What the TREAD Act Means to You … Today

 

Elected officials love to jump on consumer safety issues. It’s the best job security strategy around.

In November 2000, that’s precisely what Congress did when the Firestone recall and Ford Explorer debacle gave them the motive and opportunity to create and pass into law a body of work we know today as the TREAD Act.

At its best, the TREAD Act is a definitive piece of legislation designed to prevent anything like the massive Firestone recall – and subsequent consumer panic ®“ from ever happening again.

But at its worst, the TREAD Act is both inconclusive and convoluted. As TIA notes, the TREAD Act "is the most significant tire legislation ever in terms of government interference," and, from conception to signing, among the fastest laws ever put in place. That initial haste, observers suggest, is one reason why NHTSA is taking so much time completing required regulations.

What we know about the TREAD Act – more importantly, how it will affect you ®“ remains equally murky. We have a good idea how some aspects will impact your business, but even those may well evolve. And, because some regulations have yet to finalized, we can only suggest how, as of this issue of Tire Review, they could impact you.

While the quaint acronym – TREAD Act ®“ implies it’s all about tires, the Transportation Recall Enhancement, Accountability and Documentation Act (Public Law 106-414) actually covers passenger vehicles, vehicle parts, child restraint systems and, of course, tires.

While many of the 17 sections of the law have been decided and implemented, a couple remain either tied up in court or still to be finalized, and others haven’t even been broached. The entire TREAD Act was to have been implemented by November 2002.

Getting the TREAD Act to where it is today has required the input of tire and vehicle makers and their associations, lawyers, lobbyists, special interest groups and NHTSA, charged with creating and governing the law. No law is perfect, certainly, and the intensive efforts of both the RMA and TIA have prevented what could have been a legislative disaster for the industry.

As it stands today, there are four TREAD Act components expected to impact the independent tire dealer now. These include the long-anticipated new safety and testing standards for tires, the still-to-be finalized tire pressure monitoring system provision, and the already-implemented tire inflation/load labeling system and product defect reporting requirements.

What It Tries to Do

From a tire perspective, the TREAD Act espouses to lower the risk of death and injury by strengthening safety and testing standards, increasing the opportunity for tires to be properly inflated, and by analyzing more data to determine if a tire should be recalled because of a potential defect.

That also means NHTSA, not tiremakers, will decide when a recall is warranted – and has the power to expedite a recall/replacement program should it feel a tire company can’t move fast enough.

This won’t be an easy task given the fact that NHTSA’s fast growing "early warning system" database is projected to be larger than the one operated by the Department of Defense. That’s of concern to observers who worry NHTSA may not be able to interpret that much data quickly and accurately. Of even greater concern is the fact that NHTSA’s people are certainly not well-seasoned tire engineers and scientists.

If done well, however, the TREAD Act will help keep litigants away from the doors of tiremakers, and even dealers. That alone will stop much of the bleeding being inflicted from juries and settlements, and possibly prevent a frontal attack on a tire dealer’s wallet.

Not handled properly, it could well lead to unwarranted panic and additional black eyes on an already battered industry.

"The tricky part of the early warning system is in the interpretation," says one tiremaker. "This is a monumental task that involves a balance of safety, technology, customer satisfaction, affordability and compliance, just to name a few."

Defect Reporting

Let’s first consider the early warning system provision of the TREAD Act, part of its expansive data-reporting requirement.

Tire manufacturers, brand owners and importers are now obligated by law to report all data on accident, injury (including death) and property damage claims pertaining to their tires – especially those alleging a tire defect.

Additionally, they must report any customer satisfaction campaigns, consumer advisories, recalls or other activity involving the replacement of tires. These new TREAD Act rules also apply to tires being used in a foreign country that are identical or substantially similar to those available in the U.S.

In short, this is all about data collection and it ties back to you. When a tire is sold, you must be ready to register every one that goes out your door. That’s for openers. Some dealers are doing a good job of registering tires now, most are not. If you are among the latter, call your tire supplier immediately for the proper registration forms.

Potentially more important is your role in recording information about tire adjustments and reporting it back to your tire supplier. This is the biggie, the section of the TREAD Act that will create the single largest database in the federal government.

It will be burdensome for NHTSA, it will be burdensome for tiremakers and it will be burdensome for you. While the reporting requirements are law, how they will be handled by dealers and tiremakers remains a bit sketchy.

The reporting requirements are toughest on tire companies. Starting this April, tiremakers, brand owners and importers must deliver to NHTSA each quarter all tire adjustment data as well as any reports of death, injury or property damage involving their tires. Beginning in 2004, reports must be made every 30 days.

"It will be the serial number of the adjusted tire that drives the process," says one tiremaker. "When we have that, plus the dealer’s adjustment determination, we will be able to move ahead."

Adjusted Adjustments

Historically, the tire adjustment transaction has largely been considered a customer satisfaction function, but will it remain so? "No," say some dealers, who feel it will become more of a legal function and far more formal. Why? Because if there is a problem down the road, someone may be held liable.

Will there be an out-of-pocket expense to the dealer in this quest for adjustment information? Quite possibly, especially if tire companies get picky about adjustment policies. If that happens dealers could see their adjustment requests rejected more than in the past.

The people best equipped to identify tire problems are tire company engineers. With the trickle-down ramifications of the TREAD Act, though, dealers will now require additional tire adjustment training. They will need to know what is adjustable, what is not, and why the tire failed to meet expectations.

Adjustments will be a gamble; dealers will have to arrive at an adjustment conclusion and submit that decision to their tire supplier who may arrive at a different conclusion. Where customer satisfaction adjustments were once easily given, dealers will now have to scrutinize each claim and may have to tell customers that they won’t be getting an adjustment because they didn’t properly maintain their tires.

Awkward as that scenario may be, since the TREAD Act is only now beginning to make its presence felt, it will take time to see how this plays out.

The questions for dealers become more difficult. When an adjusted tire doesn’t involve a defect, can the dealer still give "customer satisfaction" adjustments and be reimbursed? Or will tiremakers, concerned about what goes into their quarterly reports, more narrowly define an adjustable tire? If both parties disagree, will adjustment requests be arbitrated? Will dealers need to offer consumers "adjustment warranties" as they do for road hazards and roadside assistance?

Assistance Coming

The consumer may have to bear some of the "adjustment" cost if he is part of the problem. And you’ll be the one who has to stand toe-to-toe with the customer and tell him he misapplied, misused or otherwise abused his tires

This is where it could become sticky. "That’s why we’re working on a book called, ‘Tire Wear Analysis and Out-of-Service Conditions,’" says TIA President Tom Raben. "We’ll publish photos of failed tires along with explanations of what happened to those tires.

"This way a tire dealer can show the customer a photo of a tire that matches the kind of failure just experienced. Our hope is that this type of assistance will lead to a standardized process of determining types of tire failures."

Meanwhile, NHTSA will be progressively swamped by reams of paper and data it will have to continuously analyze to determine if there is cause for even a minor recall. Many observers still feel that NHTSA will either be incapable of getting through the data quick enough to find a potentially dangerous trend, or will be incapable of making a correct assessment of the data. Either way, the results could be disastrous.

To ensure that the general reporting and early warning system work the way intended, there are civil and criminal penalties built into the TREAD Act. Civil penalties can be fines of up to $5,000 per violation or per day, capped at $15 million for a series of related violations. Under the criminal penalty, a person may be imprisoned for up to 15 years. There is also a "safe harbor" provision written into the act to encourage whistle blowing.

Beware of ‘Deals’

One message that cuts through all the red tape is easy to understand: RMA members are ready and able to help dealers with the TREAD Act, and plan to meet every testing and safety standard required.

But they also suggest that this is not the case for every tire producer in the world. There are places on the planet where tires are made in bulk and offered at bargain basement container-load prices. The question is, are these bottom-rung tire producers capable and willing to meet TREAD Act regulations?

Long story short, your tire supplier is the one charged with reporting to NHTSA, not you. But if you are an importer and your tire supplier fails to report to NHTSA, there can be serious implications for you.

If you question your supplier’s interest in, or ability to meet, the letter of the law, you need to schedule a meeting with that supplier and get things ironed out. It might be best to steer clear of these "special deals" all together.

TPMS Draws Fire

It seems everyone has a different take about NHTSA’s tire pressure monitoring system regulations. Everyone, that is, except TPMS producers.

This is the next TREAD Act provision that will impact you in a big way.

The intent of the law is to warn drivers if their tires are losing air pressure, causing them to be underinflated and dangerous. Once again, the intent of the law is noble enough, but the manner of execution remains open for discussion.

Since NHTSA issued its final TPMS rule in June 2002, the RMA has filed a petition calling for an inflation pressure reserve system, and three consumer safety groups have filed suit to block implementation of the final rule.

As this time, the TPMS regs are in legal limbo. But before it even reached that stage, NHTSA’s initial rule was overturned by the White House, which bowed to automaker concerns that the then-mandated direct TPMS was too costly.

At stake here are consumer lives, a big cash layout for vehicle makers and, no less important, nagging questions about the actual validity of pressure monitoring systems.

The harshest critics say such devices will give consumers a false sense of security. "If you had a TPMS in your car would you ever bother checking your inflation pressure?" asks one dealer, who answered his own question. "I sure wouldn’t. I’d rely on the system to tell me if I had an inflation problem. In my opinion, this could cause consumers to pay less attention to tire inflation pressure, not more."

The same dealer has an indirect TPMS on his own vehicle, and says he could set the inflation warning level to 15 psi and the system would not trigger an alarm because it reads the rotation of the tires, not the actual inflation pressure.

"Are we training consumers to ignore inflation pressure until a light or a buzzer sounds on the dashboard?" the dealer asks. "I’m concerned that we are."

NHTSA’s final ruling provides for two compliance options. The first is a direct TPMS that warns drivers when the air pressure in any or all of their tires drops at least 25% below the recommended cold inflation pressure. The second is an indirect system that would warn when any single tire lost at least 30% of its air pressure.

According to the RMA, indirect systems won’t tell the driver which tire is low, won’t work if all the tires are losing pressure at the same rate, and can give false alarms if the vehicle is in a curve or turn that causes the outside tires to rotate faster than the inside tires. Because they have sensors in each wheel, direct systems continually monitor tire pressure in each tire and can instantly alert the driver when the pressure in any tire drops below a pre-set level.

Including a direct TPMS as mandated original equipment would cost automakers $65 to $70 per vehicle, according to NHTSA. Indirect systems cost less than $22 per vehicle, says NHTSA, because they’re tied to a vehicle’s anti-lock system.

Two problems with that, though. RMA says that under certain conditions an indirect TPMS won’t warn a driver in time to prevent tire damage from occurring, particularly when a vehicle is heavily loaded. Second, after years of offering ABS as standard equipment, automakers are now pulling back and making the brake systems optional add-ons.

RMA has petitioned NHTSA to consider what it calls a reserve pressure requirement for tires. Here’s the rub. To make sure a tire has sufficient reserve pressure, vehicle makers would have to increase the vehicle’s recommended tire inflation pressure or use a larger size tire for a particular vehicle. Sounds simple.

Examining the effect of a 30% inflation deficit on a 10-ply light truck tire, size LT235/85R16 Load Range E, provides an eye opener as to what NHTSA’s ruling means. Typically a tire of this type comes OE on a Ford F350 4×4 Supercab. At the tire’s recommended inflation pressure of 80 psi, that tire has a load carrying capacity of 3,042 pounds. But if the inflation pressure drops 25% to 60 psi, the load capability of the same tire is cut to 2,425 pounds – a 617-pound difference, or the equivalent of three adults.

Applying the indirect system’s 30% rule, the inflation pressure in this tire would have to fall to just 56 psi before any warning is given. If this vehicle is already heavily loaded, at 56 psi it becomes significantly overloaded. No one in the industry likes either scenario.

You’ll remember Ford’s 26 psi mandate for the recalled Firestone tires. An indirect system wouldn’t sound an alarm until that tire reached a precarious 18 psi; even a 25% drop the inflation pressure means that tire would be rolling with just over 19 psi.

The flat out truth is that there must be enough air pressure to support the vehicle load. Whether the final, final, final rule mandates direct or indirect, tiremakers are firm in their goal of getting vehicle makers to reduce gross vehicle weight or oversize the tires so they’ll have the load carrying capacity needed at a reduced inflation pressure.

Will RMA’s petition fly? No one knows at this point, but what is known is that TPMS will be OE mandatory beginning with 10% of 2004 models, increasing to 35% of 2005 models, and to 65% of 2006 vehicles. With collected data in hand from that phase, NHTSA will then revisit the direct/indirect issue, as well as warning levels, in 2006.

"We’re pleased NHTSA wants TPMS on vehicles," says one tiremaker. "All we ask is that tire load carrying capacity rules are followed to the letter.

"Right now over 25% of the cars on the road are running on underinflated tires. We have an opportunity to eliminate that problem," the company says, "and this industry needs to be at the center of that process."

Replacement Requirements

According to one observer, when dealers learn more about replacing TPMS units, including recalibrating them, they will overcome this minor obstacle just as they learned how to deal with onboard computers.

Still, some dealers remain wary that they may not be given access to TPMS technology and the necessary tools to service them. "We will be required to replace them and service them," says one dealer. "But without the stipulations in the (not-yet-passed-into-law) Right to Repair Act, we could face issues with vehicle makers who may want to keep this information proprietary.

"I want to invest in equipment and training, not just for survival, but for legitimate sales and profit opportunities. For me, this TPMS situation remains murky."

That said, the general sense for the TPMS portion of the TREAD Act is largely positive for dealers. For one thing, it is absolutely true that tire dealers will have to recalibrate pressure monitoring systems nearly every time a customer’s tires are rotated and surely whenever tires are replaced. And they will have to reset systems when they issue a false warning. In both cases, these are profitable add-on sales.

Certainly it will be a damage-prevention issue during tire demounting/mounting procedures. And consumers will have questions about their systems. This means that dealers will need a good TPMS education, an unavoidable issue no matter which way the final rule goes.

Improvements in Labeling

Dealers and consumers facing a tire recall will be happy about this part of the TREAD Act. Beginning this September, tiremakers must place a full tire identification number (TIN) on the intended outboard side of a tire and a partial TIN on the other side.

What tire buyers won’t be very happy about is the likely higher tire cost that will result. It is estimated that it will cost the tire industry about $214 million to carry out the ruling as it stands, a cost that will be passed along to consumers.

Importantly, the impact of this third aspect of the TREAD Act on dealers will be slight. Aside from a few price increase frowns from customers, most of the news about tire labeling is good.

For example, if a dealer forgets a serial number, he can simply look at the tire and jot it down. Likewise, consumers looking for TINs for recalled tires will have the same experience. No more crawling under cars.

Another key part of this provision hones in on the vehicle placard that provides proper tire inflation pressure and load limit information. NHTSA now requires vehicle makers to mount the placard on the driver side B pillar or inside the driver side door jamb. The placard must be printed in a pre-defined format with inflation pressures in red, yellow and black on a white background.

Additionally, the placard must note the maximum vehicle load that can be safely carried, including cargo and occupant weight. Vehicle makers must also provide more tire safety information in the owner’s manual.

Whether or not consumers make any use of this added information remains to be seen, of course. But at least one dealer is concerned that enhanced labeling will stymie tire sales.

"While the intent of the law seems fair, I only hope we aren’t being pushed into a corner of selling only what is indicated on the placard," he says.

New Safety Standards

While no tiremaker we talked to had a problem with the need for new tire testing and safety standards, there will be a huge price to pay and additional pass-along costs attached.

That, as of this writing, is about all we know for certain about what is surely the most controversial aspect of the TREAD Act, one that will impact this industry for decades. A final rule was expected last September, then it was supposed to come in December. Some say it will be mid-2003 before they’re announced.

What is known at this point is that complying with new passenger tire standards could cost tiremakers a combined $1 billion just for initial changes, plus an annual layout of nearly $400 million.

"Coupled with the cost of complying with the tire labeling requirement, the simple conclusion is that tires are going to cost more," says Tom Dattilo, chairman, president and CEO of Cooper Tire & Rubber Co.

Still, the need for new tire standards isn’t a bad idea and worth a sneak peak. Given the fact that radial tires were only an emerging product when the first tire standards were put into place in 1968, most feel it’s well past time to bring them into focus.

Last February, NHTSA proposed FMVSS 139 to replace the nearly four-decades-old FMVSS 109. The initial proposal outlined new test procedures to determine the likelihood of tire failure caused by road hazards or the bead disengaging during hard maneuvering, a new underinflation failure test, and testing to determine a tire’s performance as it ages. And the proposed standards also sought to upgrade current high speed and endurance tests, and would create one set of requirements covering both passenger car and light truck/SUV tires.

Public comment on the proposal, including that of RMA, TIA, consumer groups and many other parties, was swift and sure. NHTSA took that input and went back to the drawing board. They haven’t been back since.

While we won’t know for months how this aspect of the TREAD Act will play out, we can anticipate that you will be peppered with all manner of questions from your customers, especially with the inevitable misunderstandings caused by consumer media.

Still No Respect

Because of technology advances over the last three decades, the industry now produces a product that rarely receives the credit it deserves, and certainly doesn’t earn the price that it could.

Few feel that current tire safety and testing standards – FMVSS 109 ®“ had much to do with those advances. Consumer desires, expressed through automakers, and natural competitive pressures did more to boost tire technology than any law. Still, will enhanced standards anticipated from the TREAD Act further improve tire technology? More importantly, will they serve as a shield against lawsuits?

U.S. drivers put over 10 trillion road miles on their cars in 2001. Of the 6.3 million crashes in 2001, only 23,000 were tire-related, according to NHTSA – one tire-related accident for every 435 billion miles driven.

Today’s high mileage tires safely deliver 80,000 miles plus, over eight times the treadwear of tires sold in 1968 when the first tire safety standards were put into place.

Yet the story of tire quality and performance gets no media play unless it involves a crash. And while a tire’s actual role in fatality accidents is phenomenally low, that’s when plaintiff attorneys come a-running.

And that’s a subject Cooper’s Dattilo is passionate about. "It’s unbelievable how bold trial lawyers are becoming in their zest to win big payoffs in tire cases. They will say and do almost anything.

"One reason tires have become a target for plaintiff’s attorneys is because tiremakers have visible assets in the U.S. where we are easy to sue. But what happens when the manufacturer doesn’t have easy assets to attack?" he asks.

"My guess is that tire dealers will become a primary target, especially larger dealers now accumulating assets that become very attractive to these sharks."

His advice to tire dealers. "Every product, service, process and activity needs to be put on trial. Step back and take an objective view as to whether you should or should not keep doing it."

The Last Best Chance?

"Our industry needs to get out and tell motorists what a great value they have in their tires," TIA’s Raben says. "Other industries have done what we have failed to do. With the passage of the TREAD Act, we must take this opportunity to let consumers know that if they thought the radial tire was already a good product they haven’t seen anything yet."

Raben is right. Imperfect though it may be, the TREAD Act stands as a nearly perfect conduit to change the landscape of the tire industry. The timing is perfect, but one still question remains.

Who is excited about change and who will keep doing business the same old way? We’ve just been handed an extra chance to get it right. Will we blow it?

As other pieces of the TREAD Act are finalized, we’ll bring you the details. Among those sections still waiting for a final ruling: the sale or lease of defective or non-compliant tires, remedy (tire recall) programs, the sale of replaced tires, and, of course, new testing and safety standards.