Pub. 1 2019-2020 Issue 4

16 Recalls – The Past, Present, and Future Anthony Bento, Director of Legal Affairs T he number of vehicle recalls has surged in re- cent years, and manufacturers have often failed to provide dealers with the necessary parts to fix recalls in a timely manner. Nowhere is this problem more acute than the recalls of the Takata airbags. According to NHTSA, there are roughly 41.6 million re- called vehicles equipped with 56 million defective Takata airbags. Additionally, NHTSA has warned that additional airbags are scheduled to be recalled by December 2019, bringing the total number of affected airbags to around 65-70 million. Under current law, dealers are prohibited from selling new vehicles with an open recall. But neither federal nor California law impose an absolute prohibition on the abil- ity of dealers to retail used vehicles with an open recall. Obviously, if a dealer acquires a used vehicle with an open recall, the dealer should use his or her best efforts to fix the recall. However, fixing a recall is not always possible, particularly when replacement parts are in short supply. Moreover, not all recalls are equally significant. For example, recalls have been issued related to misprinted phone numbers in owner’s manuals and brake reservoir cap labels using pictographs rather than text. If a dealer chooses to retail a used vehicle with an open recall, it’s important to clearly disclose the nature of the recall to the customer prior to sale. The recall status of any vehicle can be determined by searching NHTSA’s website at safercar.org . Additionally, CNCDA worked with Reynolds and Reynolds to develop a California-specific Recall Acknowledgement Form to help dealerships accurately and consistently disclose to customers the recall status of used vehicles. It’s important to disclose this information be- cause the California Court of Appeal issued a decision that found a dealer can violate the Consumer Legal Remedies Act by selling a used vehicle with an undisclosed open recall. (Gutierrez v. CarMax [19 Cal. App. 5th, 1234].) Moving forward, there’s some potentially good news for California dealers on recalls. Assembly Bill 179 (CNCDA’s franchise bill) contains several helpful provisions that are designed to ensure that dealers are fairly compensated for recall work. Some manufacturers employ tactics such as providing reduced or zero-cost parts to dealers to limit their reimbursement obligations. AB 179’s new recall reimbursement requirements squarely address these tactics and provide dealers with the power to seek fair reimbursement in such circumstances. In an ideal world, all recalls would be fixed immediately, and dealers would be fairly compensated for such work. However, that world will be a fantasy until the manufac- turers provide dealers with the necessary parts to fix all recalls. Until then, dealers should ensure that they provide adequate disclosures to customers purchasing a used ve- hicle with an open recall. And if the governor signs AB 179 into law, dealers should consider requesting an adjust- ment to their warranty and recall reimbursement rates in the new year. 3