Early Warning Deadline Looms

Out of crisis rises regulation for the automotive industry in the form of the Transportation Recall Enhancement, Accountability, and Documentation (TREAD) Act. Although Congress passed the act in November 2000-on the heels of the Bridgestone/Firestone tire recall-April 1 marks the start of the first reporting period, with the first quarterly reports due to the Department of Transportation's National Highway Traffic Safety Administration (NHTSA) Aug. 31. The TREAD Act requires manufacturers in the auto industry to report information about potential safety defects, primarily in the areas of tires and child protection. The information gathered will be housed in an Early Warning database NHTSA pledges to keep up-to-date. In addition, the act increases civil penalties and provides criminal penalties for safety defects that have caused death or injury if a manufacturer has violated the vehicle safety law or has mislead the Department of Transportation about such defects. It also adds new tire labeling requirements. For many manufacturers-specifically OEMs-the act means more paperwork, but ultimately it also may lead to better accountability and better performance. Auto manufacturers "are going to have to provide a variety of information they didn't provide in the past, and that's probably beneficial to the industry as well as the consumers," explains Michael S. Flynn, research scientist and director, Office for the Study of Automotive Transportation, University of Michigan, Ann Arbor. Indeed, a testament to the effectiveness of the TREAD Act may have surfaced even before the start of the first reporting period. In August 2002 Continental Tire North America Inc. voluntarily recalled nearly 600,000 tires for performance-related issues, an action Continental credited to its and Ford Motor Co.'s early-warning systems. "People in the industry seem to credit the TREAD Act for that having occurred," says Flynn. "Now if this would have been a safety defect on the scale of Bridgestone, who knows. The fact is it was caught very early and very quickly at what the companies view as a very reasonable cost to them. The fact that [manufacturers] are using the systems in more than a test capacity suggests that the systems are useful to them-it's not something that they are only going to use when they are forced to by law." While many manufacturers are well into designing and fine-tuning their reporting systems, the process hasn't been simple. "This isn't an easy thing monetarily or intellectually," notes Robert Strassburger, vice president of vehicle safety and harmonization at the Alliance of Automobile Manufacturers, Washington, D.C. "What manufacturers are having to do is create a single system for the purposes of early-warning reporting that is able to go out throughout the company and all its subsidiaries and then map or translate the data that is there into the format the NHTSA requires. It's an incredible effort." Adds Flynn: "The most important aspect of the TREAD Act is what didn't happen, and that is that regulations and paperwork requirements were changed in ways that lighten the burden significantly on automotive suppliers. What that means is that most of the cost of notification and paperwork will continue to fall on the OEMs." Once all manufacturers start reporting to NHTSA, a question arises about how the data will be analyzed. "Early warning is a tool, and it depends on how you organize the tool if you have an effective analytical process," says Ann Wilson, senior vice president for government affairs, Rubber Manufacturers Association, Washington, D.C. "We estimate that there will probably be over a million pieces of data just on warranty adjustments and property damage claims alone just from tires." That much data "can obscure as well as illuminate issues," she says, suggesting that manufacturers simply will have to wait and see how effective the TREAD Act will be. Wilson also notes that NHTSA's Early Warning system is just that-an early warning. "It's not defect reporting; it's not crisis reporting; it's early warning. It's an opportunity for the industry and NHTSA to see how a product is performing in the world." Ultimately, the effort put forth by manufacturers will reap positive returns, believes Strassburger. "I think one of the primary benefits of the system will be that some of the data that exists in these companies in disparate forms will be compiled into a uniform format for the purposes of reporting and routed through each of the company safety offices earlier. When you have the safety eyes looking at it earlier, all the better." TREAD Act: Key Dates April 1, 2003: First quarterly reporting period begins Aug. 31, 2003: First quarterly report of "early warning" due Sept. 30, 2003: One-time historic report of "early warning" due