SUBMITTED STATEMENT OF THE ASSOCIATION OF INTERNATIONAL AUTOMOBILE MANUFACTURERS, INC. TO THE SUBCOMMITTEE ON TECHNOLOGY U.S. HOUSE OF REPRESENTATIVES OCTOBER 6, 1998 The Association of International Automobile Manufacturers (AIAM) is submitting this statement for the record of the Hearing before the Technology Subcommittee regarding the Fastener Quality Act. AIAM is a trade association that represents companies which sell passenger cars and light trucks in the United States that are manufactured both here and abroad.' The Motorcycle Industry Council2 and the Recreational Vehicle Industry Association3 also participated in the preparation of these comments, support the information and positions advocated, and concur with submission of the statement. AIAM members produce in U.S. manufacturing facilities about 1.6 million vehicles per 1 AIAM represents: American Honda Motor Co., Inc.; American Suzuki Motor Corporation; BMW North America Inc.; Fiat Auto U.S.A., Inc.; Hyundai Motor America; Isuzu Motors America, Inc.; Kia Motors America, Inc.; Land Rover North America.; Mazda Motor of America, Inc.; Mercedes-Benz North America, Inc.; Mitsubishi Motor Sales of America, Inc.; Nissan North America, Inc.; Porsche Cars North America, Inc.; Rolls-Royce Motor Cars Inc.; Subaru of America, Inc.; Toyota Motor Sales, U.S.A., Inc.; Volkswagen of America, Inc.; and Volvo North America Corporation. AIAM members' U.S. auto manufacturing plants include: AutoAlliance International, Inc., Flat Rock, MI; BMW Manufacturing Corp., Spartanburg, SC; Honda of America Mfg., Inc., Marysville, OH, East Liberty, OH; Mercedes-Benz U.S. International, Vance, AL; Mitsubishi Motor Manufacturing of America, Inc., Normal, IL; Nissan Motor Manufacturing Corp. U.S.A., Smyrna, TN; Subaru-Isuzu Automotive, Inc., Lafayette, IN; Toyota Motor Manufacturing Kentucky, Inc., Georgetown, KY 2 MIC represents: American Honda Motor Co.; American Motorcycle Manufacturing, Inc.; American Suzuki Motor Corporation; Aprilia SpA; American Quantum Cycles; Ace Motorcycle Corp.; ATK America, Inc.; BMW of North America, Inc.; California Motorcycle Company, Cannondale Corporation; Ducati North America, Inc.; Impuls International, Inc.; Indian Motorcycle Manufacturing, Inc.; Kawasaki Motors Corp., USA; KTM Sportmotorcycle USA; Moto Point; MuZ of North America; Panzer Motorcycle Works; Piaggio Veicoli Europei SpA; Polaris Industries, Inc.; Triumph Motorcycles Ltd.; Whizzer Motorbike Co.; and Yamaha Motor Corp., USA. MIC also represents over 200 additional manufacturers of motorcycle parts and accessories and members of allied trades. MIC members' US manufacturing facilities are located in: Gilroy, CA; Canon City, CO; Melbourne, FL; Sprit Lake, IA; Lincoln, NE; Las Vegas, NV; and Marysville, OH. 3 The Recreational Vehicle Industry Association ("RVIA") is a national trade association that represents the manufacturers of recreation vehicles including motorhomes, travel trailers, fifth wheel trailers, and truck campers as well as custom van, pickup truck, and sport utility vehicle conversions. RVIA's members produce 95 percent of all motor homes, travel trailers, fifth wheel trailers and truck campers and over 90 percent of all custom van conversions produced in the United States. Most of these members are small volume manufacturers and small business entities. year for sale in the U.S. AIAM members sell a total of about 3.3 million vehicles per year in the U.S. Each motor vehicle contains 2,000 to 3,000 fasteners, which means that the total number of fasteners in AIAM member vehicles sold in the U.S. each year is between 6.6 and 9.9 billion. Many of these would be considered critical application fasteners. Motor vehicle manufacturers have every incentive to ensure that the critical application and other fasteners they use are of the highest quality. Concerns about product quality, safety, cost avoidance, product liability claims, and the accompanying loss of public good will have long ago attuned motor vehicle manufacturers to the importance of fastener quality and have led to the adoption of extensive quality assurance programs to assure that only high quality, safe fasteners are used in their products. These programs ensure a level of fastener quality exceeding the level of quality that the Fastener Quality Act could assure through application of its provisions. Closed-Loop Fastener Acquisition Guarantees a High Level of Fastener Quality The main feature of these quality assurance programs is a closed-loop relationship with fastener suppliers. For a motor vehicle manufacturer, the closed-loop system involves a limited number of suppliers, the manufacturer's own assembly plants, and its dealers for the distribution of spare parts. Motor vehicle manufacturers impose stringent quality requirements upon their suppliers to ensure the highest fastener quality. A motor vehicle manufacturer's closed-loop system typically includes: A uniquely identified motor vehicle manufacturer's part number. A drawing (or drawings) referencing the unique part number and specifications, dimensions, and standards to which it must conform. Imposition of the motor vehicle manufacturer's own quality assurance standards with the fastener manufacturer, or acceptance of the fastener manufacturer's own system if sufficiently rigorous. Extensive testing prior to qualifying a new supplier or when new or revised Identification of all fasteners by manufacturer's part number and application, i.e., each fastener fits a specific application and serves a clearly identified purpose. The application and use is defined either in a bill of materials (for new vehicle Total manufacturing in the U.S. is about 2.4 million of which about 800,000 are exported for sale in other countries. manufacturing) or in a service parts catalog (for replacement purposes). The Safety of Fasteners Used in Motor Vehicles is Ensured by Provisions of the National Motor Vehicle and Traffic Safety Act In addition to fastener quality assurance provided by the closed loop acquisition of fasteners, the safety of fasteners used in motor vehicle applications is assured and monitored pursuant to provisions of the National Motor Vehicle and Traffic Safety Act, and has been so assured since 1966, long before the FQA became law. All fasteners used in applications covered by Federal Motor Vehicle Safety Standards issued by the National Highway Traffic Safety Administration (NHTSA) must be produced to exacting quality for a motor vehicle manufacturer to certify that every vehicle produced complies with the safety standards. Fasteners for safety belt anchorages, fuel tank mounting, steering column energy absorption systems, seat anchorages, brake system mounting, suspension systems, wheel mounting, and other systems are covered. In addition, the Safety Act requires that any defect in design, performance, or manufacture that creates an unreasonable risk to safety must be recalled. In order to comply with the Safety Act, a motor vehicle manufacturer must ensure not only that the fastener meets specifications, but also that it is suited for the application and properly installed. The FQA only attempts to ensure that fasteners are what they are held out to be and does nothing to ensure they are adequate for their intended use or properly installed. Thus, a motor vehicle manufacturer could not rely upon compliance with the FQA as sufficient evidence that it complied with a particular safety standard issued under provisions of the Safety Act. The Safety Act ensures a higher degree of fastener quality and safety. In applying and enforcing the Safety Act, NHTSA conducts a compliance test program in which it buys vehicles in the retail market and tests them to the provisions of the safety standards. If a vehicle fails a test, NHTSA may open a noncompliance investigation that could lead to a recall of a large number of vehicles and civil penalties. In addition, all motor vehicle manufacturers have an obligation under the Safety Act to monitor the manufacturing processes and field performance of their products and to conduct safety recalls when it is determined that a defect that relates to safety exists in one of their products. NHTSA also conducts defect investigations based primarily on reports it receives from vehicle owners of parts failures or system failures. Thus there is extensive monitoring of fastener safety during production and throughout use by both motor vehicle manufacturers and the Federal government. If the FQA were the only guarantee of fastener safety, there would be no explicit Federal requirement for the recall and remedy of products with defective fasteners. Actual experience demonstrates how effective the motor vehicle industry's efforts to ensure fastener quality have been. An analysis of the NHTSA safety recall database reveals that of the 2,600 total recalls of vehicles and motor vehicle equipment over the ten-year period from 1986 through 1995, only five recalls may have involved fasteners that would be subject to the FQA. Given that each of the 15 million vehicles sold each year in the U.S. contain between 2,000 and 3,000 fasteners, this represents only five recalls for the 300 to 450 billion fasteners used on motor vehicles over a ten-year span. The FQA Does Not Specifically Require Application to Fasteners Used In Motor Vehicles When Congress removed the reference to "major end-users of fasteners" from the definition of "standards and specifications," it removed from automatic FQA coverage most of the fasteners used in the manufacturing and servicing of motor vehicles. However, the implementing regulation brought many of the fasteners back under coverage of the FQA by including any fastener standard or specification that references in any way a consensus standard organization or government agency standard. Thus, if a major end user standard only refers to consensus standard thread specifications, it is covered under the FQA. However, if the major end user standard for a fastener in an motor vehicle does not refer in any way to a consensus standard organization or government agency fastener standard, it is not covered even if the fastener is safety critical. There is no logic in this from the standpoint of motor vehicle fastener safety. If fastener safety depended solely on the FQA, this consequence would leave a major safety gap. The FQA Imposes Significant Increased Costs for Consumers Without For AIAM's members, the burden of the FQA and the implementing regulation include major increases in: Testing costs (duplicative and non-essential), Test laboratory maintenance and accreditation costs, Price Waterhouse conducted a cost study of compliance with the FQA for AIAM. The total cost of compliance for the motor vehicle industry was estimated to be $317 million. This was composed of the costs associated with such items as laboratory costs, record keeping, and lot traceability. This is far above the NIST estimate of $18.9 million for all affected industries. In addition, the implementing regulation for the FQA places a substantial financial and logistical burden on service part purchasing and distribution. Service parts are generally low volume components especially when compared to the identical components purchased by the manufacturer for vehicle production. They are generally ordered quarterly or annually, depending on demand history. Inventory quantities and sales are often very low, especially for older vehicle applications. It is common for a manufacturer, for example, to purchase 100 or fewer fasteners once a year (or less frequently) and distribute ten fasteners to each of its parts distribution centers. For imported service fasteners, these components may be imported through a minimum of three and as many as seven different ports of entry. For small volume service fasteners, the cost could be more than $100 per fastener, and may result in some service fasteners not being supplied at all. For most fastener parts, especially for older vehicles, service fasteners are not pulled from a large lot of fasteners used for vehicle assembly. They are procured in small lots frequently supplied from smaller, specialty manufacturers and from component suppliers of such items as transmissions. These manufacturers must comply with all the requirements of inspection and testing by a registered laboratory, record keeping, and supply of test reports and certification or registration. For small production lots and for small, specialty manufacturers, this will either raise the cost of the fasteners by an unreasonable amount or simply eliminate the source of these fasteners. In cases where the fastener is produced using unique tooling, there would be no alternative source for these fasteners. The result of this scenario is either an unreasonably priced service fastener or no service fastener available. The need for service fasteners could cause customers to use a fastener that fits, but that may well not meet strength or special feature requirements. The result could be a reduction in safety as owners seek generic replacements for high-strength or special features fasteners. For either volume purchasing of fasteners for motor vehicle assembly or for purchasing of small volumes of fasteners for service parts, the FQA imposes a substantial cost penalty with no benefit for consumers. In the case of service fasteners, the FQA could impose a cost penalty so high as to make certain fasteners not available, which could lead to a safety detriment. Congressionally-Mandated Study is an Opportunity to Identify the Appropriate Focus of Fastener Quality Legislation The study mandated by PL 105-234 is an opportunity to take a fresh look at where the real fastener quality problems create safety risks, and where adequate Federal regulatory and safety monitoring authority already exists. AIAM believes that the Department of Commerce (DOC) should thoroughly investigate fastener safety problems as part of this study and recommend legislative changes that focus requirements on problem areas. AIAM believes that the fastener quality in motor vehicle manufacturing exceeds the level that the FQA could provide. |