Honda Responds to $70 Million Fine

2014-honda-civic-red-top-viewHonda has been fined a record $70 million for not reporting 1,729 injuries and deaths to The National Highway Traffic Safety Administration (NHTSA). The amount is twice what GM was fined when it failed to report 40 deaths because of ignition issues. 

In a press statement, Honda blamed data entry and other errors for the reporting failure and promised to take "corrective measures":

Honda Resolves NHTSA Inquiry Regarding Early Warning Reporting

TORRANCE, Calif., Jan. 8, 2015 – American Honda Motor Co., Inc. ("Honda") has entered into an agreement with the National Highway Traffic Safety Administration (NHTSA) to resolve the government's inquiry into Honda's early warning reporting as required by the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act. As part of the Consent Order, Honda will pay a $70 million civil penalty and continue to implement a series of corrective measures among other requirements.

"We have resolved this matter and will move forward to build on the important actions Honda has already taken to address our past shortcomings in early warning reporting," said Rick Schostek, executive vice president, Honda North America, Inc. "We continue to fully cooperate with NHTSA to achieve greater transparency and to further enhance our reporting practices."

In order to ensure full compliance with its early warning reporting obligations, Honda has already begun taking steps to correct the errors responsible for the violations. The company is in the process of initiating new training regimens, changing internal reporting policy, making staffing and organizational changes, and enhancing oversight of its early warning reporting process.

The settlement agreement follows Honda's November 24, 2014 response to a Special Order issued by NHTSA in early November. That order was prompted by Honda's disclosure t NHTSA of preliminary findings from a third-party audit Honda commissioned in September 2014 in response to inadequately addressed discrepancies in the company's early warning reporting. In responding to the Special Order, as previously disclosed, Honda identified under-reporting of written claims or notices of injuries or deaths over the past decade due to errors related to data entry, computer coding, regulatory interpretation, and other errors in warranty and property damage claims reporting.

Discussion Starters: 

  • Assess Honda's statement. What works well to explain the company's position, and what could be improved? 
  • Do you buy Honda's explanation of the reporting failures?