Defective: Toyota Cars and Automobile Regulation

The National Highway Traffic Safety Administration (NHTSA) recently chastised the Toyota Motor Company for claiming that no defect existed in its cars, even while recalling 3.8 million of them. Toyota instituted the recall one month after a Lexus sedan suddenly accelerated out of control killing four people near San Diego. When Toyota blamed the problem on improperly installed floor mats, NHTSA said it expected the company to provide a “suitable vehicle solution.” The company then said that it was working on “vehicle-based remedies” for the problem.

Government regulators have two methods of promoting safer cars. NHTSA can adopt binding regulations requiring car manufacturers to adopt safety equipment, such as airbags. But Congress also authorized the agency to order a company to recall defective cars. In light of this authority, companies will voluntarily engage in a recall, as Toyota has done. According to news reports, there had been over 2,000 reports from the owners of Toyota cars that they have surged forward without warning reaching speeds of up to 100 miles per hour. NHTSA has investigated Toyota for runaway cars on eight separate occasions, but the agency only ordered two small recalls, which addressed floor mats and carpet panels. According to news reports, NHTSA has identified potential design defects in Toyota cars. Toyota maintains it was given a clean bill of health by the agency except for the floor mat problems. 

Two thousand reports of a potentially deadly defect is huge, and it’s hard to understand how NHTSA could have failed to pursue this until now. Toward that end, Congress should investigate why an agency that is supposed to be protecting the public apparently disregarded so many reports of a dangerous situation. Perhaps the agency could not find a design defect as Toyota maintains. On the other hand, the Bush administration generally took a laissez-faire approach to the regulatory enforcement.   Even if the only problem was carpeting or floor mats, why didn’t the agency require Toyota to notify all of its customers of the problem? If NHTSA did not act because it lacked the legal authority to do so, Congress should determine whether the agency’s authority to order a recall should be revised.   Whatever the source of the problem, the regulatory system has failed when it leaves thousands of people at risk despite eight years of investigations.

Relying on recalls to protect drivers and passengers usually means there will be people injured and killed before the defect is addressed. This may be unavoidable if there is an unanticipated defect—one that NHTSA could not have headed off by a regulatory requirement.   NHTSA, however, looks to recalls as its primary regulatory weapon. The reason, according to Jerry Mashaw and David Harfst, is that courts, Congress and the White House have made rulemaking an unattractive option. In their book, The Struggle for Auto Safety, the authors identify a series of court decisions in the 1960s that hamstrung the agency’s capacity for issuing safety rules.   The recall strategy has also been attractive to the agency because it avoids congressional interference and the necessity of dealing with regulatory review by the White House. 

The Mashaw-Harfst book was published in 1990, but there is no reason to think that the situation has changed. Thus, even though the agency has been hampered by judicial interpretations of its authority for more than 30 years, neither the White House nor Congress has acted to fix the situation. 

The potential for White House and legislative interference also continues. In a forthcoming book, CPR colleague Rena Steinzor and I argue that the overseers of agencies – the White House, Congress, and the courts – are largely responsible for the inability of regulatory agencies to achieve greater protections for the public. The situation is not easily fixed. It is important to have electoral and judicial oversight of regulatory agencies, but these efforts can tip over into carrying water for the industries that an agency is trying to regulate. While we have some suggestions on how to achieve a more appropriate balance between oversight and unwarranted intrusiveness, it is doubtful any of these institutions will reform their behavior until the pubic demands it.

The defects in the regulatory system are apparent even if the reason for runaway Toyota cars is not. We can hope that Toyota will correct its problem in short order. Unfortunately, Congress is unlikely to address the defects in automobile safety regulation anytime soon.