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17 December 2014

Understanding Vehicle Recalls: GM, Takata & Class Action

Take a quick look at the National Highway Traffic Safety Administration (NHTSA) website, and a surprising reality becomes clear: the auto industry recalls an extraordinary amount of defective vehicles.

In the last fifteen days, the NHTSA has announced 17 independent recalls, more than 1 every day. Some of these defects affect a small portion of vehicles; one includes only 38 motor-homes. But others have far-reaching consequences. On November 5th, Audi recalled more than 100,000 vehicles with defective airbags. And that’s just the beginning.

An Industry In Crisis

2014 is shaping up to be a bad year for vehicle manufacturers, with high-profile recalls from the likes of GM and Toyota that involve millions of cars. With around 253 million vehicles currently driving America’s roads, GM’s recent defects alone involve almost 2.5% of all car owners in the US.

As a driver, it’s important to understand the nature of recalls, because it’s very likely that one will affect you at some point in your life.

How Does A Recall Work?

In essence, drivers complain. We complain about the problems with our cars, and when the National Highway Traffic Safety Administration receives enough complaints about a particular model to warrant investigation, they’ll conduct one. Consumers can also file complaints directly with a manufacturer. Federal law requires companies to inform the NHTSA of a known defect within 24 hours.

After corroborating the fault’s existence, the NHTSA makes its findings public. Usually, this is enough pressure for a manufacturer to recall the affected vehicles on its own. If it doesn’t, the NHTSA can go to court, prove their case, and force the manufacturer to issue a recall. Unfortunately, that process can take years.

Once a recall is announced, its details will be published on the NHTSA’s website. Most manufacturers will start a website of their own, too, like this one from General Motors. Vehicle owners can search for their particular model and find out whether or not it’s included. Then, the company will offer to repair the vehicle for free, or replace it.

In the event that a considerable number of people have been injured because of the defect, companies will often establish funds to pay out injury compensation.

Recent Vehicle Recalls

GM’s Ignition Switch

On February 7, 2014, General Motors announced a recall of around 800,000 vehicles, eventually expanding the motion to encompass nearly 1 million. The cars, installed with faulty ignition switches, can turn off unexpectedly during operation, disabling airbags and leaving drivers immobile in the middle of traffic. According to NBC News, at least 42 people have been killed and 58 more injured.

While GM has repaired about 60% of the vehicles affected, the company has publicly acknowledged that it knew about the problem for more than a decade before initiating the recall. GM now faces a criminal investigation by the federal government.

Takata’s Explosive Airbag: Failure To Warn?

Japan-based manufacturer Takata supplies airbags to numerous auto companies, including Toyota, Honda, Mazda, Ford and Chrysler.

But after recent reports of these air bags exploding in high-humidity regions, the NHTSA asked Takata to recall its deadly airbag and extended this recommendation to any auto manufacturers that used it. To date, more than 10 companies have recalled over 11 million cars, but Takata has refused to play ball.

The New York Times published an investigative report alleging that Takata knew about their airbag’s defect as early as 2004, but failed to notify federal regulators. If that claim is true, it would clearly constitute a “failure to warn” the general public, one of the key foundations of many product liability lawsuits.

Currently, at least 139 injuries and 4 fatalities have been reported to the NHTSA.

What Happens Next?

With so many injuries, and so many Americans involved, it’s almost certain that the vast majority of affected individuals will enter class actions to pursue compensation, rather than filing individual personal injury lawsuits.

In fact, class action was designed to tackle just this sort of problem.

How Do Class Actions Work?

How can any single citizen take on a gigantic, multi-national corporation in court? Compared to the average American, auto manufacturers represent some of the wealthiest legal entities on earth, with millions of dollars devoted to defense attorneys and liability insurance. Even if they can’t argue on facts, an auto company can drag out the legal process indefinitely, making it impossible for a single plaintiff to keep up.

There’s strength in numbers. In a class action, multiple individuals who have been similarly injured by a defective product band together, spreading legal costs equally. This allows the “class” to hire better lawyers than they could on their own. And sometimes, the sheer number of people in a class action can legitimize their claim of wrong-doing.

Have Any Class Actions Been Filed Yet?

At a minimum, twelve separate class actions have been filed against Takata. Many argue that the company knew about its airbag’s defect, but knowingly sold the product anyway.

For its part, General Motors has established a compensation fund to pay the survivors of deceased drivers. But in an odd twist, the State of Arizona’s Attorney General has filed suit against GM, demanding $3 billion to cover the value lost to about 300,000 GM cars registered in the state. That money wouldn’t go to injured victims, or even car owners, though. Instead, it would be awarded to Arizona itself, and used to fund education initiatives.