On September 9, 1966, President Lyndon Johnson signed the Vehicle Safety Act into law, promising the American people to curb the increasing number of traffic deaths and accidents. During a speech, he compared the loss of American lives in car accidents to those in the Vietnam War, emphasizing the gravity of the situation and stating that safety must be considered a normal cost of doing business.
Fast forward to January 30, 2023, the National Highway Traffic Safety Administration (NHTSA) invoked the Vehicle Safety Act when they announced a consent order with Volvo Group North America. The consent order involved a $130 million civil penalty, one of the largest-ever penalties for violations of the Vehicle Safety Act. NHTSA Acting Administrator Ann Carlson stated in a statement that the agency would use their full authority to protect the public from safety defects and manufacturers who fail to comply with the law.
NHTSA initiated an investigation into Volvo in October 2018, looking into their recall timeliness, manufacturer communications, and early warning reporting requirements. The investigation revealed that Volvo did not comply with recall notification requirements, failed to submit certain quarterly recall reports, did not submit certain manufacturer communications, and failed to comply with early warning requirements by not reporting certain deaths and accidents.
As part of the settlement, Volvo Group North America must pay $65 million within 60 days and an additional $45 million if they violate the agreement. The company will also spend $20 million to develop a safety data analytics infrastructure to enhance their ability to detect and investigate potential safety defects. Furthermore, the company will create written procedures and training for their employees on compliance with the Vehicle Safety Act and agree to oversight by an independent third-party auditor. They will also meet regularly with NHTSA to address any potential safety concerns.
A spokesperson for Volvo stated that safety is of paramount importance to the company and that they appreciate the opportunity to resolve the matter. The company is committed to having a best-in-class safety organization and has already started making wide-ranging improvements in their North American safety processes and systems.
Professor George Ball of Indiana University, who studies product recalls, believes that the non-monetary aspect of this settlement is more interesting and tells of how NHTSA may behave in the future. He believes that NHTSA is sending a message to automotive manufacturers that they will suffer financially if they do not adhere to their quality responsibilities and, if necessary, NHTSA will step in and direct how the firm makes product quality decisions, including being involved in business process improvements. This is a paradigm shift compared to what is happening at the U.S. Consumer Product Safety Commission as well. Ball states that the Biden administration seems to be taking a much stronger stand in protecting consumers from potentially unsafe products and ensuring that firms recall as often and as quickly as they need to.
Recently, Volvo recalled over 100,000 vehicles, including over 27,000 in the U.S., due to a problem with the brake-by-wire systems. The company stated that it would release a free BCM2 software update over the air to address the issue.