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U.S. Wants to Up Auto Defect Penalties to $300 Million

Fines on automakers that fail to recall defective cars would rise almost 10-fold in the U.S. to as much as $300 million per violation under a Transportation Department proposal unveiled today.

The legislative proposal submitted to Congress fills in the details of President Barack Obama’s four-year, $302 billion plan to fund highway construction and set transportation policy.

The National Highway Traffic Safety Administration’s ability to police the auto industry has been a theme of congressional hearings into General Motors Co. (GM)’s recall of 2.59 million cars to fix a deadly ignition-switch defect.

“This is something we feel very strongly about,” Transportation Secretary Anthony Foxx said on a conference call with reporters today. “We do feel like the penalties could be set higher to ensure when a violation occurs it is more than a rounding error.”

Another recall-related provision of the proposed legislation would give the federal government new authority to require removal of the cars when a defect is first discovered, said David Friedman, the acting administrator for NHTSA. A third requires rental car companies to comply with recalls.

As the top regulator of the auto industry, NHTSA must hold manufacturers accountable for defect and compliance issues, Friedman said.

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Jeff Plungis in Washington at jplungis@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net Elizabeth Wasserman, Romaine Bostick

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