STATEMENT OF THE

ASSOCIATION OF INTERNATIONAL AUTOMOBILE

MANUFACTURERS, INC.

TO THE SUBCOMMITTEE ON TECHNOLOGY

U.S. HOUSE OF REPRESENTATIVES

REGARDING THE FASTENER QUALITY ACT

FEBRUARY 25, 1999

Introduction

Good morning, I am George Parker representing the Association of International Automobile Manufacturers, Inc. (AIAM). 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. My testimony has been shared with the entire auto industry which agrees with the statements and principles included in the testimony.

AIAM appreciates the opportunity to appear before you today to address the issues involved with the implementation of the Fastener Quality Act (FQA) in its present form. I also will be recommending some general principles for legislation that AIAM believes addresses the fastener problems that may exist.

Federal Legislation and Regulation Should Address Real Problems in an Efficient Manner

In the view of AIAM, any legislation and regulation should be directed at the identified and documented real problems with fasteners that currently may exist and apply effective and efficient strategies for dealing with those problems. The remedial strategies should be closely tailored to the problem areas identified. Unfortunately, the existing FQA meets none of these goals.

The Existing FQA is Based on Obsolete Industry Practices and Imposes Unreasonable Burdens and Costs

In its current form, the FQA would require motor vehicle manufacturers to change their current practices of purchasing fasteners from suppliers who use advanced, modern, manufacturer-approved quality assurance systems and instead require fastener suppliers to add redundant and expensive end-of-line testing of samples from discrete fastener lots by accredited, independent laboratories. This production approach resulted in the past in a lower level of quality compared to current quality assurance systems, as DOC has acknowledged. In addition, the strict test report, certification, lot control, and lot traceability requirements are inefficient, do not recognize modern, paperless record keeping, and add costs to consumers without safety benefits.

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 fees, record keeping, and lot traceability. This is far above the DOC estimate of $18.9 million for all affected industries.

In addition, the DOC 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 quantities of the identical components purchased by the manufacturer for vehicle production. 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. 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, which could cause a reduction in safety.

These unreasonable burdens and costs come in spite of the fact that the FQA does not specifically require application to fasteners used In motor vehicles and products of other major end users. When Congress removed the reference to "major end-users of fasteners" from the definition of "standards and specifications," in the 1996 amendments to the FQA, it removed from automatic FQA coverage most of the fasteners used in the manufacturing and servicing of motor vehicles. However, the DOC 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 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 fastener safety. If fastener safety depended solely on the FQA, this consequence would leave a major safety gap. Fortunately, fastener safety is assured by means other than the FQA.

Closed-Loop Fastener Acquisition Guarantees a High Level of Fastener Quality

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, 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 FQA could assure through application of its provisions.

The main feature of these quality assurance programs is a closed-loop relationship with fastener suppliers. Motor vehicle manufacturers do not buy bulk generic fasteners on the open market from unknown sources and do not offer them on the open market. 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. Instead they A motor vehicle manufacturer’s closed-loop system typically includes:

• A uniquely identified motor vehicle manufacturer’s part number.

• Extensive testing prior to qualifying a new supplier or when new or revised designs are initiated.

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 vehicles which exhibit a defect in design, performance, or manufacture that creates an unreasonable risk to safety must be recalled. 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.

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 appropriate 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.

A fundamental concept of the Safety Act is manufacturer responsibility. This concept is embodied in the provisions for self-certification by manufacturers of compliance with the Federal Motor Vehicle Safety Standards and the requirement for manufacturers to voluntarily report safety defects they discover and to recall and repair or replace the defective items. Federal oversight is by a limited compliance test program and a defects investigation program by NHTSA. In passing the National Motor Vehicle and Traffic Safety Act, Congress wisely decided not to prescribe how manufacturers provide the required level of safety performance nor to require proof of compliance or freedom from defect to accompany each motor vehicle, or be reported to the Federal government. This allows manufacturers to determine the most effective and least costly means of providing motor vehicle quality and safety and compliance with the Safety Act.

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 by NHTSA, as reported to the Fastener Quality Workshop conducted by the American Society of Mechanical Engineers (ASME) in November 1998, reveals that, in the 1994 to 1998 period, 13 recalls involving ½ million vehicles out of 1,464 recalls involving 79 million vehicles may have involved fastener quality. All 13 recalls were initiated voluntarily by the manufacturers without the necessity of a NHTSA defect or noncompliance investigation, and no injuries were involved. From all indications, had the FQA been in effect, the need for these recalls would not have been eliminated. 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 13 recalls for the 150 to 225 billion fasteners used on motor vehicles over a five-year span.

An earlier review of the NHTSA recall files by AIAM revealed a similar experience. 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. For this period of time, 300 to 450 billion fasteners were used on motor vehicles.

AIAM Recommends Fastener Quality Legislation and Regulation that Addresses Only Real Fastener Problems

Although there is not substantial evidence that there are any fastener quality problems, the auto industry believes that any potential fastener quality problems that produce safety risks would derive from mismarked, substandard, counterfeit, and other nonconforming fasteners, and from material misrepresentations about such fasteners rather than from any difficulties in producing high quality fasteners. The auto industry believes that the record before Congress supports a conclusion that there are no quality or safety problems with fasteners used in major industries. Most major end users have systems in place to insure that only the highest quality fasteners are used in their products. The FQA as it currently exists would not provide any higher levels of fastener quality and would be a step backward and impose costs without benefits.

However, if Congress believes that a law is needed on general fastener quality, the auto industry recommends that such a law be directed at deterring the introduction of nonconforming fasteners into commerce and to generally provide commercial and government customers with greater assurance that fasteners meet stated specifications by prohibiting the fraudulent dissemination of mismarked or nonconforming fasteners within the United States. The auto industry also recommends that such a law should recognize the actions that major end users take to insure only high quality fasteners are used in their products. Such a law should recognize the Quality Assurance Systems in place to produce high quality fasteners and the major end user specifications for fasteners used in their products. Also, the concept of self-certification of the Safety Act should be incorporated into any fastener quality law. Other provisions should be included to focus the law on the potential problem fasteners while eliminating the burden on industry segments that strive to produce only the highest quality fasteners. The auto industry stands ready to assist this Committee in drafting such a law.

Thank you again for the opportunity to provide views on the FQA. I would be pleased to answer any questions you may have.