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Blumenthal proposal would deflate value of customer trade-ins

July 31, 2015
By Bill Fox, NADA Chairman
Imagine what would happen if dealers could offer only a fraction for their customers’ trade-ins, or could not even send the trade-in vehicle to auction. This could be a dark reality if the Sen. Richard Blumenthal, D-Conn., used-car amendment, which would ground all recalled vehicles at dealerships until remedied, is passed.
(Editor’s note: The Senate on July 30 overwhelmingly passed a bipartisan six-year plan for highway, bridge and transit construction that does not include Blumenthal’s amendment.)
When a food recall is issued, the product under recall is immediately removed from commerce and tossed from retail shelves. This is not the way it works for a recall involving automobiles. When a particular vehicle is under open recall, that doesn’t necessarily mean it requires the drastic step of grounding the vehicle.  
While there are at least 46 million vehicles currently under open recall, the truth is many recalls don’t require the vehicle being taken out of service.  Furthermore, recall notices often are issued even though there is nothing an owner or dealer can do to resolve the problem because of a lack of auto parts.
And some recalls are due to minor causes, such as a printing error in the owner’s manual.
The Blumenthal amendment to the highway bill (House Resolution 22) currently being considered by the Senate proposes to ground all used vehicles sold at a dealership under open recall.  (Private sales would remain unregulated.)  The amendment would effectively slash the trade-in value of some recalled vehicles while removing cars from the road needlessly — and the reason could be for something as minor as a warning sticker that may peel off the sun visor. 
This amendment would cripple the used-car market, leaving consumers with diminished trade-in values or fewer options because cars would be grounded indefinitely until parts became available. This would be devastating for consumers, dealers and automakers.
Franchised auto dealers play a critical role in ensuring that recalled vehicles are repaired.
Proposals that ground all vehicles under open recall at a dealership miss the mark: They don’t differentiate between recalls involving a serious defect and those with a negligible impact on safety. Time and time again, they prove to be overly broad measures that do not require the drastic step of grounding cars. 
A recent survey of 2,100 vehicle recalls revealed that 80 percent of them do not come with any recommendation from the manufacturer or the National Highway Traffic Safety Administration to stop operating the vehicle.
The NADA is advocating for a better solution. A more viable approach would be to improve the recall process by differentiating between truly dangerous defects in which vehicles should immediately be taken off the road versus trivial issues where there is no harm to driver safety or the public good.
Policies should be tailored to boost consumer recall response and completion rates. The average vehicle recall completion rate is 75 percent. America’s dealers support a 100 percent completion rate and we urge the NHTSA to improve the recall process by designing a database that handles multiple VIN requests as a single inquiry.
Dealers should call their senators today at (202) 224-3121 and tell them to vote "No" on Sen. Blumenthal’s ill-conceived amendment.  This amendment would diminish in an instant the trade-in value of millions of vehicles, while not guaranteeing one recalled vehicle gets fixed.