How to act on TREAD?

Aug. 1, 2002
THE Ford/Firestone fiasco is a slice of Americana that won't soon be forgotten. The ramifications were severe and far-reaching. Exhibit A was the TREAD

THE Ford/Firestone fiasco is a slice of Americana that won't soon be forgotten.

The ramifications were severe and far-reaching. Exhibit A was the TREAD Act, which was enacted November 1, 2000, as a direct result of a hearing before the Committee on Energy and Commerce on the safety of Firestone tires. The committee determined that the National Highway Traffic Safety Administration could have detected the problems with the tires more quickly if it had obtained reports about those problems in a timelier fashion.

The TREAD Act — which stands for Transportation Recall Enhancement, Accountability and Documentation — requires vehicle and equipment manufacturers to report periodically to NHTSA a wide variety of information that could indicate the existence of a potential safety defect and to advise NHTSA of foreign safety recalls and other safety campaigns.

There was a provision that gave NHTSA the authority to issue a final rule that establishes an Early Warning Reporting System.

That came in July in the form of a cumbersome, but very thorough, 63-page document with tentacles that attach themselves to the trailer industry in a very profound way.

“I think the impact will be broader than we anticipated,” says Glen Darbyshire, attorney for the Truck Trailer Manufacturers Association.

One of the main reasons is that NHTSA has grossly underestimated the number of companies that will be affected by the most stringent reporting guidelines.

NHTSA has divided manufacturers into two groups, both of which must file quarterly reports:

  • Manufacturers of light vehicles, medium-heavy vehicles, and all buses, trailers, and motorcycles who produce, import, offer for sale, or sell more than 500 units annually in the United States. They must report on deaths, injuries, property damage, consumer complains, warranty claims information, field reports, and production.

  • Those who produce, import, or sell fewer than 500 in the US. They must report the same information about incidents involving deaths, but are not required to report any other information.

Fuzzy math

In its final rule, NHTSA estimates that the total first-year startup costs for the trailer manufacturers producing more than 500 units a year will be $1,631,205, plus $81,145 in each of the first three years. It also estimates that those companies will need to spend 4,025 burden hours to comply.

Only one problem: There are 28 trailer manufacturers that fall into that classification — and not eight — according to figures compiled by Trailer/Body Builders magazine and published in February 2002. They range from Wabash National Corporation's 31,682 trailers to Clement Industries' 550.

Based on that 2001 production, those 28 companies would spend $5,709,217 in first-year startup costs and would need 14,140 burden hours to comply. TTMA president Richard Bowling says he has written a letter to alert the Office of Defects Notification of the discrepancy.

“I don't know how they developed that number, because they never talked to us about it, I can guarantee you that,” he says. “I'm bringing it to their attention. That may or may not change things. I don't know. But at least, on behalf of our industry, I want to make that point. It's important that they truly understand it's not just eight companies.”

NHTSA's first-year startup estimates include $200,000 per company for computer software and personnel and $3,900 for collecting three-year data for historical costs. The per-year costs for the next three years are $9,843 for computer maintenance and $300 for ongoing costs.

As for burden hours, NHTSA determined them by multiplying the minutes per document times the number of documents. The first-year startup estimate includes 432 hours for computer setup and 72 hours to collect historical data.

Going out of business

Any way you slice it, it's going to have a dramatic impact on an industry that already was reeling under the force of the economic downturn and the ramifications of the steel tariff. Darbyshire questions whether the $5.7 million estimate for startup costs would represent more profit than the entire industry enjoyed in 2001. He says manufacturers are now trying to figure out how they can comply without going out of business.

“They don't have any choice but to comply,” he says. “And it is going to be expensive. There are going to be some manufacturers for whom this is an additional cost that makes it far more difficult to stay in business. You look at our industry the last couple of years and how many of the producers have gone bankrupt — even among the top 15 producers.

“The profit margins are thin. Many of these are small-town family businesses whose entire gross revenues likely would be less than the extras that GM puts into the trunks of all the SUVs sold nationally.

“This is a very serious responsibility that will be expensive. How expensive? That depends on a particular manufacturer's production. It depends on how difficult it will be for them to gather data consistently. They need to have a person who has read 63 pages worth of final rule-making and maintains current reading of regulatory changes. It's all the more reason to be in an organization like TTMA, where every time there's a change in regulations that affects the trailer industry, it's shipped out to the members.”

NHTSA, in Section X of the final rule, says that the new reporting regulations will not impose a cost burden on the larger manufacturers that is “significantly different” from the burden on those producing fewer than 500 units.

“The costs of reporting are directly related to the volume of reportable communications submitted to manufacturers,” administrator Jeffrey W Runge writes. “Even though some small businesses would be reporting on more categories of information and at more frequent intervals, the total number of reportable communications would probably be low enough that the company would be able to use its existing computers with commercially available software to prepare its reports, without having to invest in a new computer system.

“… Based on the best information available to us at this time, I certify that this final rule will not have a significant economic impact on a substantial number of small entities.”

Darbyshire believes the drain on company staff in burden hours will be significant.

“Each company will have to put in place a system or mechanism through which accident reports, lawsuits, complaints, warranty claims, and other types of claims get centralized, reported, retained, and put into a form that will transmit to NHTSA, either electronic or by paper, and do it on a quarterly basis,” Darbyshire says. “It will take manpower. In the past, you had your warranty departments that had to work with customers anyway. But the record-keeping had to do more with what you as a company felt was necessary to document your service to a particular customer. Now there are going to be federal regulations that regulate reports. Companies have always been subject to recall regulations, and that's usually an engineer's responsibility. But it's broader than that now. It's reporting a wide range of claims and ancillary information.”

According to NHTSA, here's what trailer companies that surpass the 500-unit threshold will be required to report:

  • Deaths

    Manufacturers must report certain specified information about each incident involving a death that occurred in the US that is identified in a claim against and received by the manufacturer. They must also report information about incidents involving a death that is identified in a notice received by the manufacturer alleging or proving that the death was caused by a possible defect in the manufacturer's product. Finally, they must report on each death occurring in foreign countries that is identified in a claim against the manufacturer involving the manufacturer's product, or one that is identical or substantially similar to a product that manufacturer has offered for sale in the US.

  • Injuries

    Manufacturers must report certain specified information about each incident involving an injury that occurred in the US that is identified in a claim against and received by the manufacturer, or that is identified in a notice received by the manufacturer which alleges or proves that injury was caused by a possible defect in the manufacturer's product.

  • Property damage

    Manufacturers must report the number of claims for property damage that occurred in the US that are related to alleged problems with certain specified components and systems, regardless of the amount of such claims.

  • Consumer complaints

    Manufacturers must report the number of consumer complaints they receive that are related to problems with certain specified components and systems that occurred in the US.

  • Warranty claims information

    Manufacturers must report the number of warranty claims, including extended warranty and good will, they receive that are related to problems with certain specified components and systems that occurred in the US.

  • Field reports

    Manufacturers must report the total number of field reports they receive from the manufacturer's employees, representatives, and dealers, and from fleets, that are related to problems with certain specified components and systems that occurred in the US. In addition, they must provide copies of certain field reports received from their employees, representatives, and fleets, but are not required to provide copies of reports received from dealers.

  • Production

    Manufacturers must report the total number of vehicles, and tires, by make, model, and model year, during the reporting period and the prior nine model years. They must separately report the numbers identified above for each model and model year, as the rule defines it.

In addition, all manufacturers must provide copies of all documents sent or made available to more than one dealer, distributor, owner, purchaser, lessor or lessee, in the US with respect to customer satisfaction campaigns, customer advisories, recalls, or other activities involving the repair or replacement of vehicles or equipment.

To help NHTSA identify trends that could indicate potential safety problems, manufacturers will be required, on a one-time basis, to report the number of warranty claims or adjustments and the number of field reports for each calendar quarter during the three-year period from April 1, 2000, through March 31, 2003, the date preceding the beginning of the first reporting period that is established by the final rule, April 1, 2003.

The reaction

This new legislation is called 49 CFR Parts 573, 574, 576, 579. Trailer manufacturers might have another name for it.

Off the record, some companies say that Congress and NHTSA have gone overboard, and they don't think it's going to help trailer manufacturers turn out safer products.

On the record, they're not saying much.

“About the only thing we could say is that we don't look forward to it,” says Frank Smidler, director of engineering for Wabash National Corp.

Darbyshire is intrigued by the situation it will create.

“NHTSA says this information will be available,” he says. “It'll be easier for an intoxicated driver to run into a trailer and get a history of all claims against the trailer manufacturer than for the manufacturer to access his driving record for DUI convictions or his medical records for drug abuse.

“This will create a national resource through which anyone who has a potential claim can research a database, allege a pattern or similarity, and sue. Imagine a government-maintained public database for every doctor who ever had a patient tell him, ‘You really missed it on me, and I was sick longer than I should have been,’ regardless of the actual truth of that complaint. What's being gathered here is unproven claim information, not proven defect information. And the burden of gathering that information is being placed on the manufacturer.”

TTMA outlines differences

In its comments to the proposed early-warning reporting requirements of the TREAD Act, TTMA contended that “there is a dramatic difference between the mass-produced automobile industry and the semi-custom built trailer industry”, and listed the differences:

  • Only approximately 250,000 trailers are manufactured annually (a number that dipped to 140,000 in 2001). There are about 2.75 million trailers on the road, an estimate based on yearly production and useful life. By contrast, automobile manufacturers reportedly produce around 15 million vehicles annually.

  • Most trailer orders are to customer specification and are not a standard model like an automobile.

  • The trailer industry has historically experienced a limited number of recalls involving relatively few units. TTMA's analysis indicates that there have been only 46 recalls issued from all such trailer manufacturers in the past 32 years. Considering the total number of trailers reported as subject to recall over the past five years (and excluding identical notices reported in subsequent years), barely more than 1/2 of 1% of all such trailers manufactured in that five-year period have been the subject of recall.

  • The limited number of fatal or serious injury accidents that are reported to trailer manufacturers allows engineering analysis of possible problems without waiting for accumulation of statistics. The economic consequences of a trailer defect motivate that manufacturer to address problems or possible defects promptly.

  • The limited number of trailers and defect-related accidents make these events statistically less significant compared to the number of accidents involving automobiles.

  • Trailers do not haul passengers or even a driver. The driver of the tractor-trailer rig is specially trained and licensed. Under federal DOT safety regulations, trailers must be inspected both annually and before each operation, and they are also subject to state DOT safety inspections on a regular basis.

Darbyshire said the trailer industry is not fighting the new regulations, nor is it treating NHTSA or Congress as if the gauntlet has been thrown down. But he wonders about the benefit it will have in the trailer industry versus the cost in dollars and manpower.

“Trailer manufacturers have a more limited number of recalls,” he says. “To my knowledge, nothing in the trailer manufacturing industry was a precursor or a precipitating event that brought on this series of regulations. The automobile and tire industries are very different in terms of the production complexities of the vehicles and the number of lawsuits and recalls. If a defect is found in a trailer, the industry members really do put safety first because it's such a competitive industry and the safe operation of the trailer is critical to the commercial success of the trailer manufacturer's customer.”

NHTSA says that in the past, its decisions on whether to open defect investigations have been based primarily on complaints received from consumers, and its efforts to quickly identify potential defects have been hampered by an inability to obtain relevant information from manufacturers.

“Experience has shown that manufacturers often obtain information suggesting the existence of a safety-related problem months, and sometimes years, before consumer complaints to NHTSA indicate a potential problem,” NHTSA said on its Web site.

And now, it has done something about it.

The remaining questions for the trailer industry: How do we comply? How can we absorb the cost?

About the Author

Rick Weber

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