for compensation through the GM ignition switch compensation 
fund.
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    ODI also received 9,266 consumer complaints between January 1, 
2003, and February 7, 2014, that involved GM vehicles subject to the 
ignition switch recall. Because ODI's screeners were not required to 
annotate their reviews of complaints until 2013, ODI cannot establish a 
full picture of why it did not investigate complaints related to the GM 
ignition switch and air bag non-deployment issues prior to 2013. From 
the time that the annotations were required to the date of the recall, 
ODI received 926 consumer complaints involving the recalled vehicles. 
ODI's initial screener advanced 27--or 3 percent--of these complaints 
for further review, compared to the average of 10 percent that are 
typically forwarded. ODI's advanced screeners noted in their 
annotations that 11 of the 27 complaints included allegations of front 
air bag non-deployment, but they did not advance these complaints for 
further consideration because they concluded there was either ``no 
actionable trend indicated'' or ``minimal hazard.'' ODI staff did not 
thoroughly understand when air bags were supposed to deploy in these 
vehicles, which prevented them from linking the ignition switch defect 
to the air bag non-deployment. This may be explained by ODI staff's 
acknowledged lack of training on air bags.
    ODI prepared three proposals for investigating the loss of power 
steering and air bag non-deployment in the Chevrolet Cobalt and Saturn 
Ion. While each proposal was supported by early warning reporting 
referrals, ODI staff did not establish the ignition switch defect as a 
potential root cause for these issues. ODI officials told us that they 
did not understand the safety consequences of the ignition switch 
defect before the GM recall.
ODI Initiates Investigations Without Assurance That the Most 
        Significant Safety Defects are Targeted
    ODI's decisions on whether to open an investigation are not backed 
by guidance for applying the factors it established for opening an 
investigation. In addition, decisions lack transparency and 
accountability. This was the case with ODI's decision not to 
investigate the GM air bag non-deployment defect.
ODI Lacks Consensus and Detailed Guidance on the Amount and Type of 
        Information Needed To Open Investigations
    According to ODI's Defects Assessment Division Chief, ODI considers 
three factors when proposing a vehicle safety defect investigation: (1) 
rate of consumer complaints,\22\ (2) severity of the potential safety 
issue, and (3) identification of a potentially defective vehicle 
component or root cause. However, ODI has not developed specific 
guidance on how screeners should apply these factors, and there is a 
lack of consensus among ODI leadership on the factors necessary to open 
an investigation--leaving screeners uncertain about how much support is 
needed to propose an investigation.
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    \22\ The rate of complaints is the number of relevant complaints 
received by NHTSA divided by the number of vehicles in production.
---------------------------------------------------------------------------
    Attorneys in NHTSA's Office of Chief Counsel state that while NHTSA 
must establish severity for all cases, it can establish either 
frequency or root cause to force a manufacturer to initiate a recall. 
The Director of ODI prefers screeners to focus on establishing the 
safety consequences of a potential defect rather than determining root 
cause, and ODI's two investigative chiefs agree that establishing a 
pattern of safety concerns is more important than identifying root 
cause. However, ODI's Defects Assessment Division Chief expects 
advanced screeners to find the root cause in order to build a 
compelling proposal for an investigation.
    The Director of ODI can also unilaterally decide not to open an 
investigation after discussion with Defects Assessment Panel 
participants. For example, the Director of ODI decided not to pursue 
two investigative proposals after concluding that they presented 
minimal hazards. The first proposal, made in June 2014, related to 2007 
to 2011 vehicles that suddenly lost steering power assist; the second, 
made in July 2014, related to 2012 model vehicles that experienced 
intermittent loss of electrical power. Both proposals established the 
rate of complaints, severity of the issue, and the defective 
components.
    Without specific guidance on the amount and type of information 
needed to launch an investigation, screeners largely rely on precedent 
and professional judgment to determine which issues merit 
investigation. One screener told us he uses his ``gut feeling'' when 
reviewing complaints to gauge the ``appetite'' of the office for 
specific issues. Another screener told us he only proposes 
investigations that have the greatest chance of being selected to avoid 
the extra work of proposing investigations that are ultimately denied. 
Three screeners said they are hesitant to propose investigations if 
similar proposals have been rejected in the past.
    In general, ODI officials prefer to open investigations that are 
most likely to result in a manufacturer recall--an assertion echoed by 
four of the eight screeners we spoke with. In 2011 and 2012--the most 
recent years for which ODI has actionable data--about 70 percent of the 
investigations eventually resulted in recalls. According to an ODI 
investigative division chief, repeatedly opening investigations that do 
not result in a recall could cause ODI to lose credibility with 
manufacturers. However, ODI's focus on issues most likely to result in 
recalls creates the potential for missed opportunities to investigate 
issues that have serious safety implications.
    Targeting potential safety defects that most likely lead to recalls 
also blurs the line between pre-investigative and investigative duties. 
Considerable investigative duties--such as research and engineering 
analysis work--are being performed in the pre-investigative phase, 
often by screeners who are not adequately trained to perform this work. 
In one case, a screener told us he could not detect any exhaust odor in 
a vehicle, but subsequent work by investigative staff found that the 
carbon monoxide level reached Consumer Product Safety Commission 
thresholds for noticeable headache, fatigue, and nausea, and exceeded 
Occupational Safety and Health Administration standards if exposure 
exceeded 8 hours.
    In addition, screeners may not have access to the data needed to 
prompt an investigation, such as manufacturer data. While NHTSA's 
Office of Chief Counsel stated that ODI may compel information from 
manufacturers during the pre-investigative stage, the Defects 
Assessment Division Chief told us they generally do not compel this 
information without first launching an investigation. Regardless, three 
screeners were unaware that their division has the authority to compel 
information from manufacturers without launching an investigation. 
These added duties not only take time away from the advanced screeners' 
primary duty of screening safety data, which can result in backlogs of 
those data, but can cause potential safety defects to be overlooked.
ODI's Investigation Decision Process Lacks Transparency and 
        Accountability
    ODI's investigation decision process involves several steps. First, 
the Defects Assessment Chief provides a list of proposals to ODI's 
investigative division chiefs--along with supporting documentation, 
such as consumer complaints and warranty claims. The division chiefs 
then review the proposals and decide whether to open an investigation, 
decline to investigate, or send the proposal to ODI's Defects 
Assessment Panel for further review.\23\ According to ODI's written 
policy, division chiefs have 2 weeks to complete their review. However, 
the investigative division chiefs consider the 2-week requirement to be 
a suggested time-frame that should be balanced against other competing 
priorities.
---------------------------------------------------------------------------
    \23\ The Defects Assessment Panel is a body chaired by the Director 
of ODI that is intended to meet monthly to review investigation 
proposals and decide whether to open an investigation.
---------------------------------------------------------------------------
    If a proposal is sent to the Defects Assessment Panel, 
investigation decisions are frequently delayed. The panel often 
reschedules meetings, and according to some screeners, the meetings 
tend to be pro forma. For example, one screener stated the meetings 
focus on the reasons for not opening an investigation rather than 
reasons for opening one. The panel also repeatedly delays decisions on 
proposals to obtain additional information. For example:

   In August 2014, the panel reviewed a proposal to investigate 
        a side air bag non-deployment that resulted in a fatality. At 
        that meeting, the Director of ODI, who sits on the panel, 
        requested additional information. By October, the manufacturer 
        had responded to ODI's questions, but an investigative division 
        chief requested that an investigation not be opened until his 
        team had completed an on-site inspection of the vehicle 
        involved in the accident. As of the most recent panel meeting 
        in February 2015--5 months after the panel first reviewed the 
        potential defect--a decision to investigate this issue remains 
        pending.

   In January 2014, the panel discussed a proposal on a 
        vehicle's steering failure. However, the panel has delayed the 
        decision whether to investigate this issue for over a year--
        despite a recommendation from the investigative division to 
        open an investigation.

    In addition to delays, ODI's decisions are not transparent. Of the 
56 investigation proposals for light vehicle safety defects in 2013, 32 
were not investigated--18 of which lacked documented justifications for 
not investigating. While the panel may provide a reason for declining 
an investigation, such as ``minimal hazard,'' it does not document the 
evidence that supports its decision. In addition, a proposal may be 
rejected by investigation divisions, which do not always document 
reasons for declining to investigate. Lack of transparency exacerbates 
the problems created by reliance on precedent because screeners do not 
learn what management deems worthy of investigation.
    Transparency and accountability are especially critical since ODI 
generally does not revisit proposals once they are declined for 
investigation. Screeners told us that there is a need for ever 
increasing numbers of incidents to consider reopening previously 
rejected investigative proposals. While ODI lists declined proposals in 
Artemis as being ``monitored,'' it does not track who monitors these 
issues. Half of the advanced screeners consider monitored proposals to 
be essentially denied and rarely resubmit proposals unless there is a 
new angle or ``smoking gun.'' One screener said resubmitting a proposal 
is like ``beating a dead horse.''
ODI Did Not Investigate or Adequately Monitor the GM Air Bag Non-
        Deployment or Ignition Switch Issues
    At a November 2007 Defects Assessment Panel meeting, ODI management 
and staff discussed a proposal to investigate frontal air bag non-
deployments related to the Chevrolet Cobalt and Saturn Ion. ODI 
ultimately declined the proposal but did not document its justification 
for doing so. According to ODI staff, the decision not to investigate 
was based on a flawed understanding of air bag technology. 
Specifically, the Defects Assessment Panel believed the air bags did 
not deploy because the drivers were not wearing their seatbelts and 
because the vehicles left the road during the accidents.\24\ At the 
same panel meeting, an ODI air bag investigator advocated against 
opening an investigation because he had concluded, based on his 
analysis of complaints, that the rate of air bag non-deployment 
complaints for the Cobalt and Ion was similar to that of peer vehicles.
---------------------------------------------------------------------------
    \24\ According to GM, frontal air bag deployment takes into 
consideration factors such as speed of the vehicle, severity and 
location of the impact, and rate of deceleration. Air bags are 
programmed not to deploy in non-accident circumstances, such as driving 
over potholes or rough terrain.
---------------------------------------------------------------------------
    According to ODI staff who attended the 2007 panel meeting, the 
Defects Assessment Panel had requested that the potential safety defect 
be monitored to identify future air bag non-deployments occurring on 
the road, where air bag deployment would be expected. In addition, 
NHTSA's Associate Administrator for Enforcement, who did not attend the 
panel discussion, told the Director of ODI and the Defects Assessment 
Division Chief that ``given the reports of fatal crashes, this
    [investigation proposal] looks like one we want to jump on and 
learn as much as we can quickly.'' The ODI screener who prepared the 
investigation proposal was initially assigned to monitor the issue. 
However, the Defects Assessment Division Chief did not reassign that 
responsibility after the screener responsible for monitoring the issue 
left NHTSA in 2008.
    ODI missed other opportunities to investigate the air bag non-
deployment issue. For example, in April 2009, the Defects Assessment 
Division Chief requested a special crash investigation of a collision 
involving air bag non-deployment in a 2005 Chevrolet Cobalt. However, 
ODI did not follow up on the investigation's results, and the Defects 
Assessment Division Chief had no explanation for why ODI did not pursue 
the issue. Two ODI staff members reviewed the findings of the special 
crash investigation in February 2010, but neither reported the results 
of their reviews. The first, an investigator, told us he did not report 
the results because he was not responsible for screening safety issues. 
The second, an advanced screener, told us that while he does not recall 
reviewing the report, he would only have noted issues in his area of 
concentration: engine, power train, and speed control.
    According to ODI officials, in 2010, an ODI screener suggested 
revisiting the 2007 investigation proposal on air bag non-deployments 
in the Chevrolet Cobalt because of new consumer complaints. However, 
after the air bag investigator updated his analysis of consumer 
complaints and identified a downward rate of complaints for the 
vehicles, the screener decided that the issue did not present enough of 
a safety trend to warrant renewing the investigation proposal.
    While ODI identified air bag non-deployments as a potential safety 
issue, it did not identify or propose an investigation of the GM 
ignition switch issue. According to ODI staff, there were no 
discussions of the ignition switch defect prior to the February 2014 
recall.
    This concludes my prepared statement. I will be happy to answer any 
questions you and other Committee Members may have for me.

    The Chairman. Thank you, Mr. Scovel.
    Administrator Rosekind, I know you only took the helm here 
at NHTSA at the end of last year, and I know you have been 
working to improve NHTSA's handling of vehicle defects. And I 
would say you have your work cut out for you.
    The Inspector General's report reaches some serious 
conclusions regarding NHTSA's ability to detect vehicle 
defects, highlighting things like failure to review information 
provided by both industry and consumers, botched data analysis, 
inadequate training and supervision as major problems for the 
agency. All of these have to concern you.
    And while we have to ensure that automakers properly report 
safety violations, it doesn't help if NHTSA's staff are not 
even reviewing the information or if, when they do, they aren't 
employing proper statistical analyses to detect defects.
    NHTSA isn't following basic best practices, and these are 
process issues that can't be solved just by throwing additional 
resources at the problem. So my question is, how do you propose 
to address these issues?
    Mr. Rosekind. Thank you for acknowledging the challenges 
that exist in our head.
    We have concurred with all 17 of the recommendations. They 
validate and are consistent with our two reports, as well.
    So I would like to provide to the Committee a list of 44 
actions that we already have underway. Ten of the 17 are 
addressed in those. And they get exactly to detailed action on 
each of these elements, from communication to case management 
to statistical tests, to make sure that every one of those--and 
I am just highlighting.
    There were 17 in their report. Our total actions are 
already up at 44. We will continue to look for every place 
possible that we can make changes.
    I will just add, I think we will look for all the internal 
changes we can, but what is also critical about the report, 
though it is outside their report to talk about the resources, 
so many people have heard me discuss: 80,000 complaints. We are 
literally looking at an individual screener having to have five 
reports analyzed every hour. Each of those reports actually 
takes an hour.
    So when the IG report says it is inadequate, I agree. And 
we have to change those.
    The Chairman. Inspector General Scovel, you identified 
three general areas of concern in your audit of the pre-
investigation practices of NHTSA's Office of Defects 
Investigations. In your opinion, what does NHTSA need most? 
More information? More expertise? Better practices for 
reviewing and analyzing data they already receive?
    Mr. Scovel. Thank you, Mr. Chairman.
    Right now, I would say the onus is on NHTSA to press 
forward with the process changes that we have outlined in our 
audit report and in my testimony today.
    We are very pleased to understand that the Administrator 
has concurred in all 17 of our recommendations and, in fact, in 
his response to our audit report last week, indicated a very 
aggressive schedule, signaling his intent to press forward as 
quickly as possible.
    I understand the Administrator's request for resources. 
That ultimately represents a policy decision between the 
administration and the Congress. I am fully cognizant of that 
and respect my role. However, I would have to say that 
allocating more resources to an effort or to an agency whose 
processes are not in line in the first place does not seem like 
a good idea.
    We would urge the Administrator to press forward with his 
aggressive timeline to address our recommendations, as well as 
his own process improvements that he has identified, in order 
to best position himself for success no matter what the policy 
decision may be regarding additional resources.
    The Chairman. Mr. Rosekind, you have recently taken some 
unprecedented steps with regard to NHTSA's handling of the 
defective Takata inflators, including issuing a preservation 
order and a consent order and announcing efforts to facilitate 
a coordinated remedy program.
    How does the agency plan to implement this program?
    Mr. Rosekind. And thank you for acknowledging the effort 
there. It was this committee that really helped focus for the 
entire country and the needed actions ahead. That all changed 
on May 19. We went from denying a defect to having 
acknowledgment of not only a defect but national recalls, the 
consent order, which allows us to actually help evaluate the 
remedy, as well as the coordinate remedy program, which is not 
just acceleration but even more advanced prioritization.
    So, right now, we have actually already been in touch with 
all 11 manufacturers, 7 potential supply folks, and have sent 
them a letter that outlines all the information we need to 
determine how this has to proceed. So the first meetings are 
already scheduled for July 1 with each of those individual 
groups. There will be both individual and group meetings 
through July, with our hope that August will be--we will take 
all that information, put it together. Planning for a public 
hearing in September that would allow us to lay out the 
program, which is very complicated.
    The Chairman. Good.
    And, very quickly, Mr. Scovel, could you just please 
discuss some of the difficulties that NHTSA has encountered or 
experienced in receiving consumer complaints? And how would 
clearer guidelines benefit the public?
    Mr. Scovel. In receiving complaints, Mr. Chairman, we would 
highlight a couple of things for the Committee's attention.
    First, in the way that NHTSA collects its data. Data 
quality has to be an ultimate concern for NHTSA in its effort 
to identify vehicle safety defects, because if that data is not 
of the highest quality, then essentially defects will be missed 
and resources may be squandered. So the accuracy and the 
completeness and the timeliness of those data submissions is 
essential.
    And that data comes from a number of different sources. The 
early warning reporting data from the manufacturer, that 
process needs to be improved. As we have shown and NHTSA has 
acknowledged, the broad discretion allowed to manufacturers in 
categorizing potential problems or defects means that the data 
quality is diluted, it is diffuse. And the best analysts at 
NHTSA or anywhere in the world will not be able to reach a 
proper conclusion based on data that is unsupportable.
    We also would note that--and I commend the Administrator 
for his attention to that and his remarks this morning, too, 
that they intend to follow up with manufacturers more often.
    In our interviews of every single employee in the Office of 
Defects Investigation and a representative of each of the 
contractors that works in that effort, we learned from the 
highest sources in that office that they generally employ what 
he called an honor system in order to determine whether 
manufacturers are meeting their requirements to submit this 
early warning reporting data. For a safety regulator to take 
that approach, sir, we think is not keeping the best safety 
interests of the public in mind.
    Consumer complaints, Mr. Chairman, which historically has 
been the primary source for NHTSA to identify safety concerns, 
are also diffuse, have also been watered down, in effect, 
because of a lack of guidance from the agency to consumers who 
are seeking to report accidents and defects to the agency but 
who find themselves at a loss when confronting on the website 
18 different category codes in a vehicle that has 15,000 
components and they themselves are not automotive experts.
    Certainly, some consumers are going to get it wrong. But, 
in many others, the most well-meaning and those who have 
themselves or their families have been impacted by vehicle 
safety defects will read the guidance and attempt to follow it 
as best they are able. The agency performance will improve as a 
result.
    The Chairman. Thank you, Mr. Scovel.
    Senator Nelson?
    Senator Nelson. You know, there is a pattern here among 
these regulatory agencies that are supposed to be looking out 
for the consumer. We saw this about 10 years ago with the 
Consumer Product Safety Commission when we had all of that 
Chinese drywall problem, the defective Chinese toys, and so 
forth, and a card table was their research department. So, too, 
we are now hearing stuff about the agency that you are trying 
to straighten out, Mr. Rosekind.
    Tell me, you all came up with 33.8 million vehicles to be 
recalled on this Takata matter. How did you come up with that 
number?
    Mr. Rosekind. So our estimate is that there are about 34 
million inflators that are defective, and they are in about 32 
million vehicles. So that is acknowledgment that some vehicles 
have both driver and passenger airbags that need to be 
replaced. It also includes that some cars have interim 
remedies. They need to come back again.
    Senator Nelson. Right.
    Mr. Rosekind. So that is why 34 million inflators in 32 
million vehicles.
    Senator Nelson. Do you have the Vehicle Identification 
Number for all of those?
    Mr. Rosekind. Yes. Those have been provided by all of the 
11 auto manufacturers at this point.
    Senator Nelson. All right.
    Now, you have heard what the Inspector General said about 
this Office of Defect Investigations. What do you think you 
need to do to ensure that ODI does not miss the next GM 
ignition defect or the next Takata airbag crisis?
    Mr. Rosekind. This is why we have fully concurred with all 
17 recommendations. They all need to be addressed. That is why 
I am going to submit to you our list of 44 total actions that 
are going on that really get to all of these processes that we 
are discussing.
    But it is also an ongoing evaluation. That is part of the 
issue here. We can't stop looking. So I am going to give you 44 
different areas. I can give you plenty of examples if you want. 
I would rather just give you the list for the moment. But part 
of it also has to be not just that list but an ongoing 
evaluation to make sure that on a continual basis we are 
looking for ways that we can improve the processes and do it 
faster and better.
    Senator Nelson. OK.
    I want to suggest to you one area. In this ODI, as the 
Inspector General has just talked about, get about 80,000 
complaints each year. Yet there is one person who conducts the 
first review of these complaints. And this particular person 
has other duties, so spending 50 percent of that person's time 
doing other things.
    So, if you do the math, that person, who spends 4 hours a 
day on this, would have to review, process, and follow on and 
flag over 80 complaints an hour. That is less than one 
complaint a minute. So how in the world can you get it done?
    Mr. Rosekind. You can't. And that is why I agree with the 
IG's report. It specifically called out the scanning of those 
reports as being inadequate. It is.
    And you have just pointed out that that is a resource 
issue. You have too many complaints and not enough people.
    That original person is a triage point to try and get it 
somewhere else, but it is just overwhelming.
    Senator Nelson. All right.
    I am going to yield the rest of our time because I want our 
members to go on and get a chance to get into this.
    The Chairman. Thank you, Senator Nelson.
    Senator McCaskill is up next.

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

    Senator McCaskill. Thank you. Thank you, Mr. Chairman, and 
thank you, Senator Nelson, for your incredible focus on this 
issue.
    As the Chairman and the Ranking know, we obviously did a 
lot of hearings around the GM recall and a lot of hearings 
around the failures of NHTSA.
    I want to first begin with rental car safety. Honda 
confirmed on Friday that the eighth death linked to a faulty 
airbag occurred last September in California. This was a rental 
car from Sunset Car Rental in San Diego that never made the 
repairs after the recall.
    I, along with Senator Schumer and others, have legislation 
pending that would prohibit a car from being rented at a rental 
car agency until open safety recalls are in fact remedied. We 
have the support of the rental car industry, the consumer and 
safety advocates, the insurance companies, and General Motors.
    But, unfortunately, many auto manufacturers are blocking 
this legislation right now. The Alliance of Automobile 
Manufacturers has opposed this legislation, and they are saying 
that they should only be grounded if there is a do-not-drive 
recall.
    Let me ask you, Dr. Rosekind, have any of the 11 
manufacturers issued a do-not-drive recall related to the 
faulty airbags?
    Mr. Rosekind. Not that I am aware of. And, annually, that 
number is very small.
    Senator McCaskill. And what about NHTSA? Do you support the 
efforts that we have ongoing to try to ground rental cars that 
have not been repaired?
    Mr. Rosekind. Absolutely.
    Senator McCaskill. OK.
    I would like to put into the record the American Car Rental 
Association and Consumers for Auto Reliability and Safety, 
their written statements for the record, if I might, on that 
subject.
    The Chairman. Without objection.
    [The information referred to follows:]

 Written Statement of the American Car Rental Association and Consumer 
                    for Auto Reliability and Safety
Introduction
    Good morning, Chairman Thune, Ranking Member Nelson and Members of 
the Committee on Commerce, Science, and Transportation. The American 
Car Rental Association (ACRA) and Consumers for Auto Reliability and 
Safety (CARS) respectfully submit this joint written statement as part 
of the Committee's hearing entitled ``Update on the Recalls of 
Defective Takata Air Bags and NHTSA's Vehicle Safety Efforts.'' ACRA 
and CARS ask that this statement be made a part of the official record 
of the hearing.
    ACRA is the national representative for over 98 percent of our 
Nation's car rental industry. ACRA's membership is comprised of more 
than 300 car rental companies, including all of the brands you would 
recognize such as Alamo, Avis, Budget, Dollar, Enterprise, Hertz, 
National and Thrifty. ACRA also has as members many mid-size, regional 
car rental companies as well as smaller, ``Mom & Pop'' operators. ACRA 
members have over two million registered vehicles in service, with 
fleets ranging in size from one million cars to ten cars.
    CARS, based in Sacramento, California, is a national award-winning 
non-profit auto safety and consumer advocacy organization dedicated to 
preventing motor vehicle-related injuries, fatalities and economic 
losses. CARS has spearheaded promulgation of several Federal motor 
vehicle safety standards, and successfully advocated for numerous 
landmark bills signed into law by Governors from both major parties. 
CARS has been working to enact safe rental car legislation in close 
collaboration with Cally Houck, whose two daughters were killed in a 
crash caused by a safety defect in an unrepaired rental vehicle that 
was under a safety recall.
    ACRA and CARS applaud this Committee for its continued interest in 
the Takata air bag and other recent automobile recalls. We have come 
together in an unusual partnership of an industry trade group and a 
consumer safety organization to urge Congress to pass the ``Raechel and 
Jacqueline Houck Safe Rental Car Act,'' which was recently introduced 
as bipartisan legislation in the House and Senate and has been referred 
to this Committee. We believe that passing this bipartisan bill is one 
important step that Congress can and should take immediately to help 
get unsafe recalled vehicles off the roads.
The Car Rental Industry and Consumer Safety
    In 2004, Raechel and Jacqueline Houck were killed by a rental car 
that had been recalled due to a defective steering component that was 
prone to causing an under-hood fire and a loss of steering. The car had 
been rented to them prior to being repaired. The legislation named in 
their memory, the ``Raechel and Jacqueline Houck Safe Rental Car Act'' 
(S. 1173/H.R. 2198), was introduced in the House and the Senate on May 
1, 2015. The Senate bill is authored by Senators Charles Schumer (D-NY) 
and Barbara Boxer (D-CA), and co-sponsored by Commerce Committee 
Ranking Member Nelson (D-FL) and by Committee members Senators Claire 
McCaskill (D-MO) and Richard Blumenthal (D-CT). The House bill is 
sponsored by Representatives. Lois Capps (D-CA), Walter Jones (R-NC), 
G.K. Butterfield (D-NC) and Jan Schakowsky (D-IL).
    The Safe Rental Car Act would prohibit rental companies from 
renting or selling cars subject to a Federal safety recall unless they 
have been repaired. The only exception to this rule would be if the 
manufacturer identified an interim measure that could be taken while 
the permanent repair was being developed that would eliminate the risk. 
Once the permanent repair becomes available, however, the car must be 
grounded until the repair is made.
    ACRA and CARS worked very hard to develop a legislative proposal 
that is supported by consumer safety organizations and the rental car 
industry. The bill fairly balances the public's interest in safety with 
the rental car industry's business model. It represents a reasoned, 
rational compromise that is effective, and also workable, given the 
realities of the auto rental marketplace.
    From the industry's point of view, properly maintained vehicles in 
the rental industry are paramount. It's about trust--between customers 
and the individual businesses of ACRA members. Customers should have 
confidence that their rental is not the subject of a safety recall and 
the legislation provides that confidence.
    From a consumer safety point of view, it is just common sense that 
rental cars subject to safety recalls should be repaired before they 
are put into the hands of consumers and their families. People who are 
renting vehicles need them right away, for a business trip, vacation or 
sometimes in an emergency. There is no time to take a rental car to get 
repaired. And consumers expect that the car they are renting is safe. 
Most people are shocked to learn that it isn't already illegal, under 
Federal law, to rent out an unrepaired recalled vehicle.
Important Safety Provisions of S. 1173/H.R. 2198

   Timing of Notice and Grounding

        S. 1173/H.R. 2198 define 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 bills call for the vehicles to be 
        grounded as soon as practicable, or 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 under S. 1173/H.R. 2198 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 continue 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.

   Car Sales From Rental Fleets

        The American car rental industry is the largest single 
        purchaser of cars from domestic and foreign car manufacturers 
        every year. The industry, in turn, sells a large number of cars 
        each year through retail and wholesale channels. S. 1173/H.R. 
        2198 require 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 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.
Federal versus State Role
    This is a critical national issue and deserves a national solution. 
The motor vehicle safety recall process is overseen by the National 
Highway Traffic and Safety Administration (NHTSA) and has its origins 
in the Federal Motor Vehicle Safety Act, originally enacted in 1966. 
Therefore, ACRA and CARS believe strongly that major changes to rental 
vehicle safety recall procedures should be made by Congress, rather 
than individual states. Rental cars are an integral part of interstate 
commerce and car rental customers cross state borders in rental 
vehicles at will and with the blessing of the renting companies.
    CARS 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 on a state-by-state basis. 
California Senator Bill Monning, who represents the district where the 
tragic crash occurred that claimed the lives of Raechel and Jacqueline 
Houck, agreed to forestall pursuit of state legislation he authored 
beginning in 2010, in order to allow Congress time to address the 
problem nationally.
    As attention to vehicle safety recalls remains squarely in the 
public spotlight, policy makers at the local, state and Federal level 
are understandably eager to address safety concerns. There have been 
several initiatives at various levels of government to particularly 
address safety recalls concerning the rental industry. No two proposals 
are the same. ACRA and CARS believe a patchwork of state and local laws 
would be disruptive to consumers and the car rental industry since 
rental cars regularly are rented in one state and driven and left in 
another. In addition, these state and local proposals create challenges 
because each attempts to address a regulatory process that is 
controlled and overseen by a Federal agency (NHTSA). ACRA and CARS are 
united in our conviction that rental car safety should be addressed on 
the Federal level.
Conclusion
    As the supporters of S. 1173 and H.R. 2198 continue to talk to 
members of Congress and their staff in support of this legislation, 
ACRA members are often asked why the car rental industry is willing to 
accept new Federal regulation of the industry's practices. The response 
to that is easy. After listening to customers, ACRA engaged and became 
part of the process. The end result is a proposal that will provide car 
rental customers additional assurance that the vehicles they rent are 
safe and provides the car rental industry with a uniform Federal 
standard across the country.
    ACRA and CARS urge Congress to enact this bill, 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 
squarely in your hands.
    As a first step toward enactment, we respectfully request that this 
Committee hold a hearing on the Raechel and Jacqueline Houck Safe 
Rental Car Act, to hear first-hand from the stakeholders why now is the 
time to pass this critical safety legislation.
    Thank you for providing ACRA and CARS with the opportunity to 
submit this statement.

    Senator McCaskill. I now want to go to this audit. And my 
colleagues are patient with me because I am an audit weirdo. I 
used to be an auditor, so I read this stuff. And Mr. Scovel 
knows that I am somebody who consumes these things.
    This audit report is one of the worst I have ever seen, in 
terms of a government agency. And the reason it is so bad--I 
agree, Mr. Scovel, this isn't about resources; this is about 
blatant, incompetent mismanagement, Mr. Rosekind.
    I mean, let's just go through one of many shortcomings, and 
this is one that just jumped out at me: when to open an 
investigation. Now, if NHTSA isn't clear about when an 
investigation is to be opened, we might as well shut it down.
    The Inspector General found there are three factors to be 
considered about an investigation: rate of consumer complaints, 
severity of potential safety issues, and identification of root 
cause.
    Now, here is the scary part. Based on the interviews the 
Inspector General did, there is disagreement within your agency 
over when an investigation can even be opened. The General 
Counsel said severity must be established for all cases, along 
with frequency and root causes. The ODI Defects Assessment 
Division Chief says all three should be met. The ODI's Director 
does not think a root cause is necessary and prefers a focus on 
safety consequences. And the ODI's two investigative chiefs 
agree that a root cause is not necessary.
    So you have key personnel within your agency that aren't 
even on the same page about when an investigation should occur. 
I assume that you are getting busy on this as a baby step 
before you get at all the other problems that are in this 
problem.
    Mr. Rosekind. There are actually 44 distinct actions that 
we are taking. That is one of them. Those people are now in the 
same room determining what those threshold and criteria should 
be.
    Senator McCaskill. Do you believe that everyone that works 
there knows what their authorities are? Do you believe that 
there is a clear understanding about what the investigative 
authorities are at NHTSA?
    Mr. Rosekind. I think the people that have the specific 
authorities assigned to them are aware of those, but you have 
just highlighted where those lines have been blurred and 
clarifications are needed.
    Senator McCaskill. Well, on average, only four times a year 
over the past 4 years has ODI even requested underlying 
documentation for death and injury reports. Four times a year. 
That, to me, is stunning.
    And although you have the authority to inspect 
manufacturers' records for compliance with early warning 
requirements, NHTSA officials told the IG the agency has never 
used this authority. Never used the authority to inspect 
manufacturers' records for compliance with early warning 
requirements.
    Listen, I think you are doing your best. I think you 
understand the severity of the situation before you. But I was 
shocked when I read this IG report how bad it was. I knew it 
was bad when the Acting Director before you didn't even know 
you had subpoena power. I mean, we discovered that in a 
previous hearing.
    So we are going to be watching very carefully, Mr. 
Rosekind, the kind of work you do immediately.
    And I disagree with my colleague; I am not about to give 
you more money until I see meaningful progress on reforming the 
internal processes in this organization. You can't start 
throwing money until you have a system in place that is going 
to make this agency function like it is supposed to.
    Thank you, Mr. Scovel, for your work. I think it is very 
illuminating.
    Thank you for working so hard since you have been there. It 
is not fair to blame you for all this. I think you are trying 
as hard as you can to get the place shaped up, but we have a 
long way to go.
    And I would certainly hope, Mr. Chairman, that we would do 
a follow-up every 4 to 6 months to see how they are doing on 
the IG's list. Because I think the driving public deserves so 
much better from the cop on the beat.
    Thank you, Mr. Chairman.
    The Chairman. Yep. Thank you, Senator McCaskill. You bet.
    Senator Klobuchar?

               STATEMENT OF HON. AMY KLOBUCHAR, 
                  U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you, Mr. Chairman, for holding 
this hearing. I think it is incredibly important that we follow 
up and have hearings like this after something major has 
happened, like we saw with Takata, with GM.
    Last November, after evidence emerged that Takata were 
susceptible to ruptures in regions outside of high-humidity 
areas, I called on Takata to expand the recall nationally. Last 
month, they finally complied and expanded the recall nationwide 
for certain types of driver- and passenger-side airbags.
    One of the individuals affected by a Takata airbag was 
Shashi Chopra from North Oaks, Minnesota. She is now 
permanently blind. She was simply a passenger in a car that 
wasn't even going very fast that was in what we would consider 
a minor fender bender and is now permanently blind.
    Mr. Rosekind, what tools does NHTSA need to compel 
companies to act sooner?
    Mr. Rosekind. Part of what we are looking at, besides 
resources related to personnel, are authorities.
    So other safety agencies within DOT have imminent hazard. 
What does that mean? If a hazard was identified, we would have 
been able to take those Takata airbags off the streets much 
sooner than what happened in this situation.
    So there are a variety of authorities----
    Senator Klobuchar. And would that be, then, established by 
law? Is that what you are saying you----
    Mr. Rosekind. Yes. Those are authorities that you, 
Congress, have to provide to the agency.
    Senator Klobuchar. And were the daily civil penalties at 
NHTSA levied against Takata for failing to fully respond to 
NHTSA's special orders helpful in getting them to act?
    Mr. Rosekind. Yes. And I think what you are pointing out is 
we were able to go to $14,000 a day, which was the maximum, but 
on our list of authorities that we are looking for in GROW 
AMERICA, that is another one. Our maximum penalty is $35 
million. We are looking for $300 million.
    Senator Klobuchar. OK. Very good.
    Last month, NHTSA filed a Notice of Intent to open a 
coordinated remedy program for the replacement of defective 
Takata airbag inflators in order to consider whether and, if 
so, how NHTSA will exercise its authority to organize and 
prioritize the recall and remedy programs.
    How is NHTSA approaching the replacement of these airbags 
to ensure that vehicles that are most at risk are replaced 
first?
    Mr. Rosekind. That is why we have just sent out information 
letters to all of the 11 manufacturers, the 7 suppliers, and 
are collecting information so we can put a plan together to do 
just that.
    People have talked about an accelerated remedy. This is 
more than just making it go faster. It means coordinating and 
prioritizing to make sure people in the areas that have been 
identified for risk, which have to do with age, certain 
geography, driver side--those people need to make sure they are 
replaced as soon as possible.
    Senator Klobuchar. OK.
    Switching to the GM issue, which you are also aware of, we 
had a case of Natasha Weigel from Albert Lea, Minnesota, riding 
with her two friends in a 2005 Chevy Cobalt on a Wisconsin 
country road. Without warning, the car's electrical power went 
out. The car barreled ahead at 71 miles per hour. Natasha and 
another passenger were killed when it ran into a tree.
    The report found that Wisconsin State Trooper, Keith Young, 
conducted an investigation into the crash that clearly made 
that link--this is a state trooper in Wisconsin--between the 
defective ignition switch and the failure of the airbag to 
deploy. It cracked the code that evaded GM and NHTSA for years.
    This is what he wrote: ``The two front seat airbags did not 
deploy. It appears the ignition switch had somehow been turned 
from the `run' position to `accessory' prior to the collision 
with the trees.''
    We know this is all troubling, and in December I asked you 
what concrete changes you would implement at NHTSA to improve 
the consumer complaint process. I would like to know what 
systems NHTSA has put in place to ensure that if the Office of 
Defect Investigation investigators are in possession of 
critical information, like Trooper Young's report, I would like 
some assurance that they are now acting.
    Mr. Rosekind. And I am going to actually start, though, by 
acknowledging this committee, whether it is your opening 
statement mentioning safercar.gov or the fact that each of you 
talk about one of the tragedies, you put a face to the 
tragedies that are going on, it is so critical for people----
    Senator Klobuchar. Thank you.
    Mr. Rosekind.--to know that these are real people that are 
being affected. So thank you all for doing that.
    And I would say specifically, we did talk about this in my 
confirmation hearing, and we have new systems that are already 
in place, such as a case management system that allows our 
crash investigators, as well as the screeners and the panels, 
to look at this information from multiple sources all in one 
place. It is an attempt to basically connect those dots so the 
people who are working on this have all available information.
    And I will just----
    Senator Klobuchar. Yes. Because I know, like, there were 
about 260 complaints over an 11-year period from consumers that 
the GM vehicle had turned off while they were driving. And 
somehow, over those 11 years, those dots weren't connected.
    So, as you said, there has been a change. But how does that 
change really work in effect?
    Mr. Rosekind. We are talking about panels and screeners 
that now have access to all the information. Previously, there 
could be an update to a piece of information and the person 
responsible for that case didn't even get an alert that there 
had been updated information.
    So now you have more data and making sure, every time there 
is new data, that individual who is responsible gets all the 
information in one place.
    Senator Klobuchar. OK. Very good.
    Well, thank you very much. I will probably have some more 
questions for the record.
    But thank you, again, Senator Thune and Senator Nelson.
    The Chairman. Thank you, Senator Klobuchar.
    And next up is the Ranking Member on the Subcommittee on 
Consumer Protection, somebody who, like Senator Nelson, has 
been very involved on these issues. So I would like to 
recognize Senator Blumenthal.

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

    Senator Blumenthal. Thank you very much, Mr. Chairman. I 
want to express my appreciation to you for having this hearing 
today, which I know reflects your own interest and caring about 
this subject.
    And to my distinguished colleague from Florida, thank you 
for your very eloquent and powerful statement.
    I want to pursue some of the lines that have been raised 
already, lines of questioning, that reflect the real-life 
consequences, as you have just said, Mr. Rosekind.
    Just to show you, first, one of the airbags that actually 
bears the marks of the, in effect, exploding shreds of metal 
that so injured eight people that they were killed and many 
others.
    But the real fault is not with the airbag. There is no 
blood on the airbag. Some may say, legitimately, there is blood 
on the hands of Takata executives, who concealed and covered up 
the devastating, deadly effects of these explosions.
    The fault is really with this device, the inflator, because 
it contained a substance that caused this explosion. Ammonium 
nitrate, when moistened, became explosive. And the question for 
Takata today is whether these devices are any safer than they 
were when they killed eight people. And the evidence may well 
show that these inflators are as dangerous today as they were 
when Takata first learned that they were potential killers some 
years ago, as early as 2004 and 2006, that they are as 
dangerous today and should be completely revamped and revised 
in their basic design and structure, which Takata has not yet 
done.
    The number of deaths reported so far is eight. I feel that 
that number is a lot like the number 13 that was first 
acknowledged by GM as caused by its defective ignition switch. 
We now know that that number is at least 117 because of the 
findings of the compensation fund that GM established only 
after I and others on this committee called for them to do it. 
That number of eight may well grow. It may be only the tiny 
fractional tip of the iceberg of death that was caused by these 
exploding airbags.
    And so I believe, as has been stated, that this report is a 
searing, devastating indictment of an agency that was 
responsible for protecting the public. But let's not forget the 
responsibility of corporate executives, who could have and 
should have fully disclosed and then protected their customers 
from these devastatingly deadly devices.
    I think that that record of cover-up and concealment is one 
of the low points in corporate conduct, and it represents the 
need to strengthen not only the agency that you had, Mr. 
Rosekind--we need to strengthen that agency, not strangle it. 
We need to provide more resources and funds, not cut. But a cop 
is only as good as the legal tools that he has. A cop is only 
as good as the laws that are enforced.
    And so I have proposed, along with my colleagues Senator 
Markey, Senator Nelson, a collection of new laws that will 
strengthen your legal tools. Because, ultimately, we can use 
all the rhetoric we want in this room, in press conferences, in 
public forums, but the rhetoric is no good without real action 
and institutional change and new laws that give you the tools 
you need.
    So, for example, eliminating the caps on penalties--not 
just raising them, but eliminating the caps on penalties for 
nondisclosure; the Early Warning Reporting Act that will give 
you the mandate to establish a database that is useful to 
consumers so they can take action to protect themselves; the 
Automaker Accountability Act that I have proposed; as well as 
criminal penalties imposed not just on the companies but on the 
corporate executives when they cover up or conceal defects.
    And, as my colleague Senator McCaskill has already said, 
rental car companies need to be held accountable, but also used 
car dealers. At least one of these Takata deaths occurred as a 
result of a used car. And very often the manufacturers and the 
dealers simply can't find the present owner of a car because he 
or she has bought it as a used car.
    Automobile manufacturers and new car dealers are required 
to repair safety recalls before selling recalled vehicles under 
current law, but there is no requirement that used car dealers 
fix any outstanding safety defects before selling a used car. 
And this gap in consumer protection puts people at risk.
    So I think there are a number of preventive acts that can 
be taken, and not the least of them is that any settlements, 
such as happened with the GM ignition defect, be disclosed 
fully. Secret settlements ought to be banned. That is why I 
have proposed the Sunshine in Litigation Act with my colleague 
Senator Graham, and I hope to revive it again this challenge.
    I want to know from you whether you will join me, Mr. 
Rosekind, in seeking these basic, fundamental reforms----
    Mr. Rosekind. I am going to start----
    Senator Blumenthal.--that will be important going forward. 
We can allot and blame as much as we wish for the failures of 
the past, and there have been deadly failures. But repairing 
this system and reforming it going forward ought to be our 
concern. And it is not just oversight; it is addressing these 
problems with new legislation, giving you new tools, and your 
successors, so that there is real institutional change.
    Mr. Rosekind. And I just wanted to start by saying thank 
you, because, yes, what you have seen over the last months is 
NHTSA's willingness to use all authorities and tools available 
to us to get action. If we don't have those authorities or even 
the maximum is ineffective, we can't do our job. So we will 
support and provide any technical and other assistance to help 
with those new authorities.
    Senator Blumenthal. And you need more resources, do you 
not?
    Mr. Rosekind. Absolutely.
    Senator Blumenthal. In fact, the FAA, I think, has 
something like 30 times your budget and 6,000 employees as 
compared to your 90. Is that not a glaring deficiency? Does 
that not reflect a lack of investment in your agency and in the 
safety of our roads and drivers?
    Mr. Rosekind. And you are citing a chart that is in our 
workforce assessment that makes that comparison.
    So, with under 500 deaths in major aviation accidents, they 
have over 6,000 safety professionals working at that number. In 
the rail industry, they have under 10, and they have close to 
700 professionals working on that. And we have, in 2013, 32,719 
lives lost on our roadways, and at NHTSA we have 90 people 
dealing with those.
    Senator Blumenthal. If our airplanes and airspace were as 
dangerous as our cars and our roads, corporate officials would 
be indicted and there would be sweeping changes in the airline 
industry. The lack of dramatic crashes is perhaps what enables 
the drip-by-drip, crash-by-crash tragedies that have been 
detailed here. And this Nation has to make the kind of 
investment in your agency that, laudably, it has made in the 
safety of our airspace.
    Thank you.
    The Chairman. I have Senator Markey, followed by Peters, 
followed by Heller, followed by Daines.
    We have a vote going on, so if you want to proceed. And, if 
you can, I would like to wrap this first panel up as quickly as 
possible. I will go over and vote, and if we get to the end of 
the people who want to ask questions, gavel it out, recess it, 
and we will come back and pick up as soon as we get through 
with the vote.
    Senator Markey?

               STATEMENT OF HON. EDWARD MARKEY, 
                U.S. SENATOR FROM MASSACHUSETTS

    Senator Markey. Thank you, Mr. Chairman, very much.
    Dr. Rosekind, Senator Blumenthal and I have a bill, the 
Early Warning Reporting System Improvement Act, that requires 
automakers to automatically provide more documents about 
potentially defective cars to NHTSA and requires NHTSA to then 
make more of that information available to the public so that 
it can protect itself.
    And we can't get back the 117 people whose lives were lost 
to the GM ignition switch defect; we can't get back the 8 
people whose lives were taken by exploding Takata airbags.
    But, Dr. Rosekind, you do have right now the authority to 
implement many of the changes that the Markey-Blumenthal early 
warning reporting bill requires. You can take permanent 
measures, even without a new law, to put information about 
fatal defects into the hands of the public in case NHTSA's 
analysts fail to spot the next ignition switch or exploding 
airbag defects. You can look at the families who lost their 
parents, children, spouses, or siblings because of these 
defects, and you can tell them that you did everything you 
could to make sure that their lives weren't lost in vain.
    Dr. Rosekind, will you call for a NHTSA rulemaking to 
require automakers to provide the early warning documents that 
alert them to potentially fatal defects to NHTSA and to have 
NHTSA then make this information public?
    Mr. Rosekind. The agency and I will do everything we can 
with the transparency of the agency to try and make that 
information available. Numerous examples already raised; if the 
information had been available, that could have helped to save 
lives.
    And our interest will be to look at that and make sure that 
our current legal requirements related to privacy, 
confidentiality, wouldn't actually impede that objective.
    Senator Markey. Will you do a rulemaking, Dr. Rosekind, in 
order to make sure that there is a formalized process to ensure 
that the information goes to your agency and then the agency 
discloses it to the public so that they can protect themselves?
    Mr. Rosekind. And I will commit to looking at what shape 
that could look like, knowing what our current legal 
obligations are for confidentiality.
    Just very simply, the manufacturers have that data. They 
don't have the Federal restrictions we do related to 
confidentiality and privacy, for example. They could post that 
now----
    Senator Markey. Will you do a rulemaking? Will you do a 
rulemaking, Doctor, consistent with the Privacy Act and 
confidential proprietary information to ensure through the 
rulemaking that any information which you can make public will 
be made public and that the auto industry will be forced to 
give you that information? Will you conduct a rulemaking to 
achieve that goal?
    Mr. Rosekind. I will determine whether--whatever we can do 
for transparency, I will determine whether or not a rulemaking 
is even needed.
    Senator Markey. Well, so you are going to--so you will do 
everything, then, that is allowed by law to ensure that the 
auto industry will provide you with the information about 
defects and that NHTSA will then release that information? You 
will do everything that is allowed by existing law?
    Mr. Rosekind. That is what we will look into and make sure 
that we can provide that transparency, yes.
    Senator Markey. And you are saying that you do not need a 
rulemaking in order to accomplish that goal?
    Mr. Rosekind. And that is what I have to look at, what 
those legal conflicts are. So if it is not----
    Senator Markey. Will you do a rulemaking if one is 
required? After you determine the scope of your authority under 
the existing rules, will you do a rulemaking if it is 
necessary?
    Mr. Rosekind. If the evaluation shows a rulemaking would be 
useful for transparency, yes.
    Senator Markey. OK. Well, I think that is very important. I 
think that will really give the information to the public which 
they need. If people can go online to buy a car, they should be 
able to go online in order to determine if that car has a 
defect which could harm a family member.
    So the sooner you put it online, the sooner you put that 
information up, the sooner you get that information out there 
is the more accountable the industry is going to be. They will 
know that, that the consumers will be king, the consumers will 
be protecting their family, the consumers will be able to 
ensure that any successor NHTSA is accountable and ensuring 
that that information is made public.
    Now, Senator Blumenthal and I have another bill, and that 
bill is one that says that a used car that is now purchased by 
someone may have a recall that actually ensures that there is a 
free replacement part but that the person who purchased the 
used car really doesn't know about it. So our bill would 
require that when that new owner registers their cars that they 
are made aware of the safety defects and that those repairs are 
made.
    Would you support that kind of legislation, Dr. Rosekind?
    Mr. Rosekind. DMV is a very important touch point to get 
those people informed. GROW AMERICA talks about this, because, 
at this point, there is no sense yet of the technology to do 
that, the cost, the procedures, et cetera, and making sure that 
the consumers basically don't have any negative effects from a 
defect created by a manufacturer.
    So, absolutely, DMVs could be a touch point that could be 
used. And in GROW AMERICA, we are suggesting pilot programs to 
work that technology, the cost procedures out to figure out how 
it could go national.
    Senator Markey. OK. Thank you. I appreciate that.
    Senator Heller [presiding]. Thank you.
    I am doing the heavy lifting right now with the gavel.
    Senator Peters?

                STATEMENT OF HON. GARY PETERS, 
                   U.S. SENATOR FROM MICHIGAN

    Senator Peters. Thank you.
    And appreciate both the panelists here today and your 
testimony.
    Administrator Rosekind, I hear you when you say that NHTSA 
needs help. And if the agency is going to be able to deliver 
effective oversight for vehicle safety, we in Congress here, 
need to consider increasing your funding, as well as having 
stable funding, so you can modernize your crash data collection 
systems, hire additional electronic and technical experts, and 
enhance the Office of Defects Investigation.
    But before that happens, I am sure you know very well that 
you must prove that your agency can actually do this 
effectively and have in place the procedures that can ensure 
the work is done in a timely manner. And you know as well as 
anybody, time is of the essence. The more time that elapses 
oftentimes means more deaths as a result of problems.
    Now, I personally see all the time in Michigan the 
incredible progress that the auto industry is making to develop 
new technologies focused on collision avoidance and mitigation. 
These new developments, without question, are going to make 
traveling on our Nation's roads much safer, smarter, more 
energy-efficient, and at the same time less congested.
    And Congress, I believe, needs to do its part to promote 
these polices that will help us usher in this new age and this 
new era of safety and mobility. And the first step should be to 
ensure that NHTSA has the resources to not only address the 
major issues that it is facing today, and the one in particular 
with airbags, but also encourage the development of these new 
technologies that have the potential to save thousands of lives 
in the future.
    But it will be difficult to secure this funding and the 
ability to move this incredible technology forward if folks 
like myself and fellow Members of Congress are not confident 
that the resources are going to be deployed in an effective 
manner. And, as the IG report has made clear, there is a 
considerable amount of work to do.
    Administrator Rosekind, this recall you are involved in 
right now is of unprecedented scale. NHTSA is courting this 
recall, and you have introduced a number of programs and 
initiatives in order to do this. You have told our committee 
about the 17 recommendations of the IG, which reiterate many of 
the findings of your own internal report, and about how you 
anticipate the agency being able to implement these 
recommendations before the end of the year.
    Sir, can you say that NHTSA can adequately coordinate this 
recall that you are in the middle of right now and implement 
these reforms without more funding from Congress?
    Mr. Rosekind. We already have that plan in place, that we 
have to effect this recall with current resources. That is the 
plan.
    Senator Peters. And that will be an opportunity for us to 
see the effectiveness of your agency, to be able to use these 
resources, to be able to do this in an expedited way?
    Mr. Rosekind. Correct.
    Senator Peters. To Mr. Scovel, you have identified 
certainly an alarming lack of transparency and accountability; 
a severely deficient workforce, both in volume and technical 
expertise; and, as I mentioned earlier and you have mentioned 
here, you have delivered 17 recommendations, and NHTSA has 
concurred.
    You have provided detailed action steps taken to make 
changes, but based on, now, you have intimate knowledge of this 
agency as a result of your work, do you believe that this 
agency is capable of making these changes? And how long do you 
think it will take?
    Mr. Scovel. Thank you, Senator Peters.
    I would hold the Administrator to his word. When he 
responded to our audit report, he indicated not only 
concurrence but a very aggressive intent to make good on all of 
those in a relatively short timeframe, in our experience 
dealing with similar reports in other modes of the Department 
of Transportation.
    Clearly, the burden is on the agency at this point to make 
good on its promises to reform its processes so that it may 
then come to Congress and back to the American people and say, 
we are prepared to handle what we have, and, by the way, we may 
be able to do even a better job should, as a policy matter, we 
be accorded more resources.
    But right now, sir, the burden is on the administrator.
    Senator Peters. And you have set a very aggressive timeline 
of one year. Again, based on your intimate knowledge--and you 
have a lot of experience with a lot of different agencies--is 
that really a realistic timeline?
    Mr. Scovel. It is. I would say that is the Administrator's 
own timeline, which we endorse. We are hopeful. We will birddog 
these recommendations and the implementation of them as 
carefully as we have anything else in our long history of 
providing oversight for the department's safety regulatory 
agencies.
    Senator Peters. Well, I will be with you, working closely. 
That has always been my frustration. When you sometimes get 
recommendations from the IG, there is lip service but never 
follow-through, and 1 year turns into 2 years and 3 years.
    And, in the case of the work of this agency, these are 
people's lives at stake. And we need to have a robust regulator 
that is able to also help us in the auto industry in this 
country to move to even more dramatic safety improvements with 
some of the V2V and the V2I technologies that are coming 
forward.
    So I look forward to working with both of you gentlemen. 
Thank you so much.

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

    Senator Heller. Senator Peters, thank you.
    Mr. Rosekind, it looks like you and I are going to have a 
one-on-one conversation.
    And, Mr. Scovel, it is not because I don't appreciate your 
work.
    And I do appreciate both witnesses' being here. And I don't 
think I will complete the questioning. It is my understanding 
that we will have more members back after they get back from 
the floor. If not, we will go to recess until they do.
    But I want to talk a little bit about this gap in consumer 
protection that others are talking about. Last Saturday, I 
dropped my daughter's car off at the dealership. I usually do 
most of the work myself. My father owned an automotive 
business. And, anyways, it was an independent auto repair 
service.
    And so the question becomes, if you are the second owner, 
third owner, fourth owner of a particular vehicle. When I went 
into that dealership, does that dealership have an obligation 
to tell me if or not there is a recall on that particular make 
and model?
    Mr. Rosekind. They do not. That is part of our GROW AMERICA 
authority request, is to get that kind of independent--if you 
go to a new car dealer, they should do that for you 
automatically----
    Senator Heller. OK. But are they obligated to do that? If--
--
    Mr. Rosekind. No.
    Senator Heller.--you go to a new car dealership today, are 
they obligated on a service maintenance contract that you might 
have with them to tell you if there is a recall?
    Mr. Rosekind. Yes, they should be doing that for you.
    Senator Heller. But are they obligated and----
    Mr. Rosekind. Yes.
    Senator Heller.--are they required?
    Mr. Rosekind. Yes.
    Senator Heller. Because I asked, I did ask, and they gave 
me the answer, and I have no reason to question it. But I don't 
know that I have ever been to a dealership that I have dropped 
a car off that they have told me. And maybe they don't have to 
unless you have a recall, so I am not putting that into 
question.
    So you are saying, if I took that vehicle instead, say, to 
a Jiffy Lube, they wouldn't be obligated to tell me if there 
was a recall?
    Mr. Rosekind. Correct.
    Senator Heller. Gas station? None of them are responsible; 
is that correct?
    Mr. Rosekind. That is correct.
    Senator Heller. OK. OK. How is that going to change?
    Mr. Rosekind. In GROW AMERICA, we have asked to change that 
so that everybody, not just the new car manufacturers but all 
those independents, would also be required to run that check--
--
    Senator Heller. OK.
    Mr. Rosekind.--and inform you.
    Senator Heller. OK. So if your tendency is to bring your 
car into an independent station, what is your alternative, 
then, to know about a recall? What is the alternative?
    Mr. Rosekind. What we are recommending is that everybody on 
a regular basis, even weekly, go to safercar.gov and look up 
your VIN number.
    Senator Heller. All right. So you are an 18-year-old girl; 
do you think weekly they will go to safercar.gov?
    Mr. Rosekind. No way.
    Senator Heller. No way. I guarantee you my daughter 
wouldn't. So there is the gap.
    How do you protect--and I am a parent, and I know you are a 
parent too. And I hope you had a good Father's Day. How do you 
protect that child? As a parent that represents everybody here 
in this room, how do you protect that child, knowing that they 
won't go to safercar.gov? I will, and I will check for her.
    But I guess a better question is, what percentage of 
America even has ever heard of safercar.gov?
    Mr. Rosekind. That is a good question. I am going to 
actually find that out, to know about safercar.gov and sort of 
what its visibility is.
    But we are with you. I think, especially over the last 
year, there is so much discussion about recall fatigue and how 
much information is out there, do people know where to go; it 
is a huge problem.
    So one of the things, actually, that we have on our list of 
actions already underway is creating a national campaign. NHTSA 
is the one who runs Click It or Ticket, Drive Sober or Get 
Pulled Over.
    Senator Heller. It works, by the way.
    Mr. Rosekind. And we want to use that same effect in this 
to go after this issue. Because I am with you. It is great to 
come here and for us to announce safercar.gov, but there are 
too many people, like our kids, that aren't going to do that. 
We have to figure out how to fill those gaps.
    Senator Heller. Very good.
    I am going to stop my questioning here, but thank you very 
much for your hard work, both of you. And I am going to go down 
to the floor, but I will turn it over to Senator Daines at this 
point. Thank you very much.

                STATEMENT OF HON. STEVE DAINES, 
                   U.S. SENATOR FROM MONTANA

    Senator Daines [presiding]. All right. Thank you, Senator 
Heller.
    I truly am grateful this committee is highlighting the 
safety challenges of Takata's airbags that have killed eight 
people. However, there are other recalls that I believe need 
attention and further underscores NHTSA's lack of efficacy.
    Last summer, there was a fire truck, a 2002 International 
Model 4800, that's front axle, actually the ball and socket, 
seized, and it caused the shaft to break, seizing up the left 
front wheel. It was coming down Highway 12, just outside of 
Helena, Montana. It is between my hometown of Bozeman, and I 
drive this all the time.
    It was during daylight hours. Weather conditions were fine. 
And this fire truck veered into oncoming traffic, and the 
volunteer fire chief in the truck was killed in a very violent 
head-on collision. And there was a family of five, mom and dad 
and three small children, in a pickup that were also killed.
    So when I drive back and forth--in fact, I went by that 
tragic site just days after it happened. You could see the 
marks coming in, the tire marks, in a straightaway where this 
horrible collision occurred. There are six white crosses now 
standing by the side of the highway where that occurred.
    This particular Navistar front driveshaft has been recalled 
in approximately 500 vehicles, with notifications being mailed 
this month. Now, this accident occurred on June 19 of last 
year. So the notifications went out just in the last 10 days, a 
year after the accident.
    And it turns out this exact component was a NHTSA-approved 
solution to a previous recall that occurred in 2003.
    With that as background, Dr. Rosekind, the recent OIG 
report frequently makes references to the defects, the lack of 
process, the weak data analysis contained in these reports, 
which I have looked over. They have made 17 recommendations to 
ODI to improve early warning reporting data, improve data 
verification processes, to institute external reviews, and 
evaluate staff training needs, amongst other recommendations.
    Unfortunately, this is not the first time many of these 
recommendations have been made. The OIG highlighted similar 
issues and made similar recommendations in 2002, in 2004, in 
2011, in 2014, and now here we are in 2015.
    So my question for Dr. Rosekind is: Navistar declared a 
safety recall 2 months after the accident. They moved quickly 
with an interim solution. But 12 months after the accident, the 
final recall was being sent and the solution is being executed.
    You mentioned in your testimony it is the automakers' 
responsibility to remedy defective components. My question is, 
why is it taking a year? And what are the NHTSA scientists and 
engineers doing to expedite these solutions to mitigate these 
safety risks to all Americans?
    Mr. Rosekind. I said this earlier; I don't think you can 
say it enough. This committee--that story about the tragedy of 
those lives lost can't be told enough. So we have personalized, 
added a human face to every one of these tragedies.
    What you are highlighting is something we have emphasized. 
Identifying defects is fine. If they are not remedied, you 
still have the risk. And that is what is going on here. And 
part of the challenge that you were citing is basically making 
sure in a timely manner a correct long-term, permanent solution 
is in place.
    So I have just learned about this, and you can count on me 
going back to figure out exactly the specifics, even more than 
what you are telling me now, of what happened here to see what 
is going on.
    Senator Daines. Yes, I would appreciate that. You know, it 
is also the face of innocence here, with a fire chief--he was 
returning back to Three Forks, Montana. It was a nice summer 
evening, good daylight, in a straightaway. And you see this 
young couple and their kids in a pickup. And it is a road I 
drive all the time. And it was just the innocence of the lives 
lost, I think, that is so troubling.
    But, importantly, could this have been prevented? That is 
really the question and looking at the process and procedures, 
the speed at which the remedies are put in place. I would 
greatly appreciate you taking a look at that.
    And, you know, part of that is how many times has NHTSA had 
more than one recall on the same vehicle component. And I know 
you are new to the job. I appreciate your leadership. I know 
you have a long to-do list, but I would appreciate you looking 
into that and looking at--again, we have had repeat recalls 
here--so we can prevent these tragedies.
    Since I am the only Senator here right now, I am going to 
keep going with some more questions until I am out of time.
    Mr. Scovel, does the Office of Inspector General maintain 
stats on how often components are recalled more than once?
    Mr. Scovel. We do not. We did not include that as part of 
our current audit. We don't maintain that kind of data base to 
begin with. Our current audit, sir, it, as you know, focused on 
the pre-investigative phase and not on the recall phase.
    Senator Daines. Yes. And I might suggest it is something to 
look at, because that is starting to look at the process and 
the systemic challenges that exist today, again, with the goal 
here being preventing these tragedies from ever happening 
again. The pain these families expierence never goes away.
    NHTSA's Office of Defects Investigation has had over a 
decade to implement numerous recommendations from your office. 
What do you see the challenge around why it is taking so long 
to implement?
    Mr. Scovel. Senator, some of those recommendations were 
tailored for the circumstances and the unique programs that we 
were examining at the time. For instance, the 2002 and 2004 
reports that you referenced were examining NHTSA's ability to 
implement requirements of the newly enacted TREAD Act. In 2011, 
we were looking at the investigative phase, primarily, of 
NHTSA's operations. In the current audit, we were looking at 
the pre-investigative phase.
    So I don't want to sound like I am overly parsing this, 
because we are trying to dissect each and every phase of 
NHTSA's safety operation, with the idea of being able to 
commend what is going on right, find out what is going on 
wrong, and make effective recommendations to improve.
    Our recommendations in this case, all concurred in by the 
agency. Very aggressive timeline for their implementation. We 
believe they can all be implemented, in fact, with current 
resources. And I think that is the agency's intent. Most 
commendable on their part.
    What Dr. Rosekind is attempting to do, in our estimation, 
is to change the organizational culture of NHTSA, at least the 
defects investigation and resolution part of the operation.
    Senator Daines. Yes. I spent 28 years in business before I 
took this different day job here on Capitol Hill. And they 
always said it is what you inspect, not what you expect----
    Mr. Scovel. Right.
    Senator Daines.--and the importance of clear metrics. And I 
think there should be one, it looks like, on just perhaps its 
speed, in terms of how quickly are we going from an accident to 
action in the field here that is going to correct the defect.
    Mr. Scovel. Right.
    Senator Daines. It seemed like, when Navistar was in the 
field within 2 months, why did it take the Federal agency a 
year?
    Mr. Scovel. Right.
    Senator Daines. You know, there is a 10-month gap there.
    Mr. Scovel. Yes. And I think you are talking about safety 
steps that can be taken by way of corrective action or by way 
of recall.
    Remember, again, if you will, our current audit focused on 
the pre-investigative phase. We did get to the timing element 
of that part of NHTSA's effort. Our audit report, not so much 
our statement for today's hearing, but our audit report 
released at the end of last week, did discuss at some length 
the length of time it took for an investigative proposal to be 
evaluated, assessed, and decided within the Office of Defects 
Investigation.
    That is a key step, of course, because you are never going 
to get to a possible corrective action or a recall, at least in 
a position to be influenced by NHTSA, unless you get through 
this investigation proposal, evaluation, and decision stage.
    We found one instance where an investigative proposal 
languished 5 months. This was very recently, within the last 
year. Another one had been on the books for more than a year 
without resolution. There is a circuitous pattern for 
evaluation and discussion within the Office of Defects 
Investigation of some of these investigative proposals.
    But, again, to pick up on Dr. Rosekind's opening remarks at 
this point, question assumptions. One of the assumptions that 
desperately must be questioned is how can we speed up the 
decision loop so that we can get to the decision to investigate 
sooner and hopefully, upon investigation, get to a decision on 
corrective action sooner.
    Senator Daines. Right. And I appreciate, sir, on the 
balance of ensuring we are thorough and we have properly 
identified the problem and how to mitigate the risk.
    Mr. Scovel. Right.
    Senator Daines. It just seems as though we are seeing a 
pretty big gap there. And I appreciate your efforts, as well, 
to change the culture, to look at ways we can move faster.
    And the Senator and the Chairman have just returned here.
    Mr. Chairman, I am going to turn it back to you.
    But thank you for your thoughtful comments.
    The Chairman [presiding]. Thank you to the Senator from 
Montana for presiding here while we get through the vote.
    And I think that wraps up the first panel. So thank you, 
Mr. Rosekind and Mr. Scovel, for your time and for your 
testimony and for your responses to our questions.
    I want to invite the second panel to come up, and we will 
get going with that.
    We want to welcome our second panel of witnesses this 
morning. Thank you for being here, and for your testimony.
    I am going to hand it off for opening statements. We have 
with us today Mr. Kevin Kennedy, who is Executive Vice 
President of North America for Takata; Mr. Scott Kunselman, who 
is the Senior Vice President, Vehicle Safety and Regulatory 
Compliance, with Chrysler, formerly known as Chrysler Group; 
and Mr. Rick Schostek, who is the Executive Vice President for 
Honda North America.
    So I am going to ask, if we could, on my left and your 
right, Mr. Kennedy, if you will please proceed with your 
testimony, and then we will go from there. And, if you can, 
confine it as close to 5 minutes as possible, and we will take 
it from there.
    Mr. Kennedy?

                 STATEMENT OF KEVIN M. KENNEDY,

           EXECUTIVE VICE PRESIDENT OF NORTH AMERICA,

                 TK HOLDINGS INC. (``TAKATA'')

    Mr. Kennedy. Chairman Thune, Ranking Member Nelson, and 
distinguished members of the Committee, I am honored to be here 
on behalf of Takata and our employees throughout the United 
States.
    For Takata, safety is the core of what we do and who we 
are. We are proud that Takata airbags have saved thousands of 
lives and prevented serious injuries in hundreds of thousands 
of accidents.
    It is unacceptable to us for even one of our products to 
fail to perform as intended. We deeply regret each instance in 
which someone has been injured or killed. We will do everything 
in our power to address the safety concerns raised by airbag 
ruptures. Our chairman met twice with Administrator Rosekind 
and made that commitment personally.
    That is why, after months of testing and extensive 
analysis, we voluntarily agreed with NHTSA to take broad 
action, in conjunction with the automakers, to respond to your 
concerns and those of the public. Our agreement with NHTSA 
contemplates dramatically expanded recalls, including national 
recalls, going well beyond the scope of the risk suggested by 
the science and the testing.
    Based on more than 57,000 tests of returned inflators in 
years of research by leading experts from around the world, our 
best current judgment is that the rupture issues are related to 
long-term exposure over many years to persistent conditions of 
high heat and high absolute humidity. And for some inflators, 
these issues may also involve potential manufacturing and 
vehicle-specific factors.
    Most field ruptures have involved older inflators in the 
region of high heat and absolute humidity. And all analysis to 
date indicates that the potential for rupture is limited to an 
extremely small fraction of inflators.
    That is why Takata's filings state that a safety-related 
defect may arise in some of the inflators. Not all of the 
inflators covered by the proposed recalls are defective. But 
even one rupture is too many, and so our remedy program is much 
broader.
    Most of the injuries and all of the fatalities in the U.S. 
involve driver-side airbag inflators that feature the batwing-
shaped propellant wafers. We have agreed to replace all of the 
batwing driver inflators from the start of production through 
the end of production in any vehicle registered anywhere in the 
United States.
    These recalls will proceed in stages, and the final stage 
will include the replacement of batwing inflators previously 
installed as remedy parts.
    We are ceasing production of the batwing inflators 
altogether.
    There have been far fewer field ruptures involving 
passenger-side airbags. Nevertheless, our agreement with NHTSA 
also contemplates significantly expanded recalls for passenger 
airbag inflators.
    To support these recalls, our total production of 
replacement kits for North America will soon reach 1 million 
per month. We have augmented our capacity to produce 
replacement kits by including inflators made by other 
suppliers.
    We are investing in innovation and working with our 
automaker customers to develop a range of new inflator 
products. At the same time, Takata continues to serve its 
customers by producing airbag inflators that use phase-
stabilized ammonium nitrate propellant, which has distinct 
safety and efficiency benefits over alternative propellants. We 
have full confidence in the safety of these products.
    We are using various technologies in response to the 
recalls. The process of qualifying new products takes time, and 
for certain types of airbags and for certain vehicle models, 
the best solution today is to use existing technologies in 
place of the original unit. We agree with NHTSA that it is 
absolutely the right response to public safety concerns not to 
wait but to replace an older unit with a new inflator. Doing so 
provides an important safety benefit.
    We have agreed with NHTSA to do ongoing testing to verify 
the safety and the service life of these remedy parts. If they 
need to be replaced in the future, we will act before a 
potential risk of rupture develops. We are also supporting the 
testing work of the automakers and NHTSA as well as the work of 
the independent quality assurance panel led by former Secretary 
of Transportation Sam Skinner. And we will work with the 
automakers to get the word out to consumers to help maximize 
recall completion rates.
    We will continue to do all we can to ensure uncompromised 
safety, and we will keep you and the public updated on our 
progress.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Kennedy follows:]

   Prepared Statement of Kevin M. Kennedy, Executive Vice President, 
            of North America, TK Holdings Inc. (``Takata'')
    Chairman Thune, Ranking Member Nelson, and distinguished Members of 
the Committee, I am honored to be here today on behalf of Takata and 
our employees across the United States and around the world who are 
dedicated to making products that save lives.
    For Takata, safety is more than an obligation; it is the core of 
who we are and what we do. We are proud that millions of Takata airbags 
have inflated properly, preventing thousands of deaths and avoiding 
serious injuries in hundreds of thousands of accidents. We are also 
proud of our seatbelts that save lives, the spacesuit materials we make 
to protect our astronauts, and all the other high-quality products 
Takata manufactures.
    It is unacceptable to us and incompatible with our safety mission 
for even one of our products to fail to perform as intended and to put 
people at risk. We deeply regret each instance in which a Takata airbag 
inflator has ruptured, especially in those cases where someone has been 
injured or killed.
    We understand how important it is to the driving public, Congress, 
the National Highway Traffic Safety Administration (``NHTSA''), and our 
automaker partners to address and resolve the safety concerns raised by 
the airbag ruptures, and we are committed to doing everything in our 
power to help achieve that goal.
    I am therefore pleased to tell you today what Takata is doing to 
address these issues.
Takata's Agreement with NHTSA
    After months of testing and analysis of tens of thousands of 
returned inflators and extensive discussions and collaboration, we 
voluntarily agreed with NHTSA to take broad actions, in conjunction 
with the automakers, to respond to the public safety concerns.
    Our agreement with NHTSA contemplates dramatically expanded 
recalls--including in several instances nationwide recalls--
encompassing various types of airbag inflators.
    The proposed recalls and the related commitments we have made go 
well beyond the scope of the safety risk suggested by the current 
science and testing data.
Root Cause Assessment
    Takata has engaged world-renowned experts in energetic systems from 
Germany's Fraunhofer Institute to conduct years of research into the 
root cause of the inflator ruptures, and we have consulted with various 
engineering experts in the United States. Takata has also tested and 
analyzed tens of thousands of returned inflators over the past several 
months. We have shared the results of that research with NHTSA and the 
automakers, as well as with this Committee.
    Based on this research and our ongoing testing and analysis of 
returned inflators, Takata has gained a much better understanding of 
the long-term phenomenon behind the recent ruptures. Our best current 
judgment is that the potential for rupture is related to long-term 
exposure, over a period of several years, to persistent conditions of 
high heat and high absolute humidity. In certain circumstances, these 
conditions can result in an alteration in the propellant wafers in the 
inflators that could potentially lead to over-aggressive combustion.
    The research of our experts suggests that the potential for this 
long-term phenomenon to occur was not within the scope of the testing 
specifications prescribed by automakers or comprehended within the 
industry's inflator validation practice when the inflators were 
originally made--an important fact that is not intended to put blame on 
the automakers or suggest an allocation of responsibility between the 
automakers and Takata.
    The potential for rupturing may also be influenced by other 
factors, including the possibility of manufacturing issues, like those 
identified in earlier recalls, and factors specific to particular 
vehicle models.
    Consistent with this research, most of the field ruptures have 
involved older inflators and most have occurred in regions of the 
country with high heat and high levels of absolute humidity. All 
research to date indicates that the potential for ruptures is limited 
to an extremely small fraction of older inflators.
    But even one rupture is too many, and so Takata has agreed to take 
much broader action.
Driver Airbag Inflators
    All of the fatalities--including most recently in Louisiana--and 
most of the injuries that have occurred in accidents with ruptured 
airbag inflators in the United States have involved older types of 
driver-side airbag inflators that feature ``batwing-shaped'' propellant 
wafers.
    We propose to replace all of these ``batwing'' driver inflators, 
from start of production through end of production, in all vehicles 
registered anywhere in the United States.
    To date, there have been a total of 70 reported instances in the 
U.S. of such ``field ruptures'' involving the ``batwing'' driver 
inflators. Fifty-eight (58) of those ruptures occurred in vehicles that 
were already subject to previous recalls involving identified issues 
with the pressing of the propellant wafers in some of these inflators.
    To put these incidents in perspective, the 70 reported cases of 
field ruptures involving the older batwing driver inflators represent 
approximately 0.009 percent of estimated total deployments of these 
airbags, or around 9 failures out of every 100,000 deployments.
    In the past several months, Takata has conducted ballistic tests of 
more than 19,000 of these driver inflators, and 16 of them have 
ruptured during testing, or approximately 0.084 percent of the tested 
inflators. The inflators selected for this ballistic testing include a 
disproportionate number of older inflators returned from areas of high 
absolute humidity, so the percentage of failures seen in the testing 
results is likely to overstate the overall potential for rupture.
    These figures are not meant to minimize the issue. But they do put 
in perspective why Takata's Defect Information Reports (``DIRs'') state 
that a safety-related defect ``may arise'' in ``some'' of these 
inflators. It is not the case that all of the inflators covered by the 
DIRs are ``defective.''
    Notwithstanding the science and testing data suggesting that the 
problem is focused on a small number of older inflators that have spent 
years in regions of high heat and absolute humidity, Takata will 
support the replacement of all the batwing driver inflators through 
national recalls to be conducted by the affected automakers.
    The recommended recalls will proceed in four stages. In order to 
prioritize the replacement of inflators where the safety need is 
greatest, the first stage will target older vehicles that have ever 
been registered in the Southern States, Hawaii, and territories where 
the levels of both heat and absolute humidity are higher than anywhere 
else in the country.
    But the recalls will not stop there. Subsequent stages of the 
recalls will target the batwing driver inflators manufactured in later 
years and vehicles registered in other States outside the areas of high 
absolute humidity. The recalls will continue until we have replaced all 
of the batwing driver inflators, from start of production to end of 
production, and they will include vehicles manufactured by five 
different automakers--Honda, BMW, Chrysler, Ford, and Mazda. The final 
stage of the recalls will include the replacement of batwing driver 
inflators that were previously installed as remedy parts in prior 
recalls.
    Takata has also committed to cease producing the batwing driver 
inflators.
Passenger Airbag Inflators
    There have been far fewer field ruptures involving passenger 
airbags: 22 total reported instances in the U.S. to date (of which most 
occurred in vehicles subject to prior recalls), and none has involved a 
fatality. Nevertheless, our agreement with NHTSA also contemplates 
significantly expanded recalls covering several types of passenger 
airbag inflators.
    One of these proposed recalls will be nationwide in scope. The 
other two will focus initially on high humidity States, but with the 
potential to expand to a nationwide recall if ordered by NHTSA after 
consideration of additional testing and consultations with Takata and 
the affected automakers. Specifically:
    For one type of passenger inflator, we have recommended a 
nationwide recall that will proceed in four stages, according to the 
year the inflator was made. This recall will encompass all of the 
inflators of this type from start of production through vehicle model 
year 2008, and it will involve vehicles manufactured by eight different 
automakers.
    The root cause assessment for the potential issue with these 
inflators includes the long-term exposure to high heat and absolute 
humidity discussed above, but it also includes the possibility of a 
specific manufacturing issue.
    This type of passenger inflator has been involved in nine (9) 
reported field ruptures in the U.S., which represents approximately 
0.0045 percent of estimated deployments. While it has ruptured at a 
higher rate in Takata's ballistic testing (approximately 0.68 percent 
out of nearly 10,300 tested), all but two of the test ruptures to date 
have involved inflators returned from high absolute humidity States. 
The two exceptions were inflators manufactured on the same day, which 
suggests the possibility of a discrete manufacturing issue.
    Takata has committed to continue testing this type of inflator from 
later model years and to share this test data with NHTSA, in order to 
monitor whether additional action may be appropriate.
    For two other types of passenger inflators, Takata has recommended 
recalls focused on particular models and model years of vehicles 
manufactured by certain automakers. The recalls will initially cover 
the relevant makes, models, and model years of these vehicles that were 
sold or ever registered in Florida, Georgia, Texas, and the other high 
absolute humidity States and territories. But there will be the 
potential for these recalls to expand later to other States and 
potentially nationwide if NHTSA finds that the results of further 
testing show the need for an expansion, after consultation with Takata 
and the affected automakers.
    The scope of the recalls recommended for these last two types of 
passenger inflators tracks the results of Takata's testing and 
analysis. While there have been 13 reported field ruptures of these 
inflators, representing approximately 0.0055 percent of estimated 
deployments, all have involved vehicles of the specific makes and 
models covered by our DIRs and all were in vehicles that had spent 
years in the areas of high absolute humidity.
    In addition, Takata's ballistic testing of these two inflator types 
has shown elevated rates of test ruptures for these inflators when 
returned from the areas of high absolute humidity and from the 
particular models covered in the DIRs, and no test ruptures for the 
same types of inflators in other circumstances. These results show the 
clear importance of long-term exposure to an environment of high heat 
and absolute humidity. But they also indicate that something about the 
particular makes and models of these cars appears to be correlated with 
the potential for these inflators to rupture.
    Takata has committed to NHTSA that we will continue to test these 
types of passenger inflators from other vehicles and from other States 
to help determine whether the scope of these recalls should be 
expanded.
Continued Use of Phase-Stabilized Ammonium Nitrate, Including in Remedy 
        Parts
    In serving the demands of its customers, Takata continues to use 
phase-stabilized ammonium nitrate (``PSAN'') in the propellant 
formulations for many of its airbag inflators. PSAN is safe for use in 
airbag inflators, and Takata has full confidence in the safety of our 
current products that use PSAN propellant, including the replacement 
parts we are making in response to the recalls. The chemistry of phase 
stabilizing ammonium nitrate is well established and well understood, 
and our research into the root cause of the inflator ruptures has not 
shown that they are associated with any measurable loss of phase 
stabilization of the propellant, even after many years in the field.
    PSAN has distinct advantages over other chemicals used in 
alternative inflator propellants. It is non-toxic; it is stable and 
safe to handle during the manufacturing process; it produces far less 
smoke and particulate matter when the airbag is deployed, so that it is 
much less irritating to vehicle occupants with respiratory 
sensitivities; and PSAN-based propellants are significantly more 
efficient than other propellants (converting a higher percentage of the 
solid propellant into gas), so that PSAN inflators can be smaller and 
lighter, which has helped automakers meet government mandates to 
produce more fuel-efficient vehicles.
    At the present time, more than 50 percent of the airbag replacement 
kits Takata is providing in response to the recalls contain inflators 
made by other suppliers that do not use ammonium nitrate propellant. We 
expect that number to reach 70 percent by the end of this year. The use 
of other suppliers' inflators significantly augments Takata's capacity 
for production of replacement inflators and also responds to some 
automakers' desire to use alternative technologies in implementing 
their recalls.
    Through investments in innovation, Takata has developed and 
continues to develop a range of new inflator products for use in both 
driver airbags and passenger airbags, including updated PSAN-based 
inflators with desiccant and inflators that do not use ammonium nitrate 
in the propellant. Takata is working intensively with vehicle 
manufacturers to validate new inflator products, including for use as 
remedy parts. Over time, all of our inflators will consist of new 
products.
    The process of developing and qualifying inflators that are re-
engineered, including re-engineering inflators to add desiccant, takes 
time. Among other things, this process involves testing to establish 
that the airbag modules equipped with re-engineered inflators will 
adequately protect vehicle occupants in a crash. The completion of that 
process requires several months.
    For certain types of inflators in certain vehicle models, there is 
currently no available alternative to the use of a PSAN-based inflator 
as the remedy part. In these cases, we have agreed with NHTSA that the 
right solution for public safety is not to wait for the completion of a 
process of engineering changes and approvals, but is to take action now 
to replace the original inflators that are subject to the recalls with 
new PSAN inflators.
    The replacement of the original inflator with a newly made PSAN-
based inflator is absolutely the right response to the public safety 
concerns raised by the inflator ruptures, and doing so provides an 
important safety benefit. Because a clear factor in these ruptures is 
the age of the inflator and long-term exposure to particular 
environmental conditions over many years, the replacement of older 
inflators with newly manufactured units, even ones without desiccant, 
will provide an ample margin of safety over the older units being 
replaced, particularly those that have been exposed for many years to 
conditions of high heat and absolute humidity.
    In replacing the batwing inflators on the driver side, Takata's 
remedy parts include, in addition to inflators from other suppliers, a 
newer type of PSAN driver inflator that has not shown a potential risk 
for rupture after exposure to high heat and absolute humidity. On the 
passenger side, Takata has made improvements to address specific 
manufacturing issues and other improvements in the production of new 
inflators, and these improvements also contribute to the added safety 
of the newly manufactured PSAN replacement inflators.
    As we pledged in writing in the Consent Order and the DIRs we 
filed, Takata has agreed with NHTSA to conduct ongoing testing of PSAN-
based inflators used as remedy parts, in order to determine the 
appropriate service life of the parts and whether further action may be 
needed to replace the remedy parts in the future. You can be assured 
that if later replacement of these remedy parts is determined to be 
appropriate, Takata will take the necessary action, in conjunction with 
the affected automakers, to complete such replacements well before any 
potential risk of rupture develops.
    In the meantime, we strongly believe, and NHTSA agrees, that the 
goal of safety is best served through the expanded recall actions we 
have recommended.
Implementing the Recalls
    The Consent Order that we have agreed to with NHTSA makes clear 
that NHTSA will play a central role in overseeing the organization and 
implementation of these proposed recalls. NHTSA has now issued notices 
in the Federal Register to receive comments on how best to proceed in 
this regard. We anticipate that NHTSA will convene meetings involving 
Takata and all of the affected automakers to organize and coordinate 
the staging of the recalls, so as to ensure that the remedy is 
appropriately prioritized to those vehicles where the public safety 
need is most immediate.
    The Consent Order also requires Takata, after consulting with the 
automakers, to prepare a plan for NHTSA's approval that outlines the 
steps Takata will take, both on its own and in conjunction with the 
affected automakers, to maximize recall completion rates and, as noted, 
to carry out further testing of inflators to help determine the safety 
and appropriate service life of the remedy inflators.
    Because the recalls will only succeed if consumers bring their cars 
in for repair, we have committed to working with NHTSA and our 
customers to help inform consumers about the risks associated with some 
inflators, and to urge them to respond in a timely fashion to the 
recalls that are being implemented.
    To this end, we are in the process of developing a proactive 
advertising campaign for NHTSA's approval that would be designed for 
implementation in conjunction with the automakers, in order to reach 
greater numbers of vehicle owners and help to ensure that the recall 
completion rates will be as high as possible.
Additional Measures
    Let me say a bit more about Takata's extensive testing program and 
our ramped up production of replacement kits to address the needs of 
these recalls.
    Since the last hearing before this Committee, we have continued to 
advance our investigation into the root cause factors associated with 
the inflator ruptures. We have performed ballistic tests on more than 
50,000 inflators since September of last year, and that testing and 
analysis is ongoing. We also have performed live dissections, 
propellant analysis for moisture, chemical analysis, leak testing, and 
CT scanning.
    We continue fully to support efforts by David Kelly's Independent 
Testing Consortium and the automakers to do additional testing and 
analysis. And we welcome NHTSA's decision to do its own testing, as 
well as to coordinate with us on our testing.
    In addition to supporting these ongoing testing efforts, we are 
continuing to support the work of the independent Quality Assurance 
Panel, led by former Secretary of Transportation Samuel K. Skinner, to 
ensure that best practices are in place for the production of safe 
inflators. We are committed to adopting the recommendations his panel 
puts forth, and sharing the findings of the report with you and with 
the public.
    We also have continued to ramp up substantially our production of 
replacement kits to fulfill automaker orders. In December, we were 
producing approximately 350,000 kits per month. In May, we produced 
approximately 700,000 units. By September, we expect to be producing 1 
million per month. That is capacity primarily directed to production 
for the U.S. market. And, as mentioned, we continue to work with other 
inflator suppliers to increase further the production of replacement 
inflators to meet anticipated demand.
Conclusion
    In closing, I want to emphasize that we have confidence in the 
inflators we are producing today. We have confidence in the integrity 
of our engineering and our current manufacturing processes. We believe 
that, properly manufactured and installed, these inflators will work as 
designed to save lives. Of course, we know that the proof is in the 
data, and that is why we have enlisted the assistance of the Quality 
Assurance Panel and why we have agreed to conduct ongoing testing, 
including of our remedy parts. We will continue to do everything we can 
to ensure uncompromised safety for our customers and the success of the 
recall efforts, and we will keep Congress, NHTSA, and the public 
updated on our progress.
    Thank you, Mr. Chairman.

    The Chairman. Thank you, Mr. Kennedy.
    Mr. Kunselman?

                 STATEMENT OF SCOTT KUNSELMAN,

           SENIOR VICE PRESIDENT AND HEAD OF VEHICLE

          SAFETY AND REGULATORY COMPLIANCE, FCA US LLC

    Mr. Kunselman. Thank you.
    Chairman Thune, Ranking Member Nelson, members of the 
Committee, thank you for the opportunity to appear today and 
provide an update on this important matter.
    My name is Scott Kunselman, and I am the senior vice 
president and head of vehicle safety and regulatory compliance 
at FCA US, LLC, formerly Chrysler. I lead an organization with 
a mission of safeguarding our customers, a mission we embrace 
with passion.
    As you know, FCA's involvement with Takata airbags is 
extensive, proactive, and ongoing.
    Today's automobiles are among the most sophisticated and 
complex consumer goods on the market. Auto manufacturers are 
more committed than ever to developing advanced safety 
technologies to reduce fatalities and injuries resulting from 
motor vehicle crashes. On a daily basis, we work to design, 
engineer, and manufacture vehicles to withstand a myriad of 
operating conditions.
    Promoting and ensuring vehicle safety is a responsibility 
shared by automakers, suppliers, government, and even 
consumers. FCA looks forward to continuing this collective 
engagement with Takata and NHTSA to help address this critical 
situation related to airbag inflators.
    FCA has remained actively engaged with Takata and NHTSA 
since I spoke with this committee last November. Much has 
transpired since that time. Through multiple recall campaign 
expansions and based on information from both Takata and 
actions by NHTSA, FCA is now in the process of recalling 4.8 
million inflators in approximately 4.5 million vehicles across 
the United States.
    We are also aggressively taking actions on multiple fronts 
to assist in determining the root cause of inflator ruptures, 
which remains unknown at this time. FCA is an active 
participant in the Independent Testing Coalition, a group 
consisting of all 11 affected automakers formed in December 
2014 and, again, trying to independently determine the root 
cause of inflator ruptures. In addition, FCA continues to 
return recalled inflators to Takata to further their research 
and understanding.
    But despite the lack of root cause determination to date, 
FCA's mission to identify and implement solutions that will 
improve the safety of our customers has not been delayed. 
Today, I am pleased to share with the Committee that as of June 
8, 2015, FCA is replacing all driver-side inflators involved in 
the recall with an alternate and permanent design provided 
through TRW. Customers who receive the TRW inflator replacement 
will require no further action on their vehicles.
    The Takata inflators that are no longer needed due to the 
supply from TRW are being quarantined and returned from our 
dealers to Takata. All of the approximately 50,000 customers 
who previously received a Takata inflator will be notified to 
return for the TRW update, as well.
    In addition to these driver-side efforts, FCA has been 
working with Takata to develop improved versions of the 
passenger inflator designs. These new versions will contain an 
improved igniter material as well as a desiccant that will 
protect the propellant from moisture exposure. These designs 
will complete validation testing in August, and FCA expects to 
begin installing those in November of this year.
    To date, FCA continues to be aware of just a single 
incident of a high-pressure deployment involving a driver-side 
airbag causing an injury in one of our vehicles. Our actions 
demonstrate the abundance of caution we are employing to 
protect our customers.
    In closing, I would like to reiterate our belief that 
promoting and ensuring vehicle safety is a responsibility 
shared by automakers, suppliers, government, and consumers, and 
FCA will continue to collaborate with Takata, NHTSA, and others 
to aggressively address this matter.
    I once again extend my thanks to the Committee for 
discussing this important issue, and I would be pleased to 
answer any questions.
    [The prepared statement of Mr. Kunselman follows:]

 Prepared Statement of Scott G. Kunselman, Sr. Vice President and Head 
        of Vehicle Safety and Regulatory Compliance, FCA US LLC
    Chairman Thune, Ranking Member Nelson, Members of the Committee, 
thank you for the opportunity to appear today and provide an update on 
this important matter.
    My name is Scott Kunselman and I am Senior Vice President and Head 
of Vehicle Safety and Regulatory Compliance at FCA US LLC. I lead an 
organization with a mission of safeguarding our customers, a mission we 
embrace with passion.
    As you know, FCA's involvement with Takata airbags is extensive, 
proactive and ongoing.
    Today's automobiles are among the most sophisticated and complex 
consumer goods on the market. Auto manufacturers are more committed 
than ever to developing advanced safety technologies to reduce 
fatalities and injuries resulting from motor vehicle crashes. On a 
daily basis, we work to design, engineer, and manufacture vehicles to 
withstand a myriad of operating conditions.
    Promoting and ensuring vehicle safety is a responsibility shared by 
auto makers, suppliers, government and consumers. FCA looks forward to 
continuing this collective engagement with Takata and NHTSA to help 
address this critical situation relating to airbag inflators.
    FCA has remained actively engaged with Takata and NHTSA since I 
spoke with this Committee last November. Much has transpired since that 
time. Through multiple recall campaign expansions, based on information 
from Takata and actions by NHTSA, FCA is now in the process of 
recalling 4.8 million inflators in 4.5 million vehicles in the United 
States.
    We are also aggressively taking actions on multiple fronts to 
assist in determining the root cause of inflator ruptures, which 
remains unknown at this time. FCA is an active participant in the 
Independent Testing Coalition (ITC), a group consisting of the 11 
affected automakers formed in December 2014 trying to independently 
determine the root cause of the inflator ruptures. In addition, FCA 
continues to return recalled inflators to Takata to further their 
research and understanding.
    Despite the lack of a root cause determination to date, FCA's 
mission to identify and implement solutions that will improve the 
safety of our customers has not been delayed. Today, I am pleased to 
share with the Committee that as of June 8, 2015, FCA is replacing all 
driver side inflators involved in the recall with an alternate and 
permanent design provided by TRW. Customers who receive the TRW 
inflator replacement will require no further action on their vehicles. 
Takata inflators that are no longer needed due to the supply from TRW 
are being quarantined and returned from our dealers to Takata. All of 
the approximately 50,000 customers who previously received a Takata 
inflator will be notified to return for the TRW update, as well.
    In addition to these driver side efforts, FCA has been working with 
Takata to develop improved versions of the passenger inflator designs. 
These new versions will contain an improved igniter material, as well 
as a desiccant that will protect the propellant from moisture exposure. 
These designs will complete validation testing in August and FCA 
expects to begin installation in November of this year.
    To date, FCA continues to be aware of a single incident of a high-
pressure deployment involving a driver's-side air bag that caused a 
personal injury in one of our vehicles. Our actions demonstrate the 
abundance of caution we are employing to protect our customers.
    In closing, I would like to reiterate our belief that promoting and 
ensuring vehicle safety is a responsibility shared by auto makers, 
suppliers, government, and consumers. FCA will continue to work 
collaboratively with Takata, NHTSA and others to aggressively address 
this matter.
    I once again extend my thanks to the Committee for discussing this 
important issue and I would be pleased to answer any questions.

    The Chairman. Thank you, Mr. Kunselman.
    Mr. Schostek?

  STATEMENT OF RICK SCHOSTEK, EXECUTIVE VICE PRESIDENT, HONDA 
                         NORTH AMERICA

    Mr. Schostek. Thank you, Mr. Chairman, Ranking Member 
Nelson, and members of the Committee. I appreciate the 
opportunity to update the Committee on our efforts since my 
last appearance before this committee.
    Let me begin by acknowledging that in the past 2 weeks we 
have confirmed that two more customers lost their lives--one in 
September 2014 and the other in April of this year--as a result 
of Takata airbag inflator ruptures that have occurred in our 
older-model vehicles.
    This is heartbreaking and a painful reminder to us of the 
reason we continue to urgently accelerate our actions to repair 
the affected vehicles. But, of course, the real pain is 
experienced by the families of the victims. We sincerely 
apologize to them and extend our deepest sympathies.
    We are working very hard to solve this problem. Over and 
above the required mailed notification to affected customers, 
we have pursued new and creative ideas to encourage our 
customers to check their vehicle identification number in order 
to increase the rate of response to the recalls. We have 
enhanced our general recalls website and created a new micro 
site dedicated to this issue to keep our customers informed and 
to make it easy for them to check their vehicles for open 
recalls.
    Honda also voluntarily initiated a bilingual regional 
advertising program in March to implore customers to repair 
their vehicles. This campaign of radio commercials and full-
page newspaper ads, represented here to my left, was designed 
to grab the attention of customers in the nine high temperature 
and absolute humidity states and two U.S. territories. We also 
are using social media channels in a targeted way, including 
via Facebook, with good success.
    And let me add, Mr. Chairman, that whenever we issue a 
press release or statement on this matter, we specifically 
request that the news media help us spread the word by 
directing customers to our recall websites so they can look up 
their VIN and get their vehicle repaired. And we have 
appreciated the news media's assistance with this effort.
    To accelerate the safety actions and increase the supply of 
airbag inflators, Honda proactively began searching for 
alternate supply solutions to more quickly facilitate the 
repairs of these older-model vehicles. And that effort led to 
agreements with Daicel, Autoliv, and TRW to provide us with 
replacement parts, in addition to Takata.
    As a result of this proactive effort by Honda and the 
actions taken by our dealers, we are averaging more than 50,000 
repairs per week. We have also asked our dealers to expand 
their service hours and never turn away a customer with an 
affected vehicle.
    And we require dealers to check the VIN for every vehicle 
that comes into their dealership. To support this policy, in 
February we initiated a new system that alerts dealers whenever 
their staff fails to check a VIN of a car brought in for 
service to see if it has an open recall.
    We have also reinforced with our dealers Honda's firm 
policy to provide affected customers with a loaner or rental 
car free of charge while their vehicle is being repaired or if 
they are waiting for a replacement part to be delivered. All 
dealers are authorized to make a vehicle available to a 
customer without prior approval from Honda.
    We have also been searching salvage yards nationwide to 
find and secure recalled inflators. We have already identified 
many thousands of inflators from salvage yards that now never 
will be installed in another vehicle.
    In some markets, we have enlisted a special investigative 
firm as part of our effort to contact hard-to-reach owners of 
older model vehicles affected by the Takata airbag inflator 
recalls.
    Mr. Chairman, for many reasons, it is particularly 
difficult to locate the owners of older vehicles and get them 
repaired. When I testified last November, I suggested that we 
find a way to tie the annual state vehicle registration process 
to a requirement that safety defects be addressed before 
completion of vehicle registration.
    Subsequently, Ms. Stephanie Erdman, who was injured by a 
Takata inflator rupture and who also appeared before this 
committee last fall, joined me in writing an op-ed in 
Automotive News in support of the idea of such a registration 
requirement.
    We continue to believe there is substantial promise with 
this approach, and we want to thank Senators Markey and 
Blumenthal for introducing S. 617. I recognize there are some 
issues about the concept that require further discussion, but I 
am convinced that this is the single most significant step we 
can take.
    Again, I very much appreciate the opportunity to appear 
before the Committee today, and I would be happy to address 
your questions. Thank you.
    [The prepared statement of Mr. Schostek follows:]

    Prepared Statement of Rick Schostek, Executive Vice President, 
                          Honda North America
    Thank you, Mr. Chairman, Ranking Member Nelson and members of the 
Committee. My name is Rick Schostek, Executive Vice President of Honda 
North America, based in Marysville, Ohio.
    I appreciate the opportunity to update the Committee regarding the 
efforts made by Honda with respect to the recall of Takata airbag 
inflators since my last appearance before this committee over seven 
months ago.
    Let me begin by acknowledging that in the past two weeks we have 
confirmed that two more customers lost their lives--one in September 
2014 and the other in April of this year--as a result of Takata airbag 
inflator ruptures that have occurred in our older model vehicles. This 
is heartbreaking, and a painful reminder to us of the reason we 
continue to urgently accelerate our actions to repair the affected 
vehicles. But of course the real pain is experienced by the families of 
the victims. We sincerely apologize to them, and extend our deepest and 
heartfelt sympathies.
    We are working very hard to solve this problem. During the past few 
months, we have been accelerating our efforts to repair vehicles at a 
level unprecedented in the history of our company.
    This is a reflection of the deep commitment our company has 
undertaken to notify our customers and to increase the supply of 
replacement inflators available for repairs.
    Over and above the required mailed notification to affected 
customers, we have pursued new and creative ideas and methods to 
encourage our customers to check their vehicle identification number 
and recall status in order to increase the rate of response to recall 
notifications.
    We have enhanced our general recalls website and created a new 
microsite dedicated to this issue to keep our customers informed and to 
make it easy for them to check their vehicles for open recalls. And our 
Customer Relations department is set up to receive calls from customers 
seven days a week.
    Honda also voluntarily initiated a bi-lingual regional advertising 
campaign in March to implore customers to repair their vehicles. This 
campaign of radio commercials and full-page newspaper ads, represented 
behind me, was designed to grab the attention of customers in the nine 
states and two U.S. territories that experience the most consistently 
high temperatures and absolute humidity and to encourage them to 
immediately check for open recalls and safety improvement campaigns.
    We also are using social media channels in a targeted way--
including via Facebook, with good success. Let me add, Mr. Chairman, 
that whenever we issue a news release or statement on this matter, we 
specifically request that the news media help us spread the word by 
directing customers to our recall websites, so they can look up their 
VIN and get their vehicle repaired. We have appreciated the news 
media's assistance with this effort.
    To accelerate the safety actions and increase the supply of airbag 
inflators, Honda proactively began searching for alternative supply 
solutions to more quickly facilitate repairs of our older model 
vehicles. This effort led to agreements with Daicel, Autoliv and TRW 
Automotive to provide us with replacement parts in addition to Takata.
    As a result of this proactive effort by Honda and the actions taken 
by our dealers, in recent weeks, we are averaging more than 50,000 
repairs per week. We have asked our dealers to expand service hours and 
to never turn away a customer with an affected vehicle. And we require 
dealers to check the VIN for every vehicle that comes into their 
dealership. To support this policy, in February we initiated a new 
system that alerts dealers whenever their staff fails to check the VIN 
of a car brought in for service to see if it has an open recall.
    We also have reinforced with our dealers Honda's firm policy to 
provide affected customers with a loaner or rental car free of charge 
while their vehicle is being repaired or if they are waiting for a 
replacement part to be delivered. All dealers are authorized to make a 
vehicle available to a customer without prior approval from Honda. We 
have been actively monitoring the availability of loaner and rental 
cars and engaging with our dealers to ensure that they offer such 
vehicles so we can meet our customers' needs.
    Further, to prevent the possibility that any Takata airbag 
inflators under recall can be used as a replacement part, we've been 
searching salvage yards nationwide to find and secure recalled 
inflators. We have already identified many thousands of inflators from 
salvage yards that now never will be installed in another vehicle.
    In some markets, we have enlisted a special investigative firm as 
part of our effort to contact hard-to-reach owners of older model 
vehicles affected by the Takata airbag inflator recalls.
    Mr. Chairman, for many reasons, it is particularly difficult to 
locate the owners of older vehicles and get the vehicles repaired. When 
I testified last November, I suggested that we find a way to tie the 
annual state vehicle registration process to a requirement that safety 
defects be addressed before completion of vehicle registration. 
Subsequently, Ms. Stephanie Erdman, who was injured by a Takata 
inflator rupture and who also appeared before this committee last fall, 
joined me in writing an Op Ed in Automotive News in support of the idea 
of such a registration requirement.
    We continue to believe that there is substantial promise with this 
approach. I want to thank Senators Markey and Blumenthal for 
introducing S.617, the Repairing Every Car to Avoid Lost Lives Act--the 
``RECALL'' Act. I recognize that there are a number of issues about 
this concept that require further discussion. But I am convinced that 
this is the single most significant step we can take to achieve what we 
all want to accomplish, and that is a 100 percent repair rate. Our 
company stands ready to work with the Congress to help find a path 
forward.
    Even as we look at new, long-term solutions to improve recall 
completions, we remain focused on the needs of our customers today. And 
we are fully mobilized on the effort to complete the recalls and safety 
improvement campaigns associated with Takata airbag inflators.
    Again, I very much appreciate the opportunity to appear before the 
Committee today, and I will be happy to address your questions. Thank 
you.

    The Chairman. Thank you, Mr. Schostek.
    Mr. Kennedy, NHTSA has urged Takata to get replacement 
inflators into vehicles with potentially defective airbags as 
quickly as possible even if the root cause has not yet been 
identified and those replacements may have to be replaced again 
some years down the road.
    We are all concerned this very serious safety issue has 
persisted for way too long. And eight people have died; 
numerous others have received serious injuries. Takata has been 
looking at this problem for several years. We need to know why 
this happened and make sure it doesn't happen again.
    So tell me what Takata is doing to find the root cause.
    Mr. Kennedy. Well, Senator, we have been working with a 
number of avenues to get to root cause. As you have mentioned, 
we have been working on this for a number of years. We have 
been working with the Fraunhofer Institute from Germany, who is 
the leading expert in the world on propellants and pressure 
vessel designs.
    We have learned much, especially in the last 6 to 8 months, 
as to what the root cause of this is. We understand the 
mechanism. We understand a number of the factors that cause the 
issues. But, as you said, we do not have a definitive root 
cause that we can turn on and off.
    But, in spite of that, we have gone forward with NHTSA and 
the automakers to replace parts because this is in the best 
interests of the public safety.
    The Chairman. Well, without a root cause, though, we don't 
know whether or not the new replacement inflators have the same 
defect. So why is it a good idea to put new inflators into cars 
that might have the same defect?
    Mr. Kennedy. Yes. Well, let me talk about that a little 
bit.
    Many of the replacement parts are alternative designs; they 
are not the same design that was originally used. As I 
mentioned, particularly on the driver side, the batwing 
inflators were the ones that have caused all of the fatalities 
in the field as well as most of the serious injuries. And we 
are not replacing with batwings. We will go out and get every 
batwing that was ever made, including all of the remedy parts.
    And we are also, as Mr. Kunselman and Mr. Schostek have 
talked about, we are using alternative inflators from many of 
our competitors in order to speed replacement parts out into 
the field.
    And then we are continuing to work to improve the current 
inflators, as Mr. Kunselman mentioned as well, in order to make 
them more robust. And part of the consent order requires us and 
NHTSA and the automakers to continue to get the parts back and 
evaluate the remedy parts to make sure that they are safe.
    The Chairman. Will these replacement bags, though--are they 
going to be safer than the original equipment, than the 
original airbags?
    Mr. Kennedy. What we do know is that it takes a 
considerably long time for this condition to manifest itself. 
Previously, Administrator Rosekind had said 7 to 12 years. So 
we know that there is a large increase in public safety and in 
the margin of safety by just putting a brand-new inflator in.
    And we do know that on some of the passenger-side ones, 
there were some manufacturing defects that we have been able to 
uncover with all the testing that we have done in the last 6 
months. So we feel very confident in the inflators that we are 
making today.
    The Chairman. Mr. Kunselman, Takata has stated, as you 
heard, that its replacement inflators are safe in the interim 
but require replacement at a later date. NHTSA also endorsed 
this approach.
    You have stated that Fiat Chrysler will be replacing all 
recalled driver-side inflators with an alternative design by 
manufacturer TRW and described TRW's design as permanent, that 
customers who receive the TRW replacement will not need to come 
back in for another replacement.
    Given that we still don't know the root cause for this 
defect, why are you so confident that the TRW inflators will 
not have to be replaced in the near future?
    Mr. Kunselman. In this case, the TRW inflator that we are 
replacing--with Takata's help, mind you--it has a track record, 
and we are not aware of any issues with its previous use in the 
field.
    We were fortunate to have an available inflator with the 
right characteristics to utilize in our vehicle program that 
has a track record, and I am unaware of issues with it in the 
past. That explains the confidence.
    The Chairman. Yes.
    Mr. Kunselman, Mr. Schostek, for our automakers, I am sure 
you both recall because we had her in here, Lieutenant 
Stephanie Erdman, who was seriously injured by shrapnel from a 
defective Takata airbag, testified at our November hearing that 
she took her vehicle to a Honda dealership three times without 
the dealer informing her that her car was subject to an open 
recall. Now, that is pretty incredible. Three times.
    And so the question is, you know, what steps have you all 
taken since then to work with your dealers? And I know you 
described some of this, Mr. Schostek, in your testimony. But 
how are you going to give us an insurance that these important 
safety recalls have been addressed and assure that recall 
information and vehicle safety issues are going to be shared 
with customers when they get their cars in and have them 
serviced?
    Mr. Schostek. Thank you, Mr. Chairman. It is an important 
question, and it is on our minds constantly, as well. We have 
more than 1,200 Honda and Acura dealers in the United States, 
and we are working hard with them.
    We have done a number of things since we last were here in 
November. As I mentioned, we have initiated a new report that 
flags if a dealer neglected to check a VIN when a customer came 
in.
    Moreover, we have had face-to-face meetings with our 
dealers. We have zone managers and district managers, and they 
have personally visited every dealer and talked to each dealer 
about the importance of checking for open recalls. We have 
periodic regional meetings of our dealer principals. We have in 
the last several months reinforced again that obligation.
    Mr. Chairman, there is sometimes turnover at a dealership. 
We need to continue to make sure that education is well 
understood, make sure that the dealer principals understand, 
the owners of the dealerships understand that this is our 
expectation of them and that we are going to check every one of 
these VINs.
    So we have taken multiple efforts already, and we will do 
more to continue to remind them of their obligation.
    The Chairman. Mr. Kunselman, do you have anything to add to 
that?
    Mr. Kunselman. Yes, I would reiterate, many of the same 
points that Mr. Schostek highlighted we are doing, as well, 
with respect to informing the dealer of their responsibility.
    I would add to it something that he also mentioned earlier. 
We have made sure that the technology is also there to make 
this automatic step in the process. When a vehicle rolls into 
the service bay at a dealer, in most cases in an automated 
fashion the vehicle uploads the information to the service 
provider's screen, and the service provider is immediately 
flagged of open recalls, and the service provider goes out of 
their way to schedule that activity on that visit or on an 
immediately subsequent visit.
    So, in addition to the reminders of responsibility, the 
urgency, we are making sure that the technology exists to make 
this an automatic step in the process, so it is not left to 
human hands, but the machine can point this out to their 
service provider.
    The Chairman. Yes. Thank you.
    Senator Nelson?
    Senator Nelson. Would you all hold up that photograph, 
please?
    This is a picture of a massive explosion in 2006 in your 
Mexico plant. It was so massive that it blew out windows a 
kilometer away.
    This plant used the ammonium nitrate propellants to make 
airbag inflators; is that correct?
    Mr. Kennedy. Yes, sir, that is correct.
    Senator Nelson. And, in your written response to our 
committee's November letter, the company said that the 
explosion was caused by, quote, ``improper storage of 
propellant scrap.'' Is that right?
    Mr. Kennedy. Yes, sir. Yes, Senator, that is correct.
    Senator Nelson. Is that the type of concern that your 
safety audits were intended to identify?
    Mr. Kennedy. One of them, yes, sir.
    Senator Nelson. Then why would Takata decide to halt these 
audits for financial reasons?
    Mr. Kennedy. Yes, I believe you are referring to the report 
that was issued yesterday by the staff of the Committee. I 
think that misrepresents exactly what happened, sir, and, if 
you will allow me, I will explain that.
    Senator Nelson. Certainly.
    Mr. Kennedy. What that was referring to--first of all, 
there are a number of safety and quality audits that are done 
on the products. The audits that were referred to in that e-
mail were not the safety and the quality audits on the 
products, first of all. Because I think that was implied or 
inferred from the report.
    Second, the only thing that was suspended was the 
participation of people from other regions of the world. We 
held the local safety audits. We held the local quality audits. 
They were all done on schedule, and they were completed. The 
only thing that e-mail was referring to was the participants 
from other parts of the world were not to be included in the 
audit.
    Senator Nelson. All right. But I am trying to get at this. 
Hasn't Takata blamed the defective airbags on how your plants 
handled the ammonium nitrate propellants and how your plants 
assembled the inflators?
    Mr. Kennedy. There were some of the earlier recalls that I 
believe were announced in 2008-2009 where we identified 
manufacturing defects that included the pressing of propellant 
disc as well as exposure to humidity during the process.
    Senator Nelson. So the answer is yes. So if you are saying 
that these pyrotechnic handling problems had to do with the 
safety of the inflators, wouldn't you have had a clue in 2006 
when that happened?
    Mr. Kennedy. Absolutely. Absolutely, we did. We had issues 
at the plant where material, scrap material, was mixed, and 
that is what led to that particular incident.
    Fortunately, no one was injured in that incident, other 
than I think someone sprained their wrist walking out the door. 
So we completely cleared the plant. No one was injured, no one 
was hurt in that particular thing.
    And we revised a number of our safety and handling 
procedures following that. They were completely redone after 
that.
    Senator Nelson. And yet, knowing that something is going on 
here, it is 9 years later----
    Mr. Kennedy. Yes, sir.
    Senator Nelson.--and now we see.
    Now, explain this batwing design and why you think that is 
the culprit.
    Mr. Kennedy. Well, the batwing design is just--it is a name 
the engineers came up with to describe the shape of the 
propellant wafer that is inside the driver airbag inflator. 
There is really nothing about it other than that.
    Senator Nelson. The propellant that caused that explosion?
    Mr. Kennedy. It was one of the--it was the mixing of 
different types of propellant and energetic materials that led 
to that particular incident.
    Senator Nelson. Did it occur to you back in 2006 with this 
that humidity might have had something to do with it?
    Mr. Kennedy. I haven't reviewed the report, and I don't 
remember it from that long ago, Senator. But I don't recall the 
humidity was an issue in that particular incident at the 
facility.
    Senator Nelson. What about----
    Mr. Kennedy. I can double-check that to be sure and get 
back with you, but that is my recollection.
    Senator Nelson. Well, what about all these deaths in the 
South? Do you think humidity is one of the contributing 
factors?
    Mr. Kennedy. Yes, Senator, we do. The report from the 
Fraunhofer Institute has concluded that they think it is a 
multifactor combination of age, exposure to high absolute 
humidity, and high temperature.
    Senator Nelson. Then how do you explain the southern 
California, where there is a mild temperature, death?
    Mr. Kennedy. Well, that is why we are continuing to look 
into the issue. We haven't dropped it. We have experts from 
Penn State. We have experts from Georgia Tech. We have the 
Fraunhofer Institute. We are working with a vast array of 
experts in this field, and we are continuing to investigate to 
try to run it to ground so we know exactly what happened.
    But that is why we decided to act, with NHTSA and the 
automakers, to go get these parts now. It is the right thing to 
do for the public's safety.
    Senator Nelson. Would you want your daughter to drive a 
vehicle with a Takata airbag that you had replaced the batwing 
ammonium nitrate?
    Mr. Kennedy. The car that my wife and children drive in 
every day uses one of these ammonium nitrate inflators.
    Senator Nelson. Did you replace the batwing?
    Mr. Kennedy. It was not--it was on the passenger side.
    Senator Nelson. Is that the only place that it is replaced, 
on the passenger side?
    Mr. Kennedy. Batwings are just a driver-side design. It is 
not used on the passenger side at all. It is purely a driver-
side issue.
    Senator Nelson. So you are attributing the batwing design 
to part of the defect.
    Mr. Kennedy. That is what the data and the testing has 
shown. All of the fatalities and most of the serious injuries 
have involved the batwing driver inflators. That is why we have 
agreed to go get 100 percent of those back from the field.
    Senator Nelson. Then I didn't understand your answer, that 
you suddenly jumped to the passenger side.
    Mr. Kennedy. Well, you asked me if I would--maybe I 
misinterpreted your question, Senator. I am sorry.
    Senator Nelson. If your daughter were driving the 
automobile that you had replaced the batwing design in the 
driver's seat----
    Mr. Kennedy. I would have no issue with that at all, 
Senator. None.
    Senator Nelson. Well, I will tell you, there are a lot of 
consumers that would. How do you think that the consumers can 
feel that this thing is fixed?
    Mr. Kennedy. Well, that was why--again, sticking with the 
batwing on the driver side--that is why we have agreed to go 
replace every one of these, to go get the parts and get them 
out of the field. And a lot of people have talked today about 
the efforts to do that.
    And that is really one area where we, as an industry and a 
government, need to concentrate, is to get the parts out of the 
field once there has been a defect analyzed and declared.
    Senator Nelson. Mr. Kunselman, apparently you don't feel 
confident enough that it is fixed. You have gone to a new 
airbag manufacturer. Tell us about that.
    Mr. Kunselman. Yes, thank you.
    Again, as I stated, we were fortuitous in the ability to 
identify an alternative that would perform appropriately in our 
vehicle, given the demands of the fill rate and size of the 
airbag. And so we did quickly move here to gain confidence that 
this would be a permanent solution, even in the absence of root 
cause, not understanding what ultimately might happen. This is 
why we took this path.
    Senator Nelson. May I regurgitate your words, and you tell 
me if this is what you just said?
    We wanted a clear path to greater confidence, so we went 
with another manufacturer.
    Mr. Kunselman. That is correct.
    Senator Nelson [presiding]. OK.
    Thank you, Mr. Chairman.
    Senator Blumenthal?
    Senator Blumenthal. Thank you, Senator Nelson.
    Thank you for being here today, all of you.
    Mr. Kennedy, you have been with Takata for only about 3 
years, correct?
    Mr. Kennedy. No, sir. I have been with Takata just over 10 
years.
    Senator Blumenthal. Ten years.
    Mr. Kennedy. Yes, sir.
    Senator Blumenthal. Sorry. So you were with the company 
back in 2005.
    Mr. Kennedy. Yes. I started in December 2004. Correct.
    Senator Blumenthal. I would like you to commit, as 
Executive Vice President of this company, that Takata will 
establish a compensation fund, similar to the one that GM 
established.
    Mr. Kennedy. Yes, I haven't been involved in that, of the 
recall, at this point, sir, so I can't do that. I will 
certainly take that back to our Chairman and to our team and 
discuss that and get back with you on that. But I am not in a 
position today to commit to that, sir.
    Senator Blumenthal. Don't you run the company's North 
American operation?
    Mr. Kennedy. I have responsibility for certain aspects in 
North America. I am responsible for our customer activity, 
including sales and marketing; engineering, application 
engineering; program management; some of our core engineering, 
not related to inflators but core engineering on other 
projects; as well as some of our IT and communications.
    Senator Blumenthal. Well, I am just a country lawyer from 
Connecticut, but it sounds like you run this company in North 
America.
    Mr. Kennedy. I report to an executive committee and a 
president of North America. So I do not run all aspects of the 
North American operation, sir.
    Senator Blumenthal. How soon can you come back with an 
answer about a compensation fund?
    Mr. Kennedy. I would think in the next--would 4 weeks be 
sufficient, sir?
    Senator Blumenthal. How about the next 2 weeks?
    Mr. Kennedy. Two weeks? Yes, sir.
    Senator Blumenthal. My view is that Takata is every bit as 
responsible for the 8 deaths found so far as GM is for the 117 
deaths and counting.
    And the number eight is still, as of today--the 
compensation fund that you should establish, in my opinion, is 
likely to disclose additional deaths that resulted from this 
defective product. Would you agree?
    Mr. Kennedy. I think it is--I would agree that it is 
probably likely, as many of these parts are still in the field.
    Senator Blumenthal. In fact, let me show you one of those 
parts. This is a Takata inflator that caused the explosion in 
this airbag that caused these holes. It didn't shred the 
airbag, but the shards that came through the airbag, caused by 
the explosion--and you can see the results of that explosion--
piercing this metal, and you can see where the shards, 
emanated, could well have caused the kinds of deaths that we 
have seen eight times so far, demonstrated eight times so far. 
Correct?
    Mr. Kennedy. Yes, sir. And, again, I just want to repeat 
how deeply sorry we are for all of the pain and suffering we 
have caused.
    Senator Blumenthal. And I am not challenging whether you 
are sorry. I believe sincerely that you are. My question is, in 
replacing these batwing propellants, have you also replaced the 
chemical, ammonium nitrate, that was used in these batwing 
propellants?
    Mr. Kennedy. Some of the replacement parts that we are 
using for those batwings still include a phase-stabilized 
ammonium nitrate. But it is a completely different design that 
we have not experienced issues with.
    Senator Blumenthal. You haven't experienced issues with it 
because you haven't finished testing.
    Mr. Kennedy. Well, they have been in the field for a number 
of years, they have been used in a number of different 
vehicles, and these alternative designs have not seen issues.
    Senator Blumenthal. Why are you continuing to use ammonium 
nitrate, when it was very likely a contributing factor, if not 
the factor, in causing these exploding inflators?
    Mr. Kennedy. Well, first, I respectfully would disagree 
that it is the issue with causing the inflator ruptures. It 
could be one of the potential factors in it.
    But phase-stabilized ammonium nitrate has many, many 
advantages, especially over the materials that we were using 
prior. The industry was using azide prior, and azide is highly, 
highly toxic. And some of the other materials that we had used 
had issues with handling and manufacturing because they were 
very, very energetic in a normal state. Phase-stabilized 
ammonium nitrate, if you put it on the table and put a torch on 
it, you can't even light it.
    It is very safe, and it is very clean. It burns very, very 
efficiently, which, again, addressed some of the concerns that 
were in the field with previous propellants that were causing 
respiratory issues with many, many drivers.
    Senator Blumenthal. But the problem is that it becomes 
unstable when it becomes moist or accumulates moisture, 
correct?
    Mr. Kennedy. Well, it is not a phase-stabilization issue. 
This is what everyone was concentrating on at the beginning, 
that it is an issue with the phase stabilization of ammonium 
nitrate. The conclusions that the Fraunhofer Institute have 
come to is this is not a phase-stabilization issue. We cannot 
even measure the loss of phase stabilization that has occurred 
in these parts.
    It is not a phase-stabilization issue. This is a much more 
subtle issue that takes many, many factors over many, many 
years. And sometimes in certain vehicles--sometimes in one 
vehicle it will perform perfectly well. The same part in 
another vehicle and the same exact area will have issues.
    So there are a number of things we don't understand. But 
that is why we felt it was time to act and get the parts out of 
the field, so we could continue this analysis of the parts.
    Senator Blumenthal. You are continuing to use ammonium 
nitrate but with a different design?
    Mr. Kennedy. We have many designs that use phase-stabilized 
ammonium nitrate. I think, of the six that are involved in 
this, most are out of--I think five of the six are out of 
production. There is another one that will be out very shortly. 
So the ones involved in these particular issues and these 
particular recalls are not in serial production any longer.
    Senator Blumenthal. Looking forward, are you replacing the 
batwing propellants or inflators out there now with inflators 
that have ammonium nitrate?
    Mr. Kennedy. Some of them are still using--it is a 
completely different inflator design, a completely different 
propellant design, but some of them do still use phase-
stabilized ammonium nitrate.
    But, as Mr. Kunselman said, we are--I think, in May, 50 
percent of the inflator kits that we sent included inflators 
from our competitors. By the time we get to December, 70 
percent are estimated to be with outside inflators.
    So most of the replacements that we are having are 
alternative propellant designs. But even the ones that aren't 
are using later versions of ammonium nitrate, for the most 
part, at this point.
    Senator Blumenthal. Have you tested these new designs?
    Mr. Kennedy. Yes, sir, we have.
    Senator Blumenthal. How rigorously?
    Mr. Kennedy. Very rigorously. And most of them have been in 
production for a number of years.
    Senator Blumenthal. Have they shown signs of moisture?
    Mr. Kennedy. Not to my knowledge, sir.
    Senator Blumenthal. But you are continuing to use ammonium 
nitrate.
    Mr. Kennedy. Yes, sir. We are continuing to use phase-
stabilized ammonium nitrate.
    Senator Blumenthal. And, Mr. Kunselman, that is one of the 
reasons why you are going to TRW, correct?
    Mr. Kunselman. Thank you.
    As I stated, the path to the TRW inflator was fortuitous 
because it fit the inflation characteristics in our car and 
provided me with, absent a root cause, the most confidence that 
it would be a permanent solution.
    Senator Blumenthal. Well, I think that is a very genteel 
and nice way of saying you want a safe propellant and so you 
are going with a company that does not use ammonium nitrate. 
Correct?
    Mr. Kunselman. That is accurate.
    Senator Blumenthal. Mr. Kennedy, your company filed for a 
patent in 2006 that, in effect, demonstrated the knowledge of 
moisture's effect on ammonium nitrate, correct?
    Mr. Kennedy. I am sorry, I am not involved in the patents 
on inflators, Senator, but if you give me a little more 
information, I might be able to comment.
    Senator Blumenthal. I will give you information that is 
available to all of us, which is that your company explained 
that moisture could seep into the inflator and might cause the 
propellant to become more unstable. It said that numerous 
times.
    It filed for a patent back in 2006 that demonstrated it was 
aware of that problem in that year, correct?
    Mr. Kennedy. Well, again, I am not familiar with the patent 
you are referring to, but I can tell you that moisture seepage 
into any inflator is a known issue, and moisture in particular 
with ammonium nitrate is a known issue. And that is why we have 
addressed that in our designs and in our manufacturing 
processes.
    Senator Blumenthal. Are you familiar with the chemical 
known as desiccant?
    Mr. Kennedy. Yes, sir. Yes, Senator, I am aware of 
desiccant.
    Senator Blumenthal. At what point did Takata begin to add 
desiccant to its----
    Mr. Kennedy. I believe it was--it was in that timeframe 
that you had mentioned there. I think 2007, 2008.
    Senator Blumenthal. And the reason it added desiccant was 
to reduce the effects of moisture in making the ammonium 
nitrate more unstable.
    Mr. Kennedy. Well, there were a number of changes that were 
made--we call them X series inflators. There was a number of 
design changes that were made in the X series inflators in that 
timeframe. The propellant formulation was changed, desiccant 
was added, a number of the other components were updated. It is 
just part of what--in Japan, they call it ``kaizen''; it is 
continuous improvement. We are constantly looking at ways to 
improve the parts.
    And in those particular parts, on the passenger side we 
were able to shrink the size of the inflator by 10 millimeters, 
which saved weight and saved space in the vehicle that helped 
meet CAFE requirements and helped our customers meet their 
goals of weight reduction and performance improvements.
    Senator Blumenthal. Continuous improvement?
    Mr. Kennedy. Yes, sir.
    Senator Blumenthal. Your term?
    Mr. Kennedy. Yes, sir. ``Kaizen,'' that is what the 
Japanese call it.
    Senator Blumenthal. ``Kaizen''----
    Mr. Kennedy. Yes, sir.
    Senator Blumenthal.--in Japanese, sounds to me like a 
euphemism for trying to avoid exploding airbags.
    Mr. Kennedy. No, sir, not at all. I disagree. Like I said, 
it was a continuous improvement to improve the product. I think 
every manufacturer of every product is----
    Senator Blumenthal. How did it improve the product, besides 
avoiding the propellants exploding as a result of moisture?
    Mr. Kennedy. Well, as I said, there were a number of 
changes that were implemented into the inflators at that time. 
The addition of desiccant was one of them. It allowed us to 
make the inflators smaller; it allowed us to make the inflators 
lighter. I mean, those were all things that we are always 
looking to do.
    Senator Blumenthal. Isn't it fair to say that one of the 
reasons for that continuous improvement was the presence of 
moisture inside the inflator?
    Mr. Kennedy. Well, as I said, moisture in any inflator is a 
problem. And every inflator has leak paths that allow moisture 
in, every inflator that is out there. I mean, at the end of the 
day, an inflator is full of holes in order to let gas come out. 
So if there are holes to let gas come out, there are holes to 
let moisture in. So it is an issue that every inflator 
manufacturer deals with.
    Senator Blumenthal. Your new inflators, have they shown 
evidence of moisture?
    Mr. Kennedy. I am not sure if I can answer that completely, 
Senator, because I don't know that we have gotten parts back 
from the field on these newer ones and looked at that on every 
one of them. So I can't----
    Senator Blumenthal. I thought your testimony here today was 
that they have been rigorously tested.
    Mr. Kennedy. They have. They have.
    Senator Blumenthal. But you don't know whether moisture has 
been found in them.
    Mr. Kennedy. I don't know the answer to that specific 
question, Senator.
    Senator Blumenthal. Where I am going here, Mr. Kennedy, 
essentially, is that there is a lot of evidence that ammonium 
nitrate is a root cause and that there may well need to be a 
recall of the recalls and continuing problems.
    GM at least redesigned and remanufactured the defective 
product that caused deaths on the road as a result of the 
defective ignition switch. But the continued use of ammonium 
nitrate leads me to believe there may well need to be a recall 
of the recall parts.
    Mr. Kennedy. Well, that is why as part of the consent order 
we have agreed to continue to test the remedy parts. We have 
continued all of our efforts, internal and external, with the 
consortium of OEMs that Mr. Kunselman mentioned, with 
individuals OEMs, automakers, that are doing their own testing.
    We have not stopped anything, Senator, in relation to this 
issue. We are continuing to look, and we are continuing to look 
everywhere, to make sure that we understand this issue.
    Senator Blumenthal. Good.
    Have you issued--I just have one more question--two more 
questions.
    The Chairman [presiding]. Well, yes, we need to keep 
moving, Senator.
    Senator Blumenthal. And I have been actually asking a few 
extra questions because I knew my colleague Senator Klobuchar 
was going to be here.
    Senator Klobuchar. Oh, yes. You are so kind. Thank you.
    Senator Blumenthal. Let me ask Mr. Schostek: Would you 
commit to supporting a bill that I have offered, S. 900, that 
requires used car dealers to repair any outstanding safety 
recalls prior to selling or leasing them?
    Mr. Schostek. Senator Blumenthal, we do support that 
concept. Right now, Honda dealers sell both new cars and used 
cars, and we expect those recalls to be taken care of before 
the used cars are sold. They may have a product from another 
manufacturer on the lot; similarly a Chrysler dealer and so 
forth. And then there are independent used car dealers.
    We would like to discuss about the need to ensure the 
responsibility of the OEM to make sure that repair is completed 
and who is effecting the repair. But, most definitely, sir, we 
support the concept.
    Senator Blumenthal. Because I know you have reached out to 
two of the Honda owners who were affected here, but you 
couldn't contact them because they had bought the car used, 
correct? Carlos Solis and Hien Tran both died as a result of 
this product.
    Mr. Schostek. Indeed, Senator. The unfortunate aspect of 
the fatalities that have been experienced in our vehicles are--
these are older-model vehicles; they have tended to change 
hands, sometimes through used car dealers, independent used car 
dealers, and we have not been able to contact the appropriate 
parties. So we definitely support the concept.
    Senator Blumenthal. Thank you.
    Thanks, Mr. Chairman.
    The Chairman. Senator Klobuchar?
    Senator Klobuchar. Thank you very much, Mr. Chairman. I 
will be brief here.
    Mr. Kennedy, last November, as evidence emerged that the 
airbags might be susceptible in regions outside of high-
humidity climates, I called on an expanded recall. In December 
of last year, Takata responded to NHTSA's recall request letter 
stating that it firmly believed that the data and currently 
available information did not support a nationwide recall.
    What information did Takata have last month that it didn't 
have earlier that triggered the expanded recall?
    Mr. Kennedy. Senator, that is a great question, and I would 
be very happy to answer that.
    We have much, much more test data now than we had before. 
We have completed--I checked last night, and, as of last night, 
over 57,000 deployment tests, most of those in the last 6 
months, that have really helped us to understand where these 
issues are and what is causing them.
    And we don't have definitive root cause, but also in that 
time-frame we had a 2-day meeting at our inflator facility, 
where we brought all of the NHTSA people in and their experts 
and we had our third party, Fraunhofer, report directly to 
them. It was not filtered by Takata at all. We did the same 
thing with the OEMs affected.
    We have continued to work with a number of other outside 
experts, as I mentioned earlier: Penn State University, Georgia 
Tech----
    Senator Klobuchar. But it is just that this goes back to, 
what, 2006? And I am glad you have done this, but it seems like 
such a long period of time, and we have heard so many different 
explanations for the cause of the defect. Why the different 
explanations, and why did all of this take this long, nearly 10 
years, to get done?
    Mr. Kennedy. Well, Senator, there has been a lot done in 
those 10 years. There has been a number of recalls that have 
been issued, starting I believe in 2008 was the first one. So 
we have participated and supported multiple recalls in that 
timeframe.
    And it was really just on this latest issue that really got 
started in 2013. End of 2013 was when the first incident 
outside of previous recall populations occurred. And----
    Senator Klobuchar. OK, so--go ahead.
    Mr. Kennedy. I am sorry.
    Senator Klobuchar. Now with this major recall that you have 
decided to undertake, with a lot of prodding I will say, and it 
is going to involve, you know, a lot of vehicles, how do you 
prioritize these vehicles in terms of getting fixed? Is it 
geographically? Is it by the age of the vehicle? How are you 
going to triage this?
    Mr. Kennedy. Yes, that is, again, a very good question and 
one that was contemplated in the defect information reports.
    And it varies by design somewhat. The driver-side ones, 
where we have had the most issues in the field, those are being 
prioritized based on location. And that would be a location of 
where they are currently registered, originally registered, or 
ever registered. Some of the other ones are prioritized by age.
    And, as Administrator Rosekind mentioned in his testimony, 
that is part of the consent order that we have agreed to. They 
call it the coordinated remedy. And we will be working with 
NHTSA and all of the automakers in order to do that 
prioritization and to increase supply so we get the right parts 
to the right owners at the right time.
    Senator Klobuchar. And then how many replacement parts is 
Takata producing every month?
    Mr. Kennedy. As of a couple days ago, we passed 5 million 
replacement kits. I think this month we will probably produce 
close to 700,000----
    Senator Klobuchar. And how many are there going to be total 
that you need to have?
    Mr. Kennedy. Well, the total replacement--again, the 
numbers of a little bit elusive, but somewhere in the 32 
million range.
    Senator Klobuchar. Wow.
    Mr. Kennedy. That is vehicles that were ever manufactured, 
so some of those still may not be on the road.
    Senator Klobuchar. OK. So how long do you think it will 
take to do that?
    Mr. Kennedy. Well, we are going to be at a million units a 
month here very shortly. We have already done 5 million. That 
32 million assumes that actually all of those vehicles are 
still on the road, and we know vehicles that are 15 years old, 
a number of those are not on the road still. So it will be 
somewhat less than that.
    Senator Klobuchar. OK.
    Just one last question here, because I want to keep in my 
time limit.
    Mr. Kunselman, Mr. Schostek, how many affected Honda and 
Chrysler vehicles have received replacements?
    Mr. Kunselman. Have received replacements?
    Senator Klobuchar. Yes.
    Mr. Kunselman. On the driver side, we had just shy of 
50,000 units that were replaced with a like bag. And we have 
now implemented a recall where we will replace with a TRW 
inflator.
    Senator Klobuchar. OK.
    Mr. Kunselman. So those are just in its infancy, maybe 
1,000 units so far. It was just released on June 8.
    Senator Klobuchar. OK.
    Mr. Schostek?
    Mr. Schostek. Yes, Senator, we have replaced nearly 2 
million inflators, Takata inflators, in our vehicles.
    Senator Klobuchar. OK. Very good. So it sounds like there 
are going to be a lot more. They are not all your vehicles, 
obviously, but more to come.
    All right. Thank you very much.
    The Chairman. Senator Nelson has one question to ask, so he 
will be back in here momentarily.
    So, until he gets back, let me ask our manufacturers if 
your companies or other auto manufacturers are looking into 
what role, if any, the vehicle design may have played with 
regard to persistent high humidity affecting the performance of 
the airbag inflators. And, if so, what have you learned?
    Mr. Schostek. Mr. Chairman, I will answer that first. You 
are referring to the report recently that Takata is mentioning 
a theory about the vehicle design. I think this is mainly on 
the passenger side, not the driver side, where this theory of 
theirs is grounded.
    We have not received much information from Takata about 
this vehicle design theory, and when we do, we will be happy to 
look into it. But we have not begun a study of our own on that 
idea.
    Mr. Kunselman. I would reiterate that. We are not doing our 
own study on that. We are aware of Takata seeing this trend in 
the data and are asking the ITC if they see a similar trend 
based on the parts that have been tested coming from the field.
    The Chairman. OK.
    Senator Nelson?
    Senator Nelson. Just one quick question, Mr. Schostek. Do 
you think that rental car companies should be prohibited from 
leasing vehicles under recall until they are fixed?
    Mr. Schostek. Thank you, Senator Nelson.
    I am aware of S. 2819, the Rental Car Recall Act, that 
would prohibit rental car companies from renting if they had--
we are in support of that concept, Senator. We support the 
concept.
    The young woman who lost her life in southern California 
was driving a Honda vehicle that she rented from an agency in 
the San Diego area.
    Understand, from our business model, Senator, Honda, we do 
not sell to fleets, so we don't sell to big rental car 
companies such as Hertz, Avis, and so forth. But, nevertheless, 
there are Honda vehicles that end up in rental car inventory. 
Our dealers might sell to one of those large rental car 
companies, but, of course, the small rental car companies also 
might buy our vehicle on the used market.
    We strongly support the concept that they should be fixed 
before they are rented to a customer. And if that had happened 
in the case of the young women in southern California--who, by 
the way, we notified the auto auction that owned the vehicle 
before the rental car agency bought it, and we also notified 
the rental car agency, and neither of them took that repair. It 
is to our everlasting regret that that had an impact in this 
incident.
    Senator Nelson. Thank you.
    The Chairman. Thank you, Senator Nelson.
    Well, I would just point out that the hearing record is 
going to remain open for 2 weeks, during which time Senators 
are asked to submit any questions for the record.
    Upon receipt, the witnesses are requested to submit their 
written answers to the Committee as soon as possible.
    I want to thank our panelists, our witnesses here today for 
your testimony, and for your responses. It continues to shape 
the record that we build with regard to this very important 
issue which has had life-and-death consequences for people 
across this country. And we want to make sure that we are doing 
everything we can to get the accountability and provide, 
hopefully, the solutions that will prevent this sort of thing 
from ever happening again.
    With that, the hearing is adjourned. Thanks.
    [Whereupon, at 12:34 p.m., the hearing was adjourned.]

                            A P P E N D I X

     Response to Written Questions Submitted by Hon. John Thune to 
                         Hon. Mark R. Rosekind
    Question 1. Does NHTSA have a way to track how many visitors have 
been to safercar.gov and, on average, how many visit the site every 
day? If so, what are those numbers?
    Answer. Yes, NHTSA can track how many visitors have been to 
safercar.gov. For example, the three month period of April to June, 
2015 averaged approximately 132,000 visits per day.

    a. How does this compare to the use of manufacturers' sites for 
safety recall information?
    Answer. NHTSA does not collect or have information regarding visits 
to manufacturers' websites.

    b. Does NHTSA have any information on what percentage of Americans 
know about safercar.gov?
    Answer. Based on qualitative analysis from focus groups conducted 
for consumer outreach in support of the Office of Defects 
Investigation, the agency has found that generally Americans have a low 
awareness of safercar.gov. In order to increase awareness of 
safercar.gov NHTSA has completed and/or is planning to execute the 
following:

   Direct consumers to safercar.gov from all public-facing 
        information, e.g., ads, videos, advisories;

   Promote safercar.gov through the safercar mobile app; and,

   Launch a national consumer awareness campaign to increase 
        the submission of complaints as well as recall compliance and 
        use of the VIN Look-Up Tool.

    Question 2. In your testimony, you mention that 32 million vehicles 
have been recalled due to defective Takata inflators. Some have raised 
concerns that this number may include duplications, for instance, if a 
particular vehicle is subject to both the driver side and the passenger 
side recalls. How did NHTSA calculate this number and verify its 
accuracy? Is this still the number of vehicles subject to recall as of 
today?
    Answer. The original estimate of 32 million vehicles was based on 
information provided by Takata. In an initial effort to verify this 
figure NHTSA tabulated the total number of recalled inflators from all 
the Takata related recalls, and the results were consistent with 
Takata's estimate. At the time of the hearing, this was the best 
available information.
    NHTSA recognized that the estimate would need to be refined once 
the automakers determined the actual number of inflators and vehicles 
involved by VIN. As part of the Coordinated Remedy Program, NHTSA 
requested by July 9, 2015 a detailed breakdown of the recalled vehicle 
data by make, model and model year. In reviewing this data, Takata 
reported that its original estimate included inflators slated for 
foreign markets. In addition, NHTSA finally was provided more specific 
information indicating the number of vehicles containing both defective 
driver and passenger side inflators. Using the automakers' detailed 
responses NHTSA has determined that approximately 23.4 million total 
inflators in approximately 19.3 million vehicles are affected. These 
figures include all prior Takata recalls from 2008-2015. The attached 
chart identifies the breakdown of the recalled inflator position--both 
driver air bag (DAB) only, or passenger air bag (PAB) only, by each 
automaker.

    a. What is the number of vehicles subject to both the defective 
driver side and passenger side air bag recalls?
    Answer. Based on the most recent data acquired through the 
Coordinated Remedy Program the number of vehicles subject to both 
driver and passenger recalls is approximately 4.1 million.
                        Attachment (Question 2)

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

   Question 3. NHTSA's Workforce Assessment states that the ``New 
Paradigm'' will require $89 million in funding, which apparently 
doesn't include the additional 380 new full time equivalent employees 
(FTEs) for the Office of Defects Investigation alone. What is the 
funding request estimate including costs for the requested increase in 
FTEs?
    Answer. The Workforce Assessment responds to a previous commitment 
to the U.S. Department of Transportation's Office of Inspector General 
to assess NHTSA's workforce in light of the breathtaking advances in 
vehicle technology. The Workforce Assessment was not intended to match 
the President's FY 2016 budget, which was issued before the Workforce 
Assessment was completed. Rather, the Workforce Assessment is a 
comprehensive examination of the defects investigation system we need 
to build, and can build incrementally with resources from Congress that 
commits to a vehicle safety system as robust as those that keep our 
skies and railways safe. The total cost would be approximately $149 
million. This estimate includes $89 million identified in NHTSA's 
Workforce Assessment and $60 million for the estimated cost for the 380 
positions, which is based on an average cost of $157,000 (includes 
salaries and benefits) for each FTE.

    Question 4. NHTSA's Workforce Assessment was conducted pursuant to 
a 2011 recommendation by the Department of Transportation Office of 
Inspector General (OIG). NHTSA hired an outside contractor to conduct 
the assessment, which began in July 2013.
    a. When did NHTSA receive the contractor's written assessment?
    Answer. NHTSA received the contractor's final written assessment in 
February 2014.

    b. How much did it cost the agency to conduct this assessment?
    Answer. The contractor was under contract to perform multiple 
tasks, including the workforce assessment. The cost of the entire 
contract was approximately $424,000. The cost to conduct the workforce 
assessment was about $147,000.

    c. Why did it take until June of 2015, four years after the OIG 
recommendation, for NHTSA to issue this assessment?
    Answer. The workforce assessment was initiated prior to the GM and 
Takata recalls. Therefore, completion of the assessment was extended 
due to additional work conducted by the agency, including a business 
assessment, to produce a more comprehensive evaluation. While the 
contractor's final written assessment met the minimum contract 
requirements the final product did not fully capture all the current 
and future business needs of ODI or other offices that directly support 
the defects investigation program. As a result, the report was reworked 
to reflect lessons learned from these events in order to adequately 
reflect workforce needs given the large increase in recalls and 
consumer complaints.
                                 ______
                                 
     Response to Written Question Submitted by Hon. Bill Nelson to 
                         Hon. Mark R. Rosekind
    Question. Administrator Rosekind, you said at the hearing that 
NHTSA is currently implementing 44 actions to ensure that ODI does not 
miss the next GM ignition switch defect or the next Takata airbag 
crisis and that the list would be provided to the Committee. Please 
list the 44 actions.
    Answer. NHTSA continuously seeks to enhance our processes and 
procedures, as demonstrated by the attached list of process 
improvements and our recently published Path Forward report. The list 
of process improvements continues to grow and now includes 45 distinct 
actions implemented and initiated.
             National Highway Traffic Safety Administration
                 Defect and Recall System Improvements
    The following improvements in NHTSA's defects and recalls system 
have been implemented or initiated in response to a variety of efforts. 
These include the 2011 Office of the Inspector General Report, NHTSA's 
Path Forward and Workforce Assessments reports, and the 2015 OIG 
Report. These improvements include actions that directly address 10 of 
the 17 2015 OIG recommendations.
    Oversight of System Improvements--As recognition of the need for 
ongoing evaluation and improvement, NHTSA devised a mechanism for 
tracking implementation and applying improvements Agency-wide.

   1.  NHTSA's Risk Control Innovations Program will monitor, track and 
        review system improvements and apply the methodology and 
        enhancement Agency-wide, where appropriate.

    Workforce Assessment and Training--Improving the NHTSA's ability to 
identify safety defects and manage recalls requires investments in the 
Agency's people as well as improvements to the defect-recall system.

   2.  NHTSA developed a training plan to assist the organization in 
        the development of its current and future workforce to ensure 
        continuity of institutional knowledge, and to ensure that 
        Office of Defect Investigations (ODI) staff is made aware of 
        and become proficient in new automotive, investigative, and 
        vehicle safety technologies.

   3.  At OIG's recommendation, NHTSA hired a contractor to conduct a 
        workforce assessment to determine the number of staff required 
        to ensure that ODI met its objectives and determined the most 
        effective mix of staff to improve defects analysis in the 
        future. In November 2014, ODI conducted its own workforce 
        assessment to supplement the contractor's efforts in order to 
        address the staffing and resource needs required to meet 
        growing defects analysis needs in light of several high profile 
        recalls. This effort also strategically assessed the needs and 
        expectations of the defects program, and set a vision of how 
        NHTSA will improve its defects management process.

    Improved Tracking and Documentation--NHTSA implemented processes 
and documentation requirements to improve the tracking of defect issues 
and investigations, to provide consistent rules for reconsideration, 
and to provide records of decisions that can inform future 
investigations. NHTSA is currently establishing new documentation 
requirements in response to the 2015 OIG recommendations.

   4.  NHTSA added a new process to require its investigators to 
        provide office director briefings prior to exceeding the ODI 
        guidance for investigation timelines. The briefing must include 
        justification for the additional time along with an action plan 
        to bring closure to the issue.

   5.  NHTSA implemented a system to track complaints relevant to each 
        investigation.

   6.  NHTSA began systemically tracking pre-investigation work.

   7.  NHTSA created standardized forms and a repository to document 
        Defects Assessment Panel meetings and decisions.

   8.  NHTSA created a standardized process and an Investigation 
        Documentation Checklist for storing evidence and investigation 
        documents.

   9.  NHTSA is developing rules that require the defect assessment 
        panel to revisit an issue if certain criteria are met. This 
        action responds to 2015 IG Recommendation No. 16.

  10.  NHTSA is developing a plan to improve reviews of vehicle owner 
        complaints. This action responds to 2015 IG Recommendation No. 
        11.

  11.  NHTSA is developing procedures to improve documentation of the 
        outcomes of weekly meetings where pre-investigative issues are 
        discussed. This action responds to 2015 IG Recommendation No. 
        13.

  12.  NHTSA is defining appropriate timeframes for opening an 
        investigation and a process for justifying departures from 
        these timeframes. This action responds to 2015 IG 
        Recommendation No. 17.

    Improved Information Collection--NHTSA is addressing ways to 
improve the quality and the focus of information it receives, and to 
streamline the analysis of that data.

  13.  NHTSA is working on ways to facilitate consumers' provision of 
        more complete information to the agency through the Vehicle 
        Owner's Questionnaire (``VOQ'') process, including offering 
        more flexibility in how consumers can describe their complaint 
        and making it easier to upload supporting documentation and 
        pictures related to the complaint. This action responds to 2015 
        IG Recommendation No. 6.

  14.  NHTSA has initiated efforts to provide more clarity to 
        manufacturers about Early Warning Reporting (EWR) requirements. 
        NHTSA will support manufacturers' efforts to implement best 
        practices to comply with their obligations to provide complete 
        EWR data. This action responds to 2015 IG Recommendation Nos. 
        1, 2, and 3.

  15.  NHTSA implemented revised procedures for Death and Injury (DI) 
        reports, requiring manufacturers to provide their opinions and 
        theories about the cause of an incident or accident. NHTSA is 
        following up on all reports involving fatalities. In addition, 
        where related litigation is initiated, NHTSA will require the 
        manufacturer to provide copies of documents reflecting the 
        final disposition of the lawsuit.

  16.  NHTSA is developing a dedicated outreach and reporting system 
        for law enforcement involved with crash responses as a 
        communication channel to not only collect information, but give 
        feedback to the submitter. Based on lessons learned from this 
        initiative, ODI may also broaden the plan to include 
        communities such as EMS and insurance adjustors/investigators. 
        This action responds to 2015 IG Recommendation No. 12.

    Improved Collaboration and Assessment--ODI will continue to 
leverage expertise from throughout the Agency when assistance is 
needed, specifically if research is required or when additional real-
world crash data can inform defects assessments or investigations. The 
Agency will be challenging automatic assumptions and request assistance 
from manufacturers and suppliers when necessary.

  17.  NHTSA now has research engineers from NHTSA's Vehicle Research 
        and Test Center (VRTC) regularly participate in Defect 
        Assessment Panels.

  18.  NHTSA hosted an international Enhanced Safety of Vehicles 
        conference, with a special session on enforcement-related 
        issues. Nine countries participated in the event, and they 
        agreed to establish a worldwide network for enforcement 
        information of mutual interest.

  19.  NHTSA established a process for determining when a third-party 
        or the VRTC should be used to verify manufacturer information 
        or to assist in identifying a potential defect.

  20.  NHTSA now formally involves VRTC vehicle research engineers in 
        pre-investigative activities to research unfamiliar or 
        technically complex potential safety hazards by conducting high 
        level research and basic tests to better understand these 
        systems.

  21.  NHTSA has implemented a number of new initiatives and efforts to 
        enhance coordination between ODI and other NHTSA crash 
        investigation programs. For example, the Special Crash 
        Investigations office (SCI) is now included as an active 
        participant in ODI's decisions about initiating formal 
        investigations. This action responds to 2015 IG Recommendation 
        No. 12.

  22.  When ODI is monitoring a high-hazard issue but has insufficient 
        evidence of a possible defect to warrant opening an 
        investigation, or where something that appears to be an 
        unlikely explanation has been posited, NHTSA will now reach out 
        to the relevant vehicle manufacturer (OEM). This communication 
        will be documented as a pre-investigative notification of 
        interest, creating a record that NHTSA has informed the OEM of 
        the issue and reiterating the OEM's responsibility to provide 
        relevant and timely information about the issue to the agency, 
        including information critical to the potential safety system 
        interactions of the issue. This action responds to 2015 IG 
        Recommendation No. 15

  23.  NHTSA's Office of Vehicle Safety Research and ODI are working 
        together to increase and expand meetings with the automotive 
        industry in order to enhance NHTSA's working knowledge about 
        new and emerging technologies and the interrelationships 
        between vehicle systems. Based on these meetings with 
        manufacturers, NHTSA is developing an additional set of 
        inquiries to be used during screening and investigating new 
        safety systems.

  24.  NHTSA began to specifically request EDR data from manufacturers, 
        vehicle ``health check'' files, and downloads from any related 
        sub-modules. NHTSA is currently requesting that automakers 
        provide detailed information on what additional data is 
        available on vehicles that could be helpful in assessing 
        potential safety defects.

  25.  NHTSA is expanding previous efforts to apply an enhanced systems 
        safety approach to the analysis of defects, considering whether 
        one possible defect is a symptom of another system failure.

  26.  Using the computerized Corporate Information Factory (a suite of 
        software tools to improve organizational efficiency in 
        predictive analysis, data visualization, case management, 
        customer-driven communication, and program planning), NHTSA 
        continues to increase its efforts to more effectively utilize 
        and cross-reference Early Warning Reporting (EWR) data, Death 
        and Injury (DI) reports and inquiries, SCI investigation 
        reports, and other data from manufacturers and the public that 
        may provide critical details about incidents and vehicles.

  27.  NHTSA is developing a common system data standard that is paired 
        with a centralized database (called the vPIC-List) for 
        information obtained from manufacturers associated with Vehicle 
        Identification Number (VIN) requirements and Manufacturer 
        Identification Requirements.
Improved Enforcement

  28.  When NHTSA finds that an OEM has failed to meet its obligation 
        for a timely recall, the agency considers enhanced oversight, 
        as it has done in recent consent orders for GM and Hyundai. In 
        addition, NHTSA is exploring mechanisms to have manufacturers 
        conduct regular audits of their internal processes for finding 
        potential safety defects, and ensure that failures identified 
        during these audits lead to consequences appropriate to the 
        findings.

    Improved Outreach to Consumers--Defect identification is only the 
first step in an effective recall system. Unless the recalls are 
remedied, unsafe vehicles remain on the road and a risk to drivers and 
passengers. NHTSA has implemented new and better ways to notify 
consumers of defects and continues to identify ways to improve recall 
completion rates.

  29.  NHTSA implemented a subscription service to allow consumers to 
        receive e-mail alerts when the make and model of their vehicle 
        has an active recall.

  30.  NHTSA developed and implemented the SaferCar mobile application 
        for Apple products that provides real-time vehicle safety 
        information and allows consumers to file complaints, register 
        for recall notifications, locate child seat inspection 
        stations, and search 5-Star safety ratings.

  31.  NHTSA recently expanded the SaferCar mobile application to 
        Android phones.

  32.  NHTSA now requires new, distinctive recall labels on mailings 
        that notify owners of recalled vehicles or equipment.

  33.  NHTSA developed a VIN Lookup tool that allows consumers to 
        search electronically for open recalls on their vehicles using 
        their VIN number.

  34.  NHTSA made it possible for Manufacturers to file recall reports 
        electronically via manufacturer submission portals.

  35.  NHTSA hosted the first of a series of industry meetings, 
        Retooling Recalls, where NHTSA will define an issue in need of 
        collaborative effort and facilitate the sharing of best 
        practices.

  36.  NHTSA recently launched a recalls spotlight web page dedicated 
        to information specific to breaking news and trending recalls.

  37.  NHTSA created a recalls-specific account on Twitter 
        (@NHTSArecalls) to alert followers and consumers about vehicle, 
        tires, car seats, and equipment recalls.

  38.  NHTSA released a recalls process video educating consumers on 
        how recalls notices are sent and that recalls repairs are free 
        of charge.

  39.  NHTSA will produce a VIN Look-Up Demonstration (July 2015).

  40.  NHTSA plans to launch a Recalls Consumer Awareness Campaign 
        (Fall 2015).

      a. Messages and Goals of the Campaign include:

                         i. To encourage consumers to use the VIN Look-
                        Up tool

                         ii. To urge consumers to comply with recall 
                        notices

                        iii. To have consumers sign up for recall 
                        alerts

      b. The Campaign will include online advertising and a suite of 
            informational videos.

  41.  NHTSA will implement an enhanced e-mail engagement process to 
        allow consumers who file complaints or sign up for e-mail 
        alerts to stay informed of news affecting their vehicles. The 
        existing infrastructure already allows NHTSA to reach consumers 
        via e-mail with a list of recalls within a given time period.

  42.  NHTSA revised its current e-mail engagement language to inform 
        consumer expectations of how complaints will be handled and 
        what will happen in the event of a vehicle recall.

  43.  Using analytics tools, NHTSA identified the top online 
        automotive websites used by consumers as an additional source 
        of consumer complaints to identify potential defect trends. 
        They include KBB.com, Edmunds.com, and Cars.com. NHTSA has 
        built relationships with these and other organizations for 
        purposes of sharing new vehicle safety content.

  44.  Presently, manufacturers' defect reports are technically 
        focused, making them of limited use to consumers, who need this 
        information most. NHTSA has established a defect report review 
        process that will ensure that consumers are receiving recall 
        information in comprehensible plain language and format.
Protecting Confidential Consumer Information

  45.  NHTSA now requires a second level of review to ensure that 
        confidential information collected from manufacturers is 
        redacted prior to web mounting.
                                 ______
                                 
     Response to Written Question Submitted by Hon. John Thune to 
                       Hon. Calvin L. Scovel III
    Question. Based on your audit of NHTSA's Defect Identification and 
Investigation process, what are the problems with NHTSA's statistical 
practices? What could statistical analyses of TREAD Act data provide 
that NHTSA's analyses cannot?
    Answer. Sound statistical analyses of TREAD Act data could point 
NHTSA personnel to the automotive defects most warranting further 
investigation. They could do this by identifying which data trends and 
outliers are statistically significant, meaning they are unlikely to 
have appeared through random variation. This focusing of agency 
attention could increase the likelihood of early identification of 
safety defects and support efficient use of agency resources.
    NHTSA's current statistical analyses cannot achieve these ends 
because the agency omits critical steps in standard statistical 
practice when analyzing TREAD Act aggregate data. Those steps involve 
developing a base case of what statistical test results should look 
like in the absence of anomalies, against which actual test results can 
be compared. NHTSA calculates results from a variety of tests, but does 
not develop a base case against which to compare any of them. 
Consequently, agency personnel have no way of knowing which, if any, of 
the results from the different tests were unlikely to have occurred by 
chance. Instead, they use ad hoc approaches to determining which test 
values they consider indicate a defect warranting further 
investigation.
    Sound statistical practice also involves periodically assessing the 
predictive performance of the analytical methods used. This enables 
adjustment and refinement of the methods, leading to improvements in 
accuracy over time. NHTSA has not checked the ability of its analyses 
of TREAD Act aggregate data to identify safety defects since their 
implementation, let alone addressed issues of their accuracy.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John Thune to 
                            Kevin M. Kennedy
    Question 1. In your testimony, you stated: ``In addition to 
supporting these ongoing testing efforts, we are continuing to support 
the work of the independent Quality Assurance Panel, led by former 
Secretary of Transportation Samuel K. Skinner, to ensure that best 
practices are in place for the production of safe inflators. We are 
committed to adopting the recommendations his panel puts forth, and 
sharing the findings of the report with you and with the public.''

    Question 1a. What is the progress of the Quality Assurance Panel to 
date?
    Answer. The Quality Assurance Panel has completed reviews of, and 
site visits to, Takata's facilities in Armada, Michigan, Moses Lake, 
Washington, and Monclova, Mexico. The Panel is planning to visit 
Takata's facilities in Japan in August 2015. Takata has assisted, and 
continues to assist, the Panel by regularly providing requested 
information and producing relevant personnel for interviews. Takata 
understands that the full Panel has met on several occasions and plans 
to meet regularly on an ongoing basis to review collected data, 
evaluations and recommendations.

    Question 1b. Have you changed any production practices since the 
recalls began? If so, what and when?
    Answer. Takata continually acts to strengthen and improve its 
manufacturing and production processes. However, because the Panel has 
to date not issued a report or recommendations on how Takata may 
improve its production practices, Takata has not altered its production 
practices as a result of the Panel's ongoing review.

    Question 1c. When can we expect the Panel to complete its report, 
and when can we expect the report to be provided to the Committee?
    Answer. Takata's current understanding is that the Panel expects to 
complete its report by November 2015. Takata intends to make the 
Panel's report available to the Committee and the public when it is 
issued.

    Question 2. How many recalled inflators has Takata obtained from 
the field to date?
    Answer. As of July 27, 2015, Takata has received from automobile 
manufactures approximately 3,600,000 inflators that they have collected 
from recalls and other safety campaigns.

    Question 2a. How many returned inflators has Takata tested thus 
far?
    Answer. As of July 27, 2015, Takata has tested approximately 97,000 
returned inflators, including conducting approximately 70,000 ballistic 
tests, 15,000 live dissection tests and 12,000 CT scans.

    Question 2b. How many inflators does Takata expect to collect each 
month going forward?
    Answer. Takata currently expects to receive from automobile 
manufacturers approximately 500,000 inflators per month on an ongoing 
basis.

    Question 2c. How many inflators has Takata provided to other 
entities for testing, as directed under the preservation order?
    Answer. Pursuant to the Preservation Order and Testing Control Plan 
dated February 25, 2015 (``Preservation Order''), Takata has provided 
recalled and/or returned inflators to NHTSA, an automobile 
manufacturer, and a consultant retained by automobile manufacturers. As 
of July 27, 2015, Takata has provided approximately 2,073 recalled and/
or returned inflators to those parties for testing.

    Question 2d. To which entities has Takata provided inflators for 
testing?
    Answer. As of July 27, 2015, Takata has provided inflators to 
Toyota, NHTSA and Orbital ATK for testing pursuant to the Preservation 
Order.

    Question 2e. Does Takata plan to test a certain percentage of the 
recalled inflators? If so, what is that percentage?
    Answer. Takata's testing program is not designed to test to a 
target percentage, but rather Takata intends on testing to its full 
capacity until it determines the root cause of rupturing inflators. 
Since September 2014, when Takata began receiving from automobile 
manufacturers inflators collected pursuant to the regional safety 
campaign, Takata expanded its testing capacity from approximately 1,000 
inflators per month to its current testing capacity of between 16,000 
and 20,000 inflators per month.

    Question 2f. Has Takata received any testing results thus far?
    Answer. Takata has compiled, and continues to compile, results from 
its own testing program and reports those results on a regular basis to 
NHTSA and the automobile manufacturers. Takata has provided prior 
summaries of its test results to the Committee. To date, Takata has not 
received test results from the other parties who are testing returned 
inflators.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Bill Nelson to 
                            Kevin M. Kennedy
    Question 1. At the current pace of production, how long do you 
anticipate it will take Takata (and other airbag manufacturers) to 
produce sufficient replacement parts to cover all recalled vehicles?
    Answer. Takata has taken significant steps to increase its capacity 
to produce replacement inflators and kits and it is currently in the 
process of further increasing its production capacity. Similarly, 
Takata has significantly increased the number of replacement inflators 
manufactured by third parties that it is supplying in replacement kits. 
In May 2015, Takata produced approximately 730,000 replacement 
inflators and 1,167,000 replacement inflator kits, which contain 
inflators manufactured by Takata and third-party manufacturers. In June 
2015, Takata produced approximately 830,000 replacement inflators and 
1,450,000 replacement inflator kits, which also contain inflators 
manufactured by Takata and third-party manufacturers. Takata estimates 
that, by October 2015, it will have the capacity to produce 
approximately 850,000 replacement inflators and 1,900,000 replacement 
inflator kits per month, subject to its ability to obtain the necessary 
components from third-party suppliers. In addition, once Takata's 
ongoing expansion of production lines is completed (which Takata 
expects to occur by February 2016), its global monthly production 
capacity for replacement inflators will increase to approximately 
1,200,000.
    To date, Takata's production capacity for replacement inflators and 
replacement inflator kits has been sufficient to meet the demands of 
automobile manufacturers. Takata, however, cannot currently estimate 
the date by which it will be able to produce or supply sufficient 
replacement inflator kits to cover all recalled automobiles as the 
number of necessary replacement inflators and kits will depend on, 
among other things, the demands of the automobile manufacturers, the 
number of recalled automobiles that are still on the road, and the 
coordinated remedy program being prepared jointly by NHTSA and the 
automobile manufacturers.

    Question 2. Please detail your current internal product safety 
audit program, including any external third-party audits.
    Answer. Takata's current safety audit program in North America is 
designed to ensure that its propellants, inflators, and air bag modules 
are manufactured safely and correctly. Takata's audit teams evaluate 
Takata's practices with respect to, among other things, propellant 
handling, proper disposal of scrap material, on-site security, 
functionality of information systems, effectiveness of manufacturing 
processes, and compliance with Takata's quality assurance policies and 
procedures. Specifically, Takata conducts internal quality audits, 
during which a team of auditors at each Takata factory conducts audits 
of processes within the factory on a weekly basis. These internal 
audits are documented and verified by the External Registrar during 
onsite visits every six months. In addition, the Horizontal Deployment 
Group, a subset of the Takata Corporate Quality Group, conducts monthly 
audits at each Takata plant for the purpose of confirming that prior 
issues have been effectively addressed and remedied. These audits also 
function as part of Takata's document retention program.
    Takata also regularly retains third-parties to conduct independent 
audits of its safety and quality assurance practices. For instance, 
Takata hires third parties to conduct environmental, quality systems, 
and personal and workplace safety audits at its North American 
facilities. These audits confirm Takata's compliance with quality 
systems as set forth by the ISO/TS-16949 Quality Standard. Takata has 
also engaged outside energetic materials expert and risk analysis 
consulting group Baker Engineering and Risk Consultants, Inc. 
(``BakerRisk'') to conduct several manufacturing and safety audits, 
including: (1) a review of manufacturing processes at Takata's Moses 
Lake, Washington and Monclova, Mexico facilities between 2009 and 2010; 
(2) a review of manufacturing and quality assurance processes at Moses 
Lake for 2004L propellant, including safeguards for handling storage of 
2004L materials and finished propellant and mitigation of a potential 
accidental explosion at the facility, in 2011; (3) an audit of 
procedures at Monclova for receiving 2004L propellant and for quality 
assurance of new propellant, bulk storage of propellant, and material 
handling during assembly in the waste stream, in 2011; and (4) safety 
audits at Moses Lake and Monclova in 2013. In addition, Takata has 
engaged the International Center for Automotive Research to review its 
X-Series inflator manufacturing processes in Monclova in 2011 and to 
review 13X desiccant handling on Monclova inflator lines in 2012. 
Automobile manufacturers also routinely audit Takata's manufacturing 
facilities.
    Finally, the Takata Product Testing Laboratories are accredited to 
the A2LA Standard, which confirms that the laboratories within Takata 
meet the industry standards for testing.

    Question 3. In Takata's statement in response to the Committee's 
Minority staff report titled, ``Danger Behind the Wheel: The Takata 
Airbag Crisis and How to Fix Our Broken Auto Recall Process,'' Takata 
said that it has ``convened an independent Quality Assurance Panel to 
conduct a comprehensive review to ensure Takata's current manufacturing 
procedures meet best practices.''

    Question 3a. When was this Quality Assurance Panel established?
    Answer. Takata established the Quality Assurance Panel in December 
2014.

    Question 3b. What instigated Takata to take this step?
    Answer. Takata is, and always has been, dedicated to public safety. 
Its primary mission is to make products that save lives and prevent 
injuries. Accordingly, Takata formed the Quality Assurance Panel as 
part of its response to field incidents involving rupturing Takata 
airbag inflators. The Quality Assurance Panel reflects Takata's 
practice of continuously improving its products.

    Question 3c. What, specifically, is the role of this panel? What 
are its functions that were not part of Takata's existing quality 
control programs?
    Answer. The purpose of the Quality Assurance Panel is to audit and 
prepare an independent report regarding Takata's current manufacturing 
procedures for best practices in the production of safe inflators, 
including inflator propellant. The Quality Assurance Panel's functions 
are not significantly different from those of Takata's internal 
auditing program, but its independent status will hopefully provide 
Takata with input that will advance the safety of Takata's 
manufacturing procedures, practices and policies.
                                 ______
                                 
 Response to Written Questions Submitted by Hon. Richard Blumenthal to 
                            Kevin M. Kennedy
    Question 1. Are there any circumstances in which ammonium nitrate 
can become moist and remain safe for use in airbag propellants? What 
level of moisture in ammonium nitrate mixtures is sufficient to cause 
safety concerns--Is there a standard used by Takata to determine how 
much moisture is acceptable in its new inflator designs?
    Answer. All ammonium nitrate propellants, and indeed all 
propellants, contain some level of moisture. As such, all Takata PSAN-
based inflators, whether new or old, contain moisture. The vast 
majority of those inflators have operated safely in the field. Takata 
is unable to quantify as a single number the level of moisture that is 
sufficient to cause safety concerns because that determination depends 
on the environmental exposure experienced by the inflator over its 
lifetime. For example, a certain level of moisture present in an 
inflator that spent a lifetime in a mild climate, like Seattle, will 
have a different effect than if the automobile resides in a high 
temperature climate, like Miami. Takata's current field data suggests 
that moisture in mild climates, without persistent high temperatures, 
will not degrade the performance of the propellant.

    Question 2. At the hearing on June 23, 2015, you stated that you 
were unable to answer ``completely'' whether Takata's newly designed 
inflators had shown evidence of moisture. What has Takata's testing 
revealed regarding evidence of moisture in these inflators?
    Answer. Takata interprets the phrase ``newly designed inflators'' 
to refer to Takata's inflators that contain the 2004L propellant. 
Takata is not currently aware of any incidents from either its 
manufacturing process (including related testing) or root cause 
analysis that would indicate that the 2004L propellant in its newly 
designed inflators may experience an alteration over time that could 
potentially lead to over-aggressive combustion in the event of an air 
bag deployment. Takata also conducted substantial internal induced 
moisture testing, which demonstrates that inflators with 2004L 
propellant perform better than inflators with 2004 propellant when 
exposed to the same level of moisture and aging.
    Furthermore, pursuant to the Consent Order dated May 18, 2015 
between Takata and NHTSA (the ``Consent Order''), Takata has provided 
NHTSA with a proposed plan regarding the service life and safety of its 
non-recalled PSAN inflators, including those containing the 2004L 
propellant, which includes testing Takata that will perform to 
determine whether they are susceptible to over-pressurization and/or 
rupturing.

    Question 3. How has Takata determined what level of moisture in the 
newly designed inflators is safe? What assurance can Takata provide 
that aging of its new inflators will not lead to a second cascading 
crisis as moisture continues to infiltrate?
    Answer. Takata conducted a battery of tests on its propellants to 
determine the level of moisture that is safe in its inflators. Takata 
is not currently aware of any incidents from either its manufacturing 
process (including related testing) or root cause analysis that would 
indicate that the 2004L propellant in its newly designed inflators may 
experience an alteration over time that could potentially lead to over-
aggressive combustion in the event of an air bag deployment. 
Furthermore, pursuant to the Consent Order, Takata has provided to 
NHTSA a proposed test plan regarding the service life and safety of 
these inflators, which includes testing that Takata will perform to 
determine whether they are susceptible to over-pressurization and/or 
rupturing.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John Thune to 
                            Scott Kunselman
    Question 1. We are all aware that, historically, recall completion 
rates are unacceptably low. What more can be done to improve these 
rates?
    Answer. FCA US's primary goal is to remedy all recalled vehicles. 
However, there are a number of factors and challenges affecting 
participation rates that are outside of the control FCA U.S. and other 
automakers control that we strive to overcome.
    Among these factors is whether vehicle owners respond to the recall 
notices they receive by scheduling an appointment with their dealer so 
that the needed remedy can be performed free of charge.
    Another factor impacting participation rates is vehicle age. An 
analysis commissioned by the Alliance of Automobile Manufacturers 
(initiated in 2008 and 2009) determined that participation rates varied 
markedly based on the age of the vehicle involved in the recall. Among 
the findings:

   For newer vehicles, the completion rate averaged 83 percent;

   For vehicles 5-10 years old, the rate dropped nearly in half 
        to 44 percent; and

   For vehicles older than 10 years old, the completion rate 
        dropped by another two-thirds to 15 percent.

    Because there continues to be a general lack of understanding of 
why so many vehicle owners fail to respond to multiple notices and 
other efforts to inform them that their vehicle needs free repairs to 
fix a safety-related defect or non-compliance, the Alliance of 
Automobile Manufacturers, of which FCA U.S. is a member, has 
commissioned a major research effort to study consumer attitudes about 
vehicle recalls and reasons why free repairs are sought or not sought.
    a. For each recall involving defective Takata air bags, please 
provide FCA's current recall completion rates.
    Answer.

       FCA US' Takata Recall Campaign Status as of August 6, 2015
------------------------------------------------------------------------
      NHTSA #         FCA US #                   Details
------------------------------------------------------------------------
814V-354                   P40   No longer active. Absorbed into 14V-817
                                  (P81)/14V-770 (P78)0
14V-770                    P78   6%
814V-817                   P81   Never Launched. Replaced with 15V-313
                                  (R25)0
15V-313                    R25   3% Total--Phased Launch (5 phases)
                                    Phase 1 start June 8, 2015
                                    Phase 2 start TBD
                                    Phase 3-5 start TBD
815V-312                   R26   0% Planned start November0
15V-444                    R37   0% Phased launch (2 phases)
                                    Tied to R25 Phase 3 and
                                  Phase 5
------------------------------------------------------------------------

    b. What has your company done to facilitate the recall process in 
terms of reaching out to its own customers?
    Answer. FCA U.S. monitors the pace of vehicles being remedied at a 
regular frequency. The effectiveness of an outreach campaign may be 
lower where there are factors such as vehicle age, lack of current name 
on vehicle title, or even the owner-perceived ability to self-diagnose 
or self-assess the risk.
    In the event that the standard outreach plan is not producing 
results that are acceptable to FCA U.S. or NHTSA, additional actions 
may be taken. These actions would be considered outside of the norm or 
extraordinary measures. Each recall is different, and the same strategy 
may not necessarily work for all campaigns. FCA U.S. evaluates each 
recall campaign to understand the individual issues and challenges 
occurring during the execution of remedy repair and deploys a directed 
response.
    Some activities that may be included in an expanded outreach 
strategy include the creation of general URLs on the subject as well as 
personal URLs directing customers to a live person that will facilitate 
the remedy's completion. FCA U.S. is also working with demographic 
expert Urban Science to program and leverage the organization's 
StreetSmart tool to identify the specific location of vehicles that 
have not yet had their recall remedy completed.
    As a recent example, FCA U.S. has initiated expanded outreach 
activities for Recall 14V-770 (P78). We will use a phased approach, 
beginning with robo calls to determine ``bad'' phone numbers. Shortly 
thereafter, the outreach activities will progress to follow-up outbound 
phone calls and e-mail notifications to the owners in the target areas 
as well as follow-up mailers. Additional outreach activities will be 
determined as necessary.

    Question 2. What is the process, generally, for remedying a recall 
and repairing the defective part?
    Answer. FCA sends owner letters to all affected customers informing 
the customer their vehicle is involved in a recall. The owner letter 
informs the customer of the issue and consequence of the recall to the 
customer. The owner letter also informs the customer of the specific 
repair and the estimated time to complete the repair. The customer has 
the option to either schedule a service repair in advance or drive to a 
dealer and have the recall remedy performed.
    Dealers are notified of the recall by a release of the repair 
instructions by FCA U.S. to the dealer computer network. When a 
customer brings a vehicle to the dealer, the dealer enters the VIN into 
the dealer computer system, which informs the dealer that the VIN is 
associated with a specific recall.

    a. How long does it typically take to procure and then ship 
replacement parts to the dealers?
    Answer. Each recall is different so there is no way to characterize 
a ``typical'' length of time to procure and ship parts to dealers for 
recall campaigns.

    b. What can be done to make the repair process more hassle-free for 
customers?
    Answer. The safety of our customers is paramount, as is the trust 
our customers place in their vehicles. We recognize that people rely on 
their vehicles for many important purposes.
    FCA U.S. Customer Assistance Centers assist customers with getting 
their recalls completed in several ways, including:

  1.  Agents contact dealers on behalf of customers to schedule 
        appointments when remedy parts are available;

  2.  When remedy parts are not available, customer information is 
        retained and the customer will be notified when parts become 
        available; and

  3.  Agents provide information about open recalls and estimated 
        timing when remedy parts are not available.

    When conducting a recall, it is our primary goal to have the parts 
available and promptly remedy vehicles. When that cannot be 
accomplished, we make loaner cars available upon request. On July 1, 
2015, FCA U.S. enhanced its Courtesy Transportation/Dealer Service 
Loaner Program making it easier for dealers to provide loaner vehicles 
to owners waiting for recall completion.
                                 ______
                                 
      Response to Written Question Submitted by Hon. Roy Blunt to 
                            Scott Kunselman
    Question. Do you have suggestions on how to protect consumers from 
rental cars with open safety recalls?
    Answer. Safety is our top priority at FCA US. Ensuring that unsafe 
vehicles are off the road is critical to motor vehicle safety. FCA U.S. 
believes that all customers, including rental car companies, should be 
able to have their recalled vehicles repaired in a timely manner and 
that all customers should be treated equally whether they are driving 
their own vehicle or one they rented. For this reason, FCA U.S. 
continues to support the Alliance of Automobile Manufacturers' 
legislative proposal regarding rental vehicles subject to recalls. This 
proposal would prevent rental car companies from renting vehicles 
unless the prospective renter is notified of the recall or the vehicle 
is subject to a do not drive notice. This would hold rental car 
companies to the same standards as auto manufacturers and ensure rental 
car customers have the same access to vehicle recall and safety 
information as customers who own an affected vehicle.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Ron Johnson to 
                            Scott Kunselman
    Question 1. Does your company support a process where consumers 
should continue to be able to rent a car or truck if the vehicle is 
under an open safety recall?
    Answer. FCA U.S. supports requiring that rental car companies 
ground all vehicles subject to a stop drive recall until they are 
repaired. For all other recalls, we continue to support requiring that 
rental car companies ground vehicles until they are repaired, unless 
the rental car company: (1) provides customers with written 
notification of any un-remedied defect or noncompliance, including pre-
remedy precautions; and (2) receives a written acknowledgement by the 
customer of receipt of notification.

    Question 2. If not, what are your legislative recommendations for 
Congress to pursue to stop driver deaths that continue to occur in 
rented, recalled vehicles?
    Answer. FCA U.S. supports the Alliance of Automobile Manufacturers' 
legislative proposal regarding rental vehicles subject to recalls. This 
proposal would prevent rental car companies from renting vehicles 
unless the prospective renter is notified of the recall or the vehicle 
is subject to a do not drive notice. This would hold rental car 
companies to the same standards as auto manufacturers and ensure rental 
car customers have the same access to vehicle recall and safety 
information as customers who own an affected vehicle.

    Question 3. What other stakeholders besides your company would you 
expect to support your recommendations, and does the car rental 
industry support your ideas? If not, why not?
    Answer. It is our understanding that nearly all of the member 
companies of the Alliance of Automobile Manufacturers support its 
legislative proposal, which ensures that rental car customers have the 
same access to vehicle recall and safety information as customers who 
own an affected vehicle by requiring that rental car companies ground 
vehicles until they are repaired, unless the rental car company: (1) 
provides customers with written notification of any un-remedied defect 
or noncompliance, including pre-remedy precautions; and (2) receives a 
written acknowledgement by the customer of receipt of notification.
    It is our understanding that all major rental car companies have 
entered into a voluntary agreement to park their vehicles subject to a 
safety recall. It is also our understanding that the same rental car 
companies support the Raechel and Jacqueline Houck Safe Rental Car Act.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Bill Nelson to 
                            Scott Kunselman
    Question 1. What is your company's position on renting to the 
public vehicles under open safety recalls?
    Answer. Safety is our top priority at FCA US. Ensuring that unsafe 
vehicles are off the road is critical to motor vehicle safety. FCA U.S. 
believes that all customers, including rental car companies, should be 
able to have their recalled vehicles repaired in a timely manner and 
that all customers should be treated equally whether they are driving 
their own vehicle or one they rented.
    FCA U.S. supports requiring that rental car companies ground all 
vehicles subject to a stop drive recall until they are repaired. For 
all other recalls, we support requiring that rental car companies 
ground vehicles until they are repaired, unless the rental car company: 
(1) provides customers with written notification of any un-remedied 
defect or noncompliance, including pre-remedy precautions; and (2) 
receives a written acknowledgement by the customer of receipt of 
notification.

    Question 2. Your company has not publicly supported S. 1173, the 
Raechel and Jacqueline Houck Safe Rental Car Act, which was 
reintroduced on April 30, 2015.

    Question 2a. Do you support S. 1173? Why or why not?
    Answer. No. FCA U.S. supports the Alliance of Automobile 
Manufacturer's (the ``Alliance'') legislative proposal regarding rental 
vehicles subject to recalls. This proposal would prevent rental car 
companies from renting vehicles unless the prospective renter is 
notified of the recall or the vehicle is subject to a do not drive 
notice. This would hold rental car companies to the same standards as 
auto manufacturers and ensure rental car customers have the same access 
to vehicle recall and safety information as customers who own an 
affected vehicle.

    Question 2b. If not, do you have alternative proposals or ideas as 
to how consumers can be better protected from rental cars under recall? 
If so, please detail them.
    Answer. FCA U.S. supports the Alliance legislative proposal, as 
described above.

    Question 3. In response to a proposal offered by the Alliance of 
Automobile Manufacturers (``the Alliance''), NHTSA analyzed the number 
of recalls in which the manufacturer advised the owner to not drive the 
recalled vehicle (so-called ``do not drive'' recalls). In a November 5, 
2014, letter to the Senate, NHTSA reported that, from 2010-2013, ``do 
not drive'' recalls issued by members of the Alliance accounted for 
only 4.9 percent of the total number of recalled vehicles. Furthermore, 
the recalled vehicles that were driven by Raechel Houck and Jewel 
Brangman were not subject to a ``do not drive'' advisory. In light of 
these facts, does your company agree with the Alliance's position that 
only recalled vehicles subject to a ``do not drive'' advisory should be 
grounded and not rented until they have been repaired?
    Answer. Yes, as described above, FCA U.S. supports the Alliance's 
position.

    Question 4. The Alliance has also proposed that vehicles subject to 
a safety recall, other than ``do not drive'' recalls, should be able to 
be rented before they are repaired--as long as the consumer is informed 
of the recall when renting the vehicle. Do you agree with the 
Alliance's position that disclosure to the customer of a safety recall 
is sufficient to protect the safety of that customer?
    Answer. FCA U.S. agrees that the Alliance legislative proposal 
ensures that rental car customers have the same access to vehicle 
recall and safety information as customers who own an affected vehicle 
by requiring that rental car companies ground vehicles until they are 
repaired, unless the rental car company: (1) provides customers with 
written notification of any un-remedied defect or noncompliance, 
including pre-remedy precautions; and (2) receives a written 
acknowledgement by the customer of receipt of notification.
                                 ______
                                 
     Response to Written Questions Submitted by Hon. John Thune to 
                             Rick Schostek
    Question 1. We are all aware that, historically, recall completion 
rates are unacceptably low. What more can be done to improve these 
rates?
    Answer. Honda continues to believe that there is substantial 
promise in tying the annual state vehicle registration process to a 
requirement that safety defects be addressed before completion of 
vehicle registration. We recognize that there are a number of issues 
about this concept that require further discussion. But we are 
convinced that this is the single most significant step we can take to 
achieve very high recall and remedy rates.

    a. For each recall involving defective Takata air bags, please 
provide Honda's current recall completion rates.
    Answer. As of August 5, 2015, with respect to Takata inflator 
recalls initiated in 2014 and later, American Honda's recall completion 
rate by inflator repair type is:

Driver-Side                                                      29.0%
Passenger-Side                                                   27.1%
Overall                                                          28.3%
 

    b. What has Honda done to facilitate the recall process in terms of 
reaching out to its own customers?
    Answer. Over and above the required mailed notification, we have 
pursued new ideas and methods to encourage our customers to check their 
vehicle identification number and recall status in order to increase 
the rate of response to recall notifications.
    We provide multiple notices in both English and Spanish. We have 
consulted with the U.S. Postal Service to try new methods to get people 
to open recall mailings. One idea was a free calendar inserted with the 
recall notice. This did not prove successful. We have used overnight 
delivery of follow-up notifications. There was no material change in 
the rate of recall completion.
    We have, and continue to contact customers by phone. In support of 
the Takata inflator campaigns, we have called more than 1.5 million 
hard-to-reach customers, using both direct and automated calls. An 
automated call just before notification or reminder mail has been 
successful in raising response rate. It is now our practice to use 
automated calls to alert customers in advance of mailed notifications.
    We have enhanced our general recalls websites and created a new 
microsite dedicated to air bag inflator recalls to keep our customers 
informed and to make it easy for them to check their vehicles for open 
recalls. We extended our Customer Relations department call center 
hours to receive calls from customers seven days per week as well as 
engage with customers on Honda's Twitter and Facebook pages.
    In some markets, we have enlisted a special investigative firm as 
part of our effort to contact hard-to-reach owners of older model 
vehicles affected by the Takata airbag inflator recalls. We also have 
worked with CARFAX to add open recall alerts to the CARFAX history 
report for affected vehicles. In addition, CARFAX is sending us an 
alert if there is a change to their history report for some vehicles 
with the affected Vehicle Identification Numbers (VINs). This helps us 
to obtain additional information to contact a hard-to-reach customer.
    Honda also voluntarily initiated a multi-million dollar bi-lingual 
regional advertising campaign in March to implore customers to repair 
their vehicles. This campaign was designed to gain the attention of 
customers in the nine states and two U.S. territories that experience 
the most consistently high temperatures and absolute humidity to 
immediately check for open recalls and safety improvement campaigns. 
Complementing this print and radio effort was a social media campaign 
via Facebook advertising

    c. In your testimony, you commended the effectiveness of Honda's 
social media campaign regarding the air bag recalls. On what metrics 
does Honda rely in evaluating the success of this social media 
campaign?
    Answer. Honda evaluated this social media campaign's success upon 
impressions (reach) and engagement rate (percent of people who 
interacted in some manner with the post such as clicking, liking, 
sharing). The campaign achieved more than 6.4 million impressions and 
more than 124,000 engagements. Ideally, regarding the air bag inflator 
recall social media campaign, we would measure success upon number of 
affected vehicles that were repaired. However, due to the multitude of 
media channels (print, radio, personal phone calls, post cards, as well 
as social media) utilized this past spring, it was not possible to 
clearly attribute the number of repairs solely to the social media 
campaign. We do know, however, that of the total Honda and Acura recall 
website views during the campaign, 52.2 percent came from the Facebook 
social media ads.

    d. What did those metrics show about this social media campaign in 
particular?
    Answer. We created a two-part Facebook ad campaign. The first was 
launched March 18,2015 targeting national Honda and Acura owners in the 
U.S.. The engagement rate (ER) for this group was 2.23 percent (above 
our benchmark of 1.10 percent) and the click through rate (CTR) was 
2.73 percent.
    The second portion of the Facebook ad campaign was launched March 
19,2015 and geo-targeted Honda and Acura owners residing in California 
and states and territories identified as high absolute humidity regions 
(Texas, Louisiana, Mississippi, Alabama, Georgia, Florida, South 
Carolina, Hawaii, Puerto Rico, and U.S. Virgin Islands). The ER for 
this group was also greater than our benchmark (1.80 percent versus 1.1 
0 percent) and the CTR was 2.33 percent. Overall the limiting factor 
for this effort-or any social media effort-, particularly for older 
vehicles that have changed hands one or more times, is having the 
current owner's e-mail address.

    Question 2. What is the process, generally, for remedying a recall 
and repairing the defective part?
    Answer. Once an automaker notifies NHTSA that it has determined a 
safety defect exists in one of its vehicles, the automaker has 60 days 
to notify registered vehicle owners of the defect and, if available, 
the process for remedying it. If there is no available remedy, then the 
automaker will have to send a second notification letter to vehicle 
owners to advise them once a remedy is available. (Whether a remedy is 
available at the time of the initial owner notification often times 
depends on whether the defect is one of manufacture or design. If it is 
the latter, then it may take time to design, test and manufacture 
replacement parts). Once the remedy is available and owners are 
notified, much of the process depends on the vehicle owner recognizing 
the automaker notice and responding to it, typically by calling either 
their local dealer to schedule a service appointment or the automaker's 
customer relations department to identify a dealer and schedule an 
appointment. When the owner arrives at the dealer for a scheduled 
recall repair appointment, the dealer will repair the vehicle for free.

    a. How long does it typically take to procure and then ship 
replacement parts to the dealers?
    Answer. There are many different factors affecting procurement and 
shipment of replacement parts to dealers, including tooling 
availability, raw material availability, component part lead-times, 
required testing, capacity limitations, and logistics lead-time. 
Procurement lead-time can vary from as little as a few days to many 
months. The general procurement timeframe, from the time the purchase 
order is generated until the time the parts arrive at American Honda, 
is typically between 30 and 60 days. After American Honda receives the 
parts, the timeframe to have them available to the dealer is typically 
about a week.

    b. What can be done to make the repair process more hassle-free for 
customers?
    Answer. We have asked our dealers to expand service hours and to 
never turn away a customer with an affected vehicle. In the event a 
customer may have forgotten to schedule or include the recall repair on 
an earlier scheduled appointment with the dealership, we require 
dealers to check the YIN for every vehicle that comes into their 
de.alership.
    We also have reinforced with our dealers Honda's firm policy to 
offer affected customers a loaner or rental car free of charge while 
their vehicle is being repaired or if they are waiting for a 
replacement part to be delivered. All dealers are authorized to make a 
vehicle available to a customer without prior approval from Honda. We 
have been actively monitoring the availability of loaner and rental 
cars and engaging with our dealers to ensure that they offer such 
vehicles so we can meet our customers' needs.
                                 ______
                                 
      Response to Written Question Submitted by Hon. Roy Blunt to 
                             Rick Schostek
    Question. Do you have suggestions on how to protect consumers from 
rental cars with open safety recalls?
    Answer. As noted in our response to Senator Johnson's first 
question, Honda supports legislation S.l173, the Raechel and Jacqueline 
Houck Safe Rental Car Act of 2015--to require car rental companies to 
remedy safety defects before a vehicle can be rented.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Ron Johnson to 
                             Rick Schostek
    Question 1. Does your company support a process where consumers 
should continue to be able to rent a car or truck if the vehicle is 
under an open safety recall?
    Answer. We believe that the defect in a vehicle rented to the 
public should be remedied before the vehicle is rented. It is for this 
reason that Mr. Schostek expressed at the June 23 hearing Honda's 
support for S.1173, the Raechel and Jacqueline Houck Safe Rental Car 
Act of 2015 and supported its inclusion in the Senate-passed Developing 
a Reliable and Innovative Vision for the Economy (DRIVE) Act.

    Question 2. If not, what are your legislative recommendations for 
Congress to pursue to stop driver deaths that continue to occur in 
rented, recalled vehicles?
    Answer. Please see our response to Question 1.

    Question 3. What other stakeholders besides your company would you 
expect to support your recommendations, and does the car rental 
industry support your ideas? If not, why not?
    Answer. Honda is not in a position to speak for other stakeholders 
on their legislative positions.
                                 ______
                                 
    Response to Written Questions Submitted by Hon. Bill Nelson to 
                             Rick Schostek
    Question 1. What is your company's position on renting to the 
public vehicles under open safety recalls?
    Answer. As a manufacturer of motor vehicles, Honda is responsible 
for the safety of our vehicles. While we establish high standards of 
design, materials and manufacture for all aspects of our vehicles, at 
times the resulting product may not meet the level of intended safety 
performance. In those circumstances where it becomes necessary to 
recall a vehicle for a safety related defect, we strive to locate and 
notify owners of affected vehicles of the need to bring the vehicle to 
a dealer for inspection and remedy where needed. Our objective is reach 
as many owners as we are able and to remedy their vehicles. We believe 
that the defect in a vehicle rented to the public should be remedied 
before the vehicle is rented.

    Question 2. Your company has not publicly supported S. 1173, the 
Raechel and Jacqueline Houck Safe Rental Car Act, which was 
reintroduced on April 30, 2015. Do you support S. 1173? Why or why not?
    Answer. Mr. Schostek announced Honda's support for S. 1173 at the 
hearing on June 23, 2015. That support was reiterated in a letter to 
Senator Schumer, the sponsor of the legislation, on July 9, 2015. A 
copy of that letter, which explains our reasons for supporting the 
bill, is appended hereto.
                               Attachment
                                  Honda North America, Inc.
                                       Washington, DC, July 9, 2015

Hon. Charles E. Schumer,
SH-322 Hart Senate Office Building,
Washington, DC.

Dear Senator Schumer:

    I write to offer Honda's support for S. 1173, the Raechel and 
Jacqueline Houck Safe Rental Car Act of 2015.
    Honda North America's Executive Vice President, Rick Schostek, 
announced our support of the legislation during his testimony before 
the Senate Commerce, Science, and Transportation Committee on June 23, 
2015. As a manufacturer of motor vehicles, we are responsible for the 
safety of our products. Despite our best efforts, from time to time it 
becomes necessary to recall a vehicle to remedy a system or component 
that may not meet the level of intended safety performance. When this 
occurs, we strive to locate all of our customers with an affected 
vehicle and urge them to bring their vehicle to our dealers for repair 
at their earliest convenience.
    As a matter of corporate policy, Honda generally does not sell its 
vehicles to rental car fleets. However, our dealers are free to do so, 
which means that some Honda and Acura vehicles do end up in rental car 
fleets. Additionally, some rental car companies purchase older vehicles 
in the used car market. As such, we believe S.1173 will facilitate our 
ability to repair these vehicles and assist us in protecting our 
customers and those who drive our vehicles.
    We congratulate you and your colleagues for sponsoring this 
important legislation.
            Sincerely,
                                           Edward B. Cohen,
                                                    Vice President,
                                     Government and Industry Relations.
Cc: Senator Barbara Boxer
Senator Claire McCaskill
Senator Kristen Gillibrand
Senator Robert Casey, Jr.
Senator Dianne Feinstein
Senator Richard Blumenthal
Senator Bill Nelson

                                  [all]

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