FACT SHEET

Honda Consent Order with NHTSA

Overview

Honda has entered into an agreement with the National Highway Traffic Safety
Administration (NHTSA) to resolve the governments inquiry into Hondas early
warning reporting as required by the Transportation Recall Enhancement,
Accountability and Documentation (TREAD) Act.

Terms

As part of the agreement, Honda will:

Pay a $70 million civil penalty.
Continue to implement a series of corrective measures, including the development
and adoption of new written procedures for comprehensive early warning reporting
and associated training.
Provide NHTSA with the information required to retroactively populate the TREAD
database with Hondas missing death-and-injury reports.
Provide NHTSA with any property damage claims, consumer complaints, warranty
claims and field reports that were missing from Hondas prior quarterly reports.
Complete additional periodic reporting to NHTSA including two third-party audits of
Hondas early warning reporting, the findings of which will be submitted to NHTSA
and made publicly available.
Most of Hondas obligations under this agreement are in place for a period of one year.
In order to ensure full compliance with its early warning reporting obligations moving
forward, Honda will adopt the terms of this agreement and is in the process of
undertaking the following: (a) fixing the errors responsible for the violations and
initiating new training regimens; (b) changing internal reporting policy; (c) making
staffing and organizational changes; and (d) enhancing oversight of the companys
early warning reporting process.

Violations

Honda admits that it violated the TREAD Act reporting requirements by failing to
submit all early warning report information as required.

Regulatory
Requirements

The heart of the Transportation Recall Enhancement, Accountability and

Documentation (TREAD) Act is an early warning reporting obligation, which requires
vehicle manufacturers on a quarterly basis to report a wide variety of information that
could indicate a potential safety defect. This information includes a report on any
death or injury incident that is known to Honda from a written claim or a written notice
containing any allegations that injury or death may have been caused by or related to a
possible defect. These claims are received by manufacturers from customers, their
representatives or other sources. Death and Injury early warning reports to NHTSA
are required to include certain specified information about the incidents. Oral claims
and notices of death or injury do not carry the same reporting requirements.
The TREAD Act also requires manufacturers to provide aggregate information about
warranty claims it has paid, property damage claims (regardless of whether paid or
denied), customer complaints (oral and written) and field reports. Certain field reports
are required to be provided in hard copy as well.

Historical
Background

The settlement agreement follows Hondas November 24, 2014 response to a Special
Order issued by NHTSA in early November. That order was prompted by Hondas
disclosure to NHTSA of preliminary findings from a third-party audit the company
commissioned in September 2014 in response to inadequately addressed
discrepancies in Hondas early warning reporting.
In responding to the Special Order, as previously disclosed, Honda identified instances
of under-reporting written claims or notices of injuries or deaths over the past decade
due to errors related to data entry, computer coding, regulatory interpretation, and
other errors in warranty and property damage claims reporting. Please see below for
further detail, including corrective measures Honda has taken to date.
Error

Corrective Measure

Data Entry Errors: In entering injury and

death claims into the companys
database, Honda often did not enter a
date in the written claim received field.
The computer program used to generate
Hondas early warning reports requires
completion of that field in order to
distinguish reportable written claims and
notices from non-reportable oral claims
for relief. Therefore, those written claims
and notices that were input without a
written claim received date were
automatically omitted from Hondas early
warning reports.

Honda is in the process of correcting the

computer programming issues and
initiating the development of training
regarding the data entry process,
including refresher training with detailed
written guidelines.

Coding Error: Early warning reports are

required to identify the particular
component involved in the injury or death
claims being reported using a series of
NHTSA component codes. Historically,
Honda maintained a more exhaustive
series of its own component/defect subcodes to track incoming claims. However,
the computer program for early warning
reporting was not set up properly at the
outset, and did not properly map all of
Hondas internal sub-codes to a NHTSA
code. Therefore, when generating its
early warning reports, Hondas computer
program included only those written injury
and death claims or notices that mapped
to a NHTSA component code thus
underreporting claims.

Honda is mapping the complete universe

of its component/defect sub-codes to
corresponding NHTSA component codes.

Narrow Regulatory Interpretation: Honda

used an overly narrow interpretation of
what constituted a written notice under
the TREAD Act.
Continued.

Honda has made the policy change to

voluntarily include both written and oral
claims of injuries or death in all future
early warning reports.

Historical
Background,
Continued

Using this narrow interpretation, Honda

did not consider third-party documentation
that the company obtained through its
associates or consultants as reportable.
For example, police reports obtained by
Honda were not considered a notice
received by the manufacturer, and thus
did not trigger an early warning report.

Inaccurate Regulatory Interpretation and

Programming Errors: The TREAD Act
requires manufacturers to report, by
number, the warranty and property
damage claims received from customers
or their representatives. In reviewing its
reporting of these areas, Honda
determined that regular warranty claims
were properly reported to NHTSA, but
certain special warranty claims, including
good will warranties and extended
warranties for certified pre-owned
vehicles and vehicles under third-party
party service contracts, were not reported.
Further, instead of reporting all property
damage claims, as required, Honda was
reporting only property damage claims
that it had denied, while those claims that
it had accepted and paid to customers
were improperly included in the count of
warranty claims. The net result is that
Honda under-reported special warranty
claims and under-reported property
damage claims.

Takata Airbag
Involvement

Honda is in the process of reprogramming

warranty and property claims to its early
warning reporting system so that all
warranty claims are included, and
property damage reports will be included
whether they are paid or denied.

Of the under-reporting instances previously disclosed by Honda, eight related to

Takata airbag inflator ruptures. All eight of the Takata-related written claims involved,
including one fatality and seven injury claims, were disclosed to NHTSA in detail by
other means.

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