Auto Industry Thrives Despite Scandals

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The U.S. automotive industry has been through a rough couple years filled with massive recalls, congressional hearings, record fines, and allegations, at times, of a careless, shoddy approach to safety.

And yet, for the most part, consumers seem unfazed as they continue to buy cars and trucks at record levels and at record prices.

"The fact of the matter is, there is a plethora of recalls, and after a certain point in time people become numb to them," said John Humphrey, senior vice president of J.D. Power's global automotive practice. "We have more recalls now than we have ever had and yet the industry is selling more cars than ever."

Consumer safety advocate Ralph Nader said the industry has improved, but continues to get away with cutting corners that harm consumers and the environment.

"Today, the cars are much safer, less polluting, modestly more fuel efficient ... but there is still a long way to go," Nader said Thursday, as he was inducted into the Automotive Hall of Fame. "We’ve ceased to see just carelessness, ignorance and indifference. These are increasingly criminal acts, now prosecuted because there is no criminal penalty in the motor vehicle safety law."

Erik Gordon, a business professor at the University of Michigan, argues that the long list of recent investigations and recalls has damaged the image of the U.S. auto industry just as automakers need to recruit young, talented engineers to develop autonomous vehicles.

"Automakers have progressed from occasional, seemingly innocent mistakes and low-profile recalls to endless, high-profile recalls that resulted from decisions to save money, to cover-ups top-level executives blamed on lower-level engineers, to cover-ups suspected of going all they way to the top and claims of paying dealers to lie about sales," Gordon said.

Meanwhile, Americans are buying more new cars and trucks than ever before at historically high prices. Last year, automakers sold more than 17.47 million new cars and trucks -- the most in U.S. history -- and this year, sales are on track to match that record.

During the past six years, as U.S. sales steadily rebounded from the depths of the Great Recession, the CEOs of General Motors, Toyota and Volkswagen -- the world's three largest automakers -- all  testified before congressional committees to defend decisions tied to safety lapses, fatal accidents and cheating on emissions testing.

Along the way, CEOs lost jobs, automakers overhauled corporate structures and others took steps to rethink safety processes and speed communication with regulators.

Now, Fiat Chrysler Automobiles is under investigation by the U.S. Securities and Exchange Commission and the U.S. Department of Justice for the way it reports monthly sales of cars and trucks.

The good news for Fiat Chrysler? Recent history suggests the automaker's reputation can survive  if it manages the crisis with the right amount of contrition and transparency.

The automotive industry is currently in the midst of the largest recall in U.S. history and the general public seems largely unaware or concerned.

The Takata air bag recall affects 32 million vehicles made by 33 automotive brands. The media focuses on the recall as federal regulators  issue dire warnings and automakers send millions of recall notices directly to owners.

And yet, the recall has the lowest general awareness of current events and issues at just 52%, according to a recent study by Kelley Blue Book that surveyed 1,000 respondents in June. That's a lower awareness than the Zika virus, at 84%, or Hillary Clinton’s e-mail issue at 87%.

The low awareness is despite the potential danger of spraying shrapnel caused by defective air bag inflators when the air bag goes off. At least 10 deaths and more than 100 injuries have been tied to the defect.

“Consumer opinions on the Takata air bag recall seem to be another unfortunate case of people thinking ‘it won’t happen to me,’ but this is easily the largest, most expensive automotive safety issue in U.S. history," said Karl Brauer, senior analyst for Kelley Blue Book.

To be sure, Takata, as a company, might not survive its crisis. The company is bleeding money and many automakers are moving work away from Takata to different airbag suppliers. Takata has been working on a restructuring plan and is said to be open to selling to a private equity firm or another company, according to Bloomberg News.

Still, only a quarter of respondents in the Kelley Blue Book survey said they think the Takata air bag recall is very or extremely important.

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