China: Learn From The Valiant Comrade LaHood! Painfully Penalize Carmakers!
Did someone say that the Chinese are good at – how shall we put it – warming up to foreign ideas? Ray LaHood’s revenue-generating ideas must have impressed the hell out of the Chinese. I can just imagine the discussion: “Come on, the Americans raise the penalty from $16.4m to $200m, so why can’t we? It’s in the name of safety. Ni dong bu dong?” Now therefore, “the Chinese government is set to impose much stricter penalties on automakers if they hide problems with their vehicles to avoid recalls,” reports The Nikkei [sub].
So far, automakers got away with a financial slap on the wrist. Under current rules, introduced in 2004, covering up automotive defects can cost a pittance of $4430, max, no matter how many cars are affected. Under newly proposed rules, hiding a defect could downright wipe out an automaker in China.
If approved, the new rules will raise the penalty to up to 50 percent of the total value of the recalled cars. Yes, you did read right. Say 100,000 cars not timely recalled ( a handful by today’s recall standards,) say $20000 per car, maximum penalty a cool billion dollars. Tong! Tong!
In the land of intentional ambiguity, of course there would be some leeway. The proposal calls for penalties from 2 percent to 50 percent.
So far, it’s only a draft by the General Administration of Quality Supervision, Inspection and Quarantine, China’s quality watchdog. The body is soliciting opinions from consumers and manufacturers through July 10 and will finalize the rules based on that input. The State Council, China’s cabinet, may put the regulations into effect later this year. Or maybe not. Automakers (who have a lot of political clout, many are owned by some kind of a government) will not like it. Chinese consumers know that this would make the cars more expensive. China loves a deal. And the Chinese government doesn’t need to shake down carmakers to generate revenue.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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And learn they will. I wonder what lessons they learned from NHTSA in the past 7 months. Did they learn you should focus your attention on the foreign companies first? Lets guess which company will be the object of the governments intentions, GM, Ford, MB? If this happens GM will see its position evaporate followed closely by US imposed trade sanctions. This could hurt the Chinese ability to import to North America but on the other hand it is no longer the largest car market in the world is it?
So $16.4 million is a "slap on the wrist"? April 17 you wrote "Ka-Ching...On April 5, the NHTSA levied their largest civil penalty in recorded history. $16,375,000 against Toyota". On May 11 you wrote "The Shakedown Continues: Toyota Could Cough Up Another $16.4 mil Over 6 Year Old Truck". Finally you've come to your senses. $16.4 million is neither a shakedown nor ka-ching--it is indeed a slap on the wrist.