By on June 16, 2010

Before the TREAD act came about in the year 2000, I had a PowerPoint chart showing the inside of a U.S. jail, along with inmates (I won’t show the image to avoid a discussion of racism). The headline was: “This is where your career can end.” It was for internal Volkswagen consumption only. Somehow, imprisonment never became law. This was then, this is now: If Washington lawmakers get their wish, managing a car company can imperil  livelihood and freedom of the top managers.

A provision of the Motor Vehicle Safety Act pushed by Senate Commerce Committee Chairman John D. Rockefeller ( D., W.Va.) would require a company’s senior executive in the U.S. to sign off on all documents submitted to the National Highway Traffic Safety Administration as part of a defect investigation, says the Dow Jones Newswire (via NASDAQ). “The executive would be fined up to $10 million in civil fines for submitting information that is deemed false or misleading. He or she would also face imprisonment of up to 12 months, beyond criminal penalties outlined in other laws.”

The Senate Commerce Committee approved the bill this month (at the same day those highly questionable 89 dead people were found in the NHTSA database). A vote of the full Senate is expected this summer.

A competing version, championed by House Energy and Commerce Committee Chairman Henry Waxman (D., Calif.), threatens company safety officials in the U.S. with loss of money and freedom. If the law will be passed, it will be highly unlikely that these posts will be filled. The Waxman bill cleared his committee and could reach the House floor in coming weeks.

The Alliance of Automobile Manufacturers, the industry’s main trade group, already cried foul and says the Rockefeller bill favors those expletive deleted foreigners. Why? The top U.S. official at domestic car companies is the CEO. At foreign auto makers, it’s some expendable underling. In other words: If GM messes up, Whitacre heads for the slammer. If Toyota NSFW’s up, it would be Jim Lentz going to the big house. The Alliance of Automobile Manufacturers favors the Waxmann version.

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18 Comments on “Run A Car Company, Go To Jail...”

  • avatar

    In years past, whenever I had to do a drawing or make calculations that showed a component of dubious strength or safety, I always signed the boss’ name. They were always flattered.

    Early on I decided that I didn’t want to have a lifetime career as a witness in product liability cases.


  • avatar
    John Horner

    Car company executives make decisions which can result in the injury or death of their customers.

    If I get into my car and kill another person due to my own negligence or malfeasance, I face the possibility of jail time. Why shouldn’t executives face the same potential penalty if they cause the death or dismemberment of a person?

    Industry insiders typically are masters at avoiding the potential implications of their decisions.

  • avatar

    Going to jail might be excessive but fining Corporate Exec’s and making them more accountable, I’m all for that.

    • 0 avatar

      To mix a little in the news — do you notice how the UK retirees who live off BP dividends care when the current climate hurts their dividends?

      The problem here — and you saw it with that cram-down from 100-to-1 on the previous equity holders of GM, now run by these professional managers — is that the modern American corporation is a zombie. The actual “owners” with their stock certificates are so far removed that the usual answer — having combined rights and responsibilities vested in the equity owners — doesn’t matter because hired managers make the decisions and they are so far divorced from the shareholders.

      It will take a long time to peel back the layers of regulation that have made a stronger and stronger separation between ownership and management in American public corporations. Fix those — and you can pick any of the financial regulations of the last 30 years, they all strengthen management/banks/financiers against equity holders — and the pain of fines and economic loss will matter and achieve desired change in behavior and focus on consumer safety — because it’s the shareholders’ ox being gored, not management.

    • 0 avatar

      If this is trend, companies that don’t display a convincing message on their corporate policies, hierarchy and principles will have more trouble attracting capital.

      Why should a company be given a free pass just because a retiree has equity in it? (BTW, in the news I heard that BP is 40% owned by Americans. I don’t know if this is accurate however.)

  • avatar
    Mr Carpenter

    Accountability is one thing, this is just plane typical political posturing and foolishness. The law of unitended consequences will come to play – big time.

    Solution for the “big 3” so-called American car companies: move your HQ offshore to China, and move the North American HQ’s to Windsor, Ontario.

    Same thing for all the transplants; move your North American HQ’s to Canada.

    Gee, what a surprise from B.O. and company (they’re all the same, eh?) – fewer jobs for Americans.

    We deserve the “leadership” we get.

    In the meanwhile, a few actually sane people are calmly discussion the prospects of continuing to move the world towards more freedom and less tyranny.

  • avatar

    Is there a fundamental failure for most of those salivating for these sorts of personal liability laws to understand why corporations, limited liability companies, and other government-created “persons” were thought up?

    So, because of some sort of employment relationship, when the government-created person General Motors LLC does something, to satisfy the mob, some individual who is employed there gets to go to jail?

    Not only will all of the auto companies relocate to Canada, any business that does anything that could have the slightest chance of damage would be negligent not to relocate.

    Gallows humor, but — if Government Motors LLC commits one of these violations before the IPO, will Barack Obama be jailed since he’s the real owner of that company? Or perhaps Geithner? Maybe that’s why the Treasury is rushing to exit.

  • avatar

    That article should be required reading for everyone with a pulse.

  • avatar

    I’m OK with this as long as its generalized.

    Spoecifically, the executive committee and CEO of the worlds largest corporation should be exposed to similar liability.

    Let’s see now.

    The fresh prince of DC and his Congressional minions knew or should have known the following:

    The MMA is a conflicted and improperly run agency.

    The Jones Act made it impossible to accept valuable skimmer ship aid from the Dutch and Scandinavians.

    The EPA regulations make it difficult to mostly clean oiled water and discharge it to get the largest % of oil out of the maximum amount of water.

    The Corpse (O’s phonetic spelling) of Engineers known dilatory ways obstructed early deployment of sand berms to block oil coming within the barrier islands.

    Is this not at least as criminal as anything Toyota may have done?

    As an aside, with Cynthia McKinney out of Congress, Waxman is the person I most want to lose in the fall.

  • avatar

    Maybe if the execs joined the UAW (they are auto workers, right?) they’d be exempt from prosecution.

  • avatar

    This is a significant over-reaction on both sides. Corporate officers and directors already are subject to criminal liability under a number of statues and theories. And Toyota would have tried just as hard (maybe even harder) to sweep their problems under the rug had this already been law.

  • avatar
    George B

    Typical overreaction by Congress. Pass a new law on top of a mess of current laws. Is there a pattern of manufacturers cutting corners that compromise safety or is automobile safety approaching a plateau where hard to predict low probability accidents are just difficult to eliminate?

  • avatar

    I foresee an interesting consequence should this come to pass. Imagine that being an officer in a company really opened you up to fines and jail time. It’s cars now, but if it goes through other industries may be added.

    Companies would have to begin paying those people a lot more to take the risky jobs–hazard pay, effectively.

    People are unhappy with how much corporate officers make now. Imagine how it could look in ten years, when any widget company CEO is a misstep away from jail.

    I like the idea of increasing corporate responsibility. I am not sure this is the right way to do it. (I am not sure that it isn’t, either.)

  • avatar

    There are more than a few regulated industries in this country. Ones where certain members of top management face imprisonment and fines if they fail to properly cary out thier responsibilities. We still have drug and medical device corporations doing buisness in the US. I think this is overblown. If someone causes deaths or serious injuries because of greed and/or negligence why should the fact that they did it at work exempt them from criminal prosecution?

  • avatar
    M 1

    Sounds like an excellent plan to strangle the little bit of life that remains of this country’s heavy manufacturing capacity.

  • avatar
    Mr Carpenter

    The whole idea behind a “limited liability company” as it is more correctly named in Canada and other English speaking nations, is to limit how much liability stockholders and executives will be under.

    In plain words, since some time in the early 19th century, a “corporation” becomes a virtual “person”.

    Just think; without this, modern life as we know it, would be virtually impossible.

    Look at Studebaker (1852-1966 in transportation).

    Clem Studebaker could design and pretty well build a wheelbarrow or a conestoga wagon, all by himself.

    Think we could get one man shops to design, engineer, develop, test, and manufacture a 21st century automobile? How about a relatively simple thing like a light switch? An insurance policy? Do you think a one or two or five man shop could do that?

    As usual, the imbecilic powers that be have yet again stumbled across yet another way to erode the foundation of modern civilization with stupid ideas like the one espoused here by a politician who knows nothing about business and cares even less. Much like the rest of the know-nothings in Washington and virtually all capitals across the world.

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