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BACKGROUND REPORT – 2.3 million vehicles in airbag recall

SALE prohibitions that could stifle vehicle sales growth are being placed on new and used vehicles by government authorities in response to a growing list of cars involved in the massive Takata airbag recall.

The prohibitions have been outlined by the compulsory recall notice released this week in Canberra and will affect new and demonstrator vehicles as well as used vehicles that are fitted with Takata airbags. The notice was issued by the assistant minister to the treasury after a safety investigation by the Australian Competition and Consumer Commission (ACCC).

Lawyers following the Takata case say the compulsory recall will affect dealers and private sellers.

In a briefing note, HWL Ebsworth Lawyers partner Evan Stents said sales of new and demonstrator vehicles fitted with Takata airbags that are the subject of a recall will be banned after December 31, this year.

In effect all new or demonstrator vehicles sold after that date will need to have any affected Takata airbag replaced.

Until then, dealers will be able to sell new or demonstrator vehicles with an affected Takata airbag as long as the consumer is made aware the airbags are subject to recall and the vehicle is fixed with a windscreen sticker warning.

So dealers cannot sell a used car if that car is under the recall notice unless the dealer abides by a string of conditions including the paramount clause that the consumer has to be totally aware of the airbag situation.

But private car sellers have no strict rules, only the need to inform a new owner that the airbag still needs replacing and a wet lettuce requirement regarding the address of the new owner.

While regulations have been applied to dealers, there is no requirement by state authorities to declare these affected vehicles unroadworthy or unregistrable. This is, in part, a byproduct of the different and complex web of state laws regarding vehicle registration.

Mr Stents said the ACCC has also said the recall should not affect a vehicle’s insurance “and that if any insurer takes a contrary view, a consumer should report it to the ACCC”.

Meanwhile, dealers are reporting significant disruption to their normal service customers with waiting lists blowing out for regular service appointments. Dealers are also conscious that that there will be a large drop in service revenue once the recall activities around these airbags is taken care of.

Mitsubishi Motors Australia Ltd said that its dealers “are doing their best to handle the new inquiries about the recall”.

“There have been some instances where a normal service job may be rescheduled but overall, they are doing a great job at repairing airbags and their routine service appointments,” a spokesperson said.

“One thing we are not doing is replacing airbags with Takata airbags. We have another manufacturer supplying our airbags.”

Honda Australia had 436,921 vehicles affected and now has an outstanding number of 58,064, representing a completion rate of 86.5 per cent.

“The average repair rate was, at its height, up to 7000 inflators a week,” a spokesperson said.

“Currently it is about 3200 a week, though it fluctuates.”

He said dealers had dedicated technicians doing the work and some dealers were opening on Saturdays to process the recall work.

“The support from our dealer network has been incredible,” he said.

“The challenge now is to reach those customers who may have received more than one form of communication from us about the recall but have failed to act.

“What we’re reinforcing to them is that the repairs are free and take less than two hours to complete.”

Honda said there are 89,134 outstanding inflators (58,064 cars) to be repaired out of 661,102 inflators (436,921 cars) in total. Inflator repairs completed are now 571,968.

“Some vehicles will have a driver and passenger airbag to be replaced so we’ve consistently talked about inflators versus actual vehicles,” the Honda spokesperson said.

BACKGROUND REPORT – 2.3 million vehicles in airbag recall


CAN YOU SELL A CAR WITH AN AFFECTED AIRBAG?

PROHIBITION ON SALE OF AFFECTED VEHICLES – NEW AND DEMONSTRATOR VEHICLES

Under the new rules selling a new vehicle or a demonstration vehicle with an affected Takata airbag will be prohibited from December 31, 2018. This means that the industry effectively has to have replaced all the affected Takata bags in new or demonstrator vehicles before then and ensure that future shipments of cars to Australia have compliant airbags.


Prior to December 31 this year, vehicles with an affected airbag may be sold on condition that:

  • The consumer is told of the affected Takata airbag in the vehicle
  • The affected Takata airbag needs to be replaced as soon as possible once the vehicle is on ‘active recall’ to avoid future risk of injury or death
  • The supplier must make direct contact with the owner to arrange a new airbag once the car is on ‘active recall’
  • The service record of the affected vehicle must show the presence of an affected Takata airbag in the vehicle; its location; the need to replace the affected Takata airbag during the ‘active recall’ period; and a notice placed on the vehicle’s windscreen and engine bay containing prescribed text about the affected Takata airbag

PROHIBITION ON SALE OF AFFECTED VEHICLES – USED VEHICLES

The rules state that car dealers cannot sell a used car that contains an affected Takata airbag that is subject to an ‘active recall’ notice.

Vehicles containing affected airbags not subject to an ‘active recall’ notice can be sold on condition that:

  • Notices placed in the vehicle show it has an affected Takata airbag which, depending on its age and other factors, will pose an increasing risk of injury or death
  • The affected Takata airbag must be replaced as soon as possible after recall action is initiated by the supplier because, as the airbag gets older, the risk of injury or death increases
  • The supplier will initiate the recall of the airbag at the time specified in the Recall Initiation Schedule on the supplier’s website
  • The supplier will contact the consumer if the supplier has the consumer’s contact details; and the consumer can contact the supplier for further information

The Compulsory Recall Notice does not prohibit the private sale of an affected vehicle by an individual. The ACCC advises that if an owner of a vehicle wishes to sell it privately before receiving a final replacement airbag, the owner should inform the new owner that the vehicle has an affected Takata airbag that will require replacement, and contact the Australian office of the manufacturer and provide them with the new owner’s contact details (with the new owner’s consent).

Information supplied by HWL Ebsworth Lawyers


BACKGROUND REPORT – 2.3 million vehicles in airbag recall

By Neil Dowling

Manheim
Macquarie