Dealership to pay for selling recalled motorcycles

Dealership to pay for selling recalled motorcycles

March 16th, 2013 by Ellis Smith in Business Around the Region

Tim Kelly owns Southern Honda

Tim Kelly owns Southern Honda

Photo by Staff File Photo /Times Free Press.

The largest Honda ATV and motorcycle dealership in the U.S. has agreed to pay $125,000 to settle an investigation into the sale of unrepaired, recalled vehicles.

Chattanooga-based Southern Honda Powersports admitted to selling 329 motorcycles that had been recalled by the manufacturer, a violation of the federal law that requires dealerships to fix known defects before they sell vehicles.

Though there have been no reported injuries or deaths as a result of the dealership's actions, that didn't stop the U.S. Department of Transportation's National Highway Traffic Safety Administration from opening an investigation in 2012 after a former worker alleged unsafe practices.

"With millions of vehicles traveling our highways every single day, we take our responsibility to safeguard the driving public very seriously, and we expect automakers and dealerships to do the same," said U.S. Transportation Secretary Ray LaHood.

The settlement represents a significant discount from the maximum fine allowed under law, which at $6,000 per vehicle could have totaled almost $2 million for all recalled vehicles sold between 2009 and 2012.

"NHTSA expects all manufacturers and dealerships to work together to ensure that recalls are completed before new vehicles are sold to the driving public," said David Strickland, administrator of NHTSA.

Tim Kelly, owner of Southern Honda, said the violations were "ancient history," and that the company's safety standards have been significantly tightened.

"The bulk of the affected vehicles were in 2007, nearly six years ago when [ex-manager] Gary Griffith was running the show," Kelly said. "We've got processes in place now where it's impossible for vehicles to leave without a recall being performed. Honda changed their systems, and we changed our systems."

As a sign of its increased vigilance, Southern Honda now offers free safety inspections to anyone, no matter where they bought their motorcycle, Kelly said. No employees who were involved in the safety violations still are working at Southern Honda, he added, even though the missed recalls were, in fact, very minor. He believes the feds' goal was to make an example of his dealership, in light of the national coverage Southern Honda has received as the dominant Honda off-road dealer in the nation.

"I'm just glad to get it behind us, and I'm glad there were no injuries and deaths involved with any vehicles involved in the recall," Kelly said. "None."

But Ernest "Pug" Vickers III, a former marketing consultant for the dealership who filed federal complaints about a wide range of business practices at Southern Powersports, said Friday's fine was just the first step.

While the NHTSA investigation covered recalled motorcycles sold at the dealership, Southern Honda also sold thousands of ATVs, which are regulated by a different agency, Vickers said. And Southern Honda sold many, many more ATVs than motorcycles, VIckers said.

"The volume of ATVs was probably five times what you're looking at here with motorcycles," he said. "ATVs fall under the Consumer Product Safety Commission, and they will be the next people coming after Kelly and Southern Powersports."

Southern Honda's officers and owners could face further scrutiny from federal prosecutors, Vickers believes, because of a line in the statute that provides for up to five years in prison for each of the 329 counts listed in the NHTSA investigation.

"I don't see how the U.S. Attorney General for the Eastern District of Tennessee can avoid prosecuting this case," Vickers said.

However, the terms of Southern Honda's settlement with NHTSA included an agreement not to refer the case for prosecution, Kelly said. And though the Consumer Product Safety Commission has jurisdiction over ATVs, that agency conducted an audit several years ago, he said.

"NHTSA has signed off completely," Kelly said. "We anticipate that this is the end of the story."