In a major regulatory move, Ford Motor Company has agreed to pay a $165 million civil penalty to the National Highway Traffic Safety Administration for failing to comply with the federal recall obligation. This penalty, the second largest in history at NHTSA, results from charges that Ford was sluggish in recalling vehicles that came with defective rear view cameras. This settlement begs the question of whether any compensation will be given to those affected.
Background of recall issue
The recall in question, totaling over 620,000 vehicles and with a concentration of the 2020 model year, involved very popular models such as F-Series trucks and several SUVs. The defect concerned malfunctioning rear view cameras that show blank screens, raising the risk of accidents considerably. Even though NHTSA received 15 complaints over this issue, it was able to confirm that there were no reported injuries or fatalities related to the defect.
Ford first recognized the issue in early 2020 but didn’t issue a recall until September of last year. That delay led to an investigation by NHTSA for possible failure by Ford to timely address the safety defect in a recall and to meet reporting requirements under the Motor Vehicle Safety Act.
Consent order details
Under the terms of the consent order, Ford will pay a cash upfront penalty of $65 million. The remaining $55 million is conditional upon Ford’s completing certain commitments to compliance over the next three years. Beyond this, Ford estimated it would spend $45 million in developing a data analytics system to identify safety trends and strengthen its internal procedures with respect to implementing the recall process. With this it seems unlikely for affected users and owners of the affected recall models to get any compensation from the settlement.
The consent order further provides that Ford be subjected to the monitoring of a third-party monitor independent of NHTSA to ensure the company complies with its undertakings to recall and report under federal law. It will also have to relook at all the recalls of the last three years to make sure the vehicles were appropriately recalled.
Implications for affected users
The settlement leaves many consumers in doubt as to whether they will be compensated for their troubles. It has not been indicated at this point that direct payouts to affected users are contemplated. Essentially, the settlement appears to be directed toward compliance and improvement of Ford’s internal processes rather than bringing restitution to consumers.
However, the fact that Ford is committed to updating its safety processes and data analytics means owners of affected vehicles can still indirectly benefit from them. With improvements to be made in its processes for recalls and timely notifications regarding potential defects in the future, Ford hopes to avoid a recurrence of the problem.
Ford’s response and future commitments
While Ford has publicly disputed those NHTSA findings, it is settling the issue administratively. Ford also said it is committed to further improvements in safety and compliance going forward. Chief Executive Jim Farley has acknowledged ongoing issues with quality control and warranty costs but reassured stakeholders that steps are being taken to rectify the issues.
Ford will invest a portion of the fine to establish a new testing lab “focused on low-voltage electrical systems” and enhance its data analysis for safety defects. The automaker also aims to develop an information sharing system that would allow it to reach decisions on recalls with more speed.
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