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Mini Brief

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AUTOMOTIVE REPAIR INDUSTRY

MINI BRIEF NUMBER MB79212

AUTHOR:
Hccalip, Bernevia M.

Economics Division

_THE LIBRARY OF CONGRESS
CONGRESSIONAL RESEARCH SERVICE

HAJOR ISSUES SYSTEM

DATE ORIGINATED Q14g;;2g
DATE UPDATED gggggggg

FOR ADDITIONAL INFORHATION CALL 287-5700

0115

cns- 1 3379212 UPDATE-01/14/80

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The automobile repair industry is characterized by numerous business
concerns which include franchised auto dealerships that service vehicles in
addition to selling them; independent repair facilities; specialty shops
providing limited mechanical repairs; and gasoline stations with service
facilities for mechanical repairs. The 0.5. Department of Transportation
(DOT) claims that the auto repair industry is the number one consumer problem
in this country. DOT estimates that consumers spend approximately $50
billion annually on auto repairs of which $26.5 billion is wasted on repair
and maintenance work that is either inadequate, fradulent, unnecessary, or
not done at all. More recent, according to the results of an undercover
survey of 62 repair shops in seven U.s. cities, DOT found that the average
consumer had about a 50-50 chance of getting a car repaired at the right
price. Since there is no Federal regulatory role in the auto repair
industry, concern over the issue has led to the formation of a number of
consumer organizations that help to identify reliable mechanics and garages.
It is evident that states are increasingly concerned about the abuses in the
auto repair industry and apparently are promoting policies reversing the
"buyer beware" attitude formerly prevalent. Some states and local
jurisdictions now have programs such as mechanic certification, dealer
licensing, rating of auto repair shops, or diagnostic clinic operations to
he‘o the consumer get a fair estimate of needed repair work from someone who
wt-ld not be .performing the work on the car.  These states include
California, Connecticut, Hawaii, New York, Rhode Island, and Washington, D.C.

In the last decade, Congress has held several investigative hearings on
the auto repair problems. However, to date, no bills have been reported out
of committee.

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It is generally accepted that, of numerous Congressional hearings on auto
repairs, the most comprehensive were held by the late Senator  Philip A.
Hart's Antitrust and Monopoly Subcommittee of the Senate Committee on the
Judiciary. These hearings, which extended over a 2-year period (December
1968-harch 1970), brought into focus many problems that consumers face in
their attempts to obtain reliable automotive service and repair. The most
pressing problem discussed in these hearings related to the inadequate
compensation for warranty work and mechanic's difficulty in coping adequately
with the highly complex and sophisticated automobiles that are now being
manufactured. Testimony given at the Hart hearings was widely reported by

lthe various newspapers, and subsequently, major automobile  manufacturers

stated that they would raise the hourly rates they paid mechanics as an
incentive toward a more complete and thorough job done on warranty repair
work. In addition, automobile manufacturers have agreed to put more emphasis
on sepairability in their new car designs. Also, engineers at auto

,manufacturing facilities were assigned to staffs of senior  stylists min an

effort to eliminate some of the high repair costs often included in new car
model designs. The auto manufacturers, in addition to increasing payments to
dealers for warranty work, are moving toward offering fuller warranties.
This new program currently being offered by General Motors, American uotors,
and Ford motors would basically extend the standard one year-2,000 mile
warranty coverage to three years or 36,000 miles for an added fee . Fees for

CRS— 2 HB792 12 UPDATE-O 1/14/8.0

this type of insurance range from $153 to $295 a year depending on the type
of car. In addition, auto dealers now offer arbitration panels to consumers

; a complaint channel. It has been noted, however, that while these ‘panels
have resolved a significant number of disputes, decisions are not binding and
the lack of manufacturer representation on the panels has been considered fa
serious handicap.

However, the problems of obtaining reliable repair service have not been
eliminated or substantially reduced. In recent years, state law enforcement
officials around the country have uncovered many instances of repair garages
engaging in the systematic defrauding of customers. According to information
accumulated by state officials and private consumer groups, inadequate,
fraudulent or unnecessary car repairs continue to exceed all other types of
consumer complaints. '

sparked by a recent undercover study by the Department of Transportation
(DOT) showing 53 cents of every dollar on auto repair is wasted, DOT and four
other agencies, namely the Department of Energy, the Environmental Protection
Agency, the Federal Trade Commission and the U.S. Office of Consumer Affairs
have formed the Automotive Inspection, Maintenance and Repair Interagency

"Coordinating Committee in an effort to reduce the cost of auto repairs to

consumers. The Committee, which is headed by Joan Claybrook, administrator
of the National Highway Traffic Safety Administration, will study several
problem areas including diagnostic capabilities and procedures, repair
procedures, consumer self-help, inspection programs and standardization.

Another facet of the auto repair problem is the shortage of qualified.

.,chanics. Of the estimated 500,000 mechanics working at the trade in the
United States, only 250,000 are trained mechanics. Since Federal consumer
protection to date has involved regulation at the manufacturing  level only

~and not at the auto repair sector, several organizations and government

agencies have launched training programs to increase the supply of trained

‘mechanics. The Department of Labor and the National Automobile Dealers

Association have initiated a nationwide mechanics‘ apprenticeship program.
They National Institute yfor Automotive Service Excellence, a private,
non-profit organization formed to upgrade auto repair service, administers
tests and certifies  qualifying auto mechanics across the country. The
American Automobile Association and the National District Attorneys‘
Association offer arbitration services in resolving disputes between
motorists, repair shops, and manufacturers. A

More recently, Congress and the Executive Branch have been considering a
means of pinpointing more specifically the maintenance problems that confront
car owners that ,appropriate remedial action can be taken. The House
Interstate and Foreign Commerce Subcommittee on Consumer Protection and
Finance held a series of hearings during the monthsi oft September, October,
and December of 1978 on auto repair. The hearings focused on a wide range of
auto problems. A subcommittee staff report released Sept. 18, 1979, which
was based on the hearings held last year, stressed the high costs, of auto
repairs; that opinion that many new car owners receive cars that already are
in need of repair; and the need of a government program to increase the
v tational training of mechanics. Congressman Bob Eckhardt, former chairman
o- the House Subcommittee on Consumer Affairs, introduced legislation earlier
this year (H.R.  1005) that would require auto’ manufacturers to repair
vehicles promptly or otherwise lend another vehicle to the owner(s) until the
work has been properly completed. Manufacturers would also be required to
replace so-called "lemons," new vehicle(s) withi wchronic problems.
Congressman Eckhardt‘s staff is preparing to negotiate with representatives

CBS“ 3 MB79212 UPDATE-01/14/80

c the auto manufacturers in an attempt to gain support for H.B. 1005
introduced during the first session of this Congress.

Consumer groups argue that the various steps taken to improve repair

iservices are not adequate to alleviate a substantial portion of auto repair

complaints. some consumer groups also believe that additional Federal
regulation of automobile manufacturers requiring more repairable designs
would reduce the need for complicated repairs and the potential for repair
abuse. However, with the increasing concern about over regulation by the
government and its economic impact on businesses and the economy generally,
objections to increased Federal regulations are bound to arise. Claims are
made that new Federal regulations would tend to increase costs and probably
induce many auto dealers to abandon the repair business.

Consumer complaints involving the auto repair industry have been noted as
the leading consumer issue for more than 10 years. spokesmen for the auto
repair industry claim that as the complexity of cars increase, consumer
complaints will increase in years ahead. The Automotive Service Councils
predict "an unparalled avalanche of new technology" and with it, "a rising
torrent of consumer complaints-—more than the most zealous consumer advocates
have ever anticipated.“ It is for these and similar reasons that Congress may
become more involved in this issue.

LIBRARY %
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