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9 Biggest Automotive Industry Scandals in U.S. History


Damaged car with passenger door open and view of deployed airbags

Auto recalls and scandals have been big news lately. From marketing scandals to exploding airbags, it seems the automotive industry has become a place where big business means bending laws and regulations as long as it increases the profit margin.

However, the truth is that car companies have been skirting laws since the auto industry began. Cheat Sheet has gathered some of the most important scandals to hit the automotive industry in the United States.

  1. General Motors V. The Chrysler Airflow

When Chrysler introduced the Airflow in 1934, it was one of the most advanced cars ever built. It introduced a new aerodynamic design that was unlike anything else on the market, and it came equipped with advanced suspension, safety glass, and a uni-body construction (made of all steel at a time when wood was still standard in vehicles).

The problem? Chrysler was a smaller manufacturer at the time – much smaller than General Motors. When they introduced a vehicle that was above anything GM was putting out, GM responded with a smear campaign. Part of that included buying advertisements in the Saturday Evening Post claiming that Chrysler had plagiarized a top-secret design and that the vehicle presented a danger on the roads.

Despite never providing evidence of the plagiarism, the designs were never released, or the inherent dangers of the Airflow, the smear campaign was a success, and the Airflow was discontinued in 1937.

  1. The Chevrolet Engine Mount Recall

With the creations of the U.S. Department of Transportation in 1966 and the National Highway Traffic Safety Administration (NHTSA) in 1970, the automotive industry was confronted with more stringent safety regulations and oversight than ever before.

One of the first scandals to be addressed by NHTSA concerned defective engine mounts equipped in 1965-1969 full-size Chevy vehicles which could set off a deadly chain reaction. By the time NHTSA address GM with the issue, the corporation revealed that it had already received 172 reports of failed engine mounts, resulting in 63 accidents and 18 injuries. Still, instead of taking action, both GM and NHTSA stayed quite on the topic for years.

Record show that the defective engine mounts could collapse while the vehicles were in motion, torque the engine out of position, and place stress on the throttle body linkage, resulting in unintended acceleration. In some instances, the movement was so severe that automatic transmissions could be twisted out of place, making it impossible to shift the vehicles into park.

An investigation revealed that the same engine mounts had been used since 1958, but had not been an issue until the horsepower and engine displacement advances that occurred in the 1960s. Finally, after the media began to take notice, GM announced the recall of 6.5 million vehicles on December 5, 1971.

  1. The Ford Pinto Recall

Perhaps the most famous (and disturbing) auto scandal of all time, the Ford Pinto, which began production in 1971, suffered from a fatal flaw that would cause vehicles to explode in the event of a rear-end collision. The defect also gave stark insight into how the auto industry treated cost-benefit analysis in regards to human lives.

Ford’s conclusion: the lives of the vehicles’ occupants were worth less than $12.

The defect was with a fuel filler neck that could separate and puncture the fuel tank when the vehicle was struck from behind. The puncture would spray fuel into the passenger compartment and ignite rapidly, resulting in a sudden fireball. What’s worse was Mother Jones’ 1977 discovery that Ford had known about the defect even before the vehicles went into production, but decided it was not cost efficient to fix the defect.

The fix would have consisted of a $11 upgrade o the vehicles’ fuel system and a $1 shield to protect the tank. An internal Ford memo from 1973 was eventually leaked to the media and outlined how many deaths per year Ford could expect from the defect.

Ford eventually recalled 1.5 million vehicles, but only after an estimated 900 people had died from the fatal flaw. Ford ended up paying out hundreds of millions of dollars in civil suits following the scandal.

  1. Ford Transmission Defect

Shortly after the Ford Pinto scandal, Ford faced another disastrous recall. In 1980, NHTSA announced that it had conducted a three-year investigation of Ford vehicles and found that transmission built between 1966 and 1980 contained a flaw which would allow the vehicles to slip from park into reverse, causing them to roll unexpectedly.

Similar to the Pinto fiasco, Mother Jones and the Detroit Free Press found evidence that the company had been aware of the defect since 1972 but opted to quietly pay out $20 million to victims and their families rather than initiate a repair that would have cost $0.03 per car.

NHTSA linked the defect to 777 accidents, 259 injuries, and 23 deaths. The recall, which would have involved 23-million vehicles, would have bankrupted Ford. Following pleas to the Reagan administration, NHTSA allowed a different option – stickers!

In 1981, Ford mailed out 23 million stickers to Ford owners which were to be put on the defective vehicles’ dashboards. It would remind them to make sure the gear selector lever was fully engaged in park and that the parking brake was also fully engaged before turning off their vehicles.

By 1984, the reported death toll had risen from 23 to 77.

  1. Possible Unintended Acceleration in Audi Vehicles?

Introduced in 1982, the Audi 5000 is the vehicle that helped to establish Audi as the luxury brand it is today. However, in 1986, CBS “exposed” a “deadly defect” that would cause the cars to accelerate suddenly and inadvertently. In their feature, 60 Minutes ran footage of an unoccupied Audi 5000 moving along under its own power. What 60 Minutes didn’t reveal was the fact that the car had been modified by the TV crew and was being moved by a canister of compressed air forcing the transmission into drive.

The report had wide reaching affects that did not benefit from Audi’s PR campaign which included condescending ads with quizzes about its cars. The topic of the ads: “If you can pass this test, you’re ready to drive an Audi.”

Tests in the U.S., Canada, and Japan revealed the accidents attributed to the defect were actually the result of drivers hitting the accelerator instead of the brakes. Audi was right, but the damage was done. Audi went from selling 75,000 cars in the U.S. in 1985 to a mere 12,000 in 1991. It took Audi nearly 20 years to recover to its pre-1986 sales numbers.

The 60 Minutes story is still considered to be one of the most unethical actions in modern journalism.

  1. Ford Explorers and Firestone Tires

SUVs were rapidly gaining popularity in the 1990s, but the 2000 Ford-Firestone rollover debacle did cause consumers to think twice about how prone high-riding vehicles were to rollover accidents.

When NHTSA called on Ford and Firestone to investigate high-rates of tire blowouts in Explorer vehicles, Ford and Firestone responded by blaming each other. Faced with being blamed for over 100 deaths, its no wonder why either company would wish to distance itself from the issue. Firestone was the first to give into a recall, citing heat, low tire pressure, and the weight and handling characteristics of the Ford Explorer. Ford followed by recalling another 13 million tires with Ford CEO Jaques Nasser saying, “We simply do not have enough confidence in the future performance of these tires keeping our customers safe.”

The executives of Firestone and Ford went at each other during televised congressional hearings and, in 2002, dissolved a preferred-partnership that had lasted roughly 100 years.

  1. Actual Unintended Acceleration in Toyota Vehicles

Toyota came under fire in 2009 when authorities released a 911 call from California Highway Patrol Officer Mark Saylor’s Lexus after his vehicle began to accelerate on its own. The car reached speeds of 125 miles per hour before Saylor crashed, killing all for occupants in the vehicle.

Toyota denied that a defect occurred until 2012 when it finally issued a recall for 9.3 million vehicles while admitting it had misled the public. The U.S. Government fined the automaker $1.2 billion to avoid criminal prosecution.

The cause of the defect, as Toyota had been aware despite their claims to the contrary, was a faulty gas pedal assembly.

  1. GM Ignition Switch Scandal

In February of 2014, General Motors disclosed that it had failed to inform regulators about the defective ignition switches on their vehicles. These switches could malfunction, causing the vehicles to stall, and cutting power to the air bags. The scandal occurred just weeks after current CEO Mary Barra took over in January of 2014. It put her and the company in the spotlight of Washington, the media, and the courts. Barra endured harsh criticism during her hearings on Capitol Hill.

Hearkening back to the Pinto-days, GM was accused of delaying life-saving recalls and repairs due to cost concerns. While GM partly acknowledge a failure to initiate the recall of their vehicle, they swore that they had not conducted cost-benefit analyses the way Ford had (as that is currently illegal). Cost of the delayed repairs ran about 50 cents per vehicle.

After a number of hearings, Barra agreed to work with Kenneth Feinberg and set up a victims’ compensation fund for individuals who had suffered injuries or lost loved ones due to the faulty switches.

These steps helped GM to secure a $900 million settlement that was far less expensive than many analysts expected. Instead of charging individuals, the Justice Department allowed GM, through the deferred prosecution agreement, to “terminate wrongdoers.”

The company also avoided a $10 billion civil suit by arguing that the “old” GM – the one that went bankrupt in 2009 – had manufactured the vehicles and the new GM should not be held responsible. GM and Chrysler received $17.8 billion in financing from the government in 2008 as part of the Troubled Assets Relief Program during the auto industry bailouts.

The defective ignition switches resulted in at least 120 deaths and 275 injuries.

  1. Takata Airbags

As deaths continue to be linked to the defective Takata airbags, with fatal collisions occurring even after recalls were issued and, in some instances, re-issued, the larger issue remains that the faulty airbag inflators are not being repaired.

Currently, recalls have been issued for more than 42 million vehicles across several brands in the U.S. alone. Despite initial recalls being issued years ago, the fact remains that, to date, only 65 percent of affected Hondas have been repaired while repair rates for other automakers fall between 2 percent and 50 percent.

So far, at least 20 deaths have been linked to the deadly Takata airbags that can rupture on deployment, sending metal shrapnel into vehicle cabins and occupants. Takata has been driven into bankruptcy as it struggles to replace parts and deal with civil lawsuits.

 

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