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AFTER RECESS

[The subcommittee reconvened at 1:45 p.m. Hon. Ralph H. Metcalfe, presiding.]

Mr. METCALFE [presiding]. The recessed meeting of the Subcommittee on Consumer Protection and Finance will come to order. We have a panel today. Mr. Daniel Stone, manager of the Motor Vehicle Inspection Programs, Hamilton Test Systems, of Phoenix, Arizona; Mr. Larry Pipes, representing the president of the American Automobile Association of Missouri, Maryland Heights, Missouri; Mr. A. G. Richardson, Jr., president, Automobile Owners Action Council, from Washington, D.C.; and Mr. Charles Livingston, Acting Associate Administrator for the Traffic Safety Programs, National Highway Traffic Safety Administration.

Welcome, gentlemen. We would first like to hear from Mr. Daniel Stone to give us his statement.

Mr. Stone?

STATEMENTS OF DANIEL C. STONE, MANAGER, MOTOR VEHI-
CLE INSPECTION PROGRAMS, HAMILTON TEST SYSTEMS, A
SUBSIDIARY OF UNITED TECHNOLOGIES CORP.; LARRY A.
PIPES, ON BEHALF OF THE AMERICAN AUTOMOBILE ASSOCI-
ATION OF MISSOURI; ARCHIE G. RICHARDSON, JR., PRESI-
DENT, AUTOMOBILE OWNERS ACTION COUNCIL; AND
CHARLES F. LIVINGSTON, ACTING ASSOCIATE ADMINISTRA-
TOR FOR TRAFFIC SAFETY PROGRAMS, NATIONAL HIGHWAY
TRAFFIC SAFETY ADMINISTRATION, DEPARTMENT OF TRANS-
PORTATION

Mr. STONE. Thank you, Mr. Chairman.
Mr. MOFFETT. Mr. Chairman?

Mr. METCALFE. I recognize Mr. Moffett.

Mr. MOFFETT. Before Mr. Stone speaks, I would like to say to the subcommittee and for the record that the company that Mr. Stone represents here, Hamilton Standard, is one of the biggest employers in my area. I have had an excellent relationship with them, I have been to their plant several times and have quarterly breakfast meetings with the management. One of the exciting things going on at Hamilton Standard is in the area of motor vehicle inspection services. Hamilton Standard is the Nation's leading supplier in that area.

As you may know, Mr. Chairman, our region has an image of having lost a great deal of manufacturing since the early fifties. We have an ample supply of run-down plants and older skilled workers out of work, and manufacturers having moved out.

I know the Chairman is familiar with this, even from his own region, but Hamilton Standard stands as a contrast to all of that. They have built a new, high technology operation in Connecticut, constantly bringing in more employees; one of the reasons for such progress is they have the foresight to get involved in areas such as this. They are a leader in fuel conservation in aircraft engines, in energy conservation in their own plants, and, as I said, the Nation's leading supplier of motor vehicle inspection services.

Mr. Stone represents the company and that portion of the company. I want to extend my personal welcome to him and to say how

pleased I am to have one of the finest companies in the country represented here today, and thank you for giving me the time.

Mr. METCALFE. Thank you very much, Mr. Moffett, the gentleman from Connecticut. We certainly appreciate your giving this fine introduction and setting the stage for Mr. Stone's testimony. You may proceed, Mr. Stone.

STATEMENT OF DANIEL C. STONE

Mr. STONE. Thank you, Mr. Chairman, and thank you, Mr.Moffett.

Mr. Chairman, I, like previous speakers, intend to summarize my statement, hoping to eliminate some areas which might be a little bit redundant with this morning's testimony, and I shall also offer the complete statement for entry into the record.

Mr. METCALFE. Unless there are any objections, the entire statement will be entered in the record. Hearing none, it will be so ordered.

Mr. STONE. Thank you. Hamilton is, in fact, a subsidiary of United Technologies Corp. It is a technically oriented company which provides systems for automotive testing and diagnostics and unique services for the consumer in the form of motor vehicle inspection for emissions and mechanical or safety-related items. In the statement there is a summary of related experience. I will just briefly mention that we have supplied diagnostic or test systems and/or facilities for such customers as the U.S. Postal Service, U.S. Army, Ford, General Motors, Chrysler, Cummins, Detroit Diesel, British Leyland, a comprehensive diagnostic inspection demonstration project as performed by Hamilton for the State of Arizona and the National Highway Traffic Safety Administration, and perhaps most unique, our inspection services for the motorists of Arizona and southern California under contracts to the States of Arizona and California.

Our statement leads to several important conclusions. I shall review them briefly now and explain their basis.

My remarks shall also delineate some options and some suggestions for the various roles of Federal and State government, the repair industry, and the inspection industry.

I shall assume that our mutual objective, generally stated, deals with a method to provide the American consumer with more effective, less costly automobile repairs, in effect, to reduce the cost of ownership, whether it be scheduled or unscheduled maintenance, fuel consumption, and then, of course, the indirect benefits of reducing emissions, safer vehicles, and perhaps even reducing noise pollution.

First, our conclusions: A comprehensive high technology, and I emphasize the words high technology, diagnostic inspection service will significantly aid the consumer and the repair industry in providing more cost-effective repairs.

The design would emphasize consumer protection, convenience, high quality, repeatable testing, and intense public education.

The second conclusion is that the diagnostic inspection function. and the repair function must be separated to avoid any possibility of conflict of interest in the outcome of the testing. This separation

further allows constant monitoring of repair industry performance when repair data is collected at the time of reinspection.

The next conclusion: Centralized high-volume diagnostic inspection centers can support more high technology and often expensive, as we have heard this morning, test systems and procedures as compared to lower volume approaches. The centralized design would provide detailed fault isolation and diagnostic information to the consumer for transfer to his or her mechanic.

Incidentally, this approach may help preserve the market position of the small businessman in the repair business who cannot afford the continuing large capital outlays for equipment to test the new models.

My earlier reference to an inspection industry was intentional. There is a new variation at the State level in the somewhat proven concept of Government contracting with private enterprise to provide services, namely, diagnostic inspection services.

Here is how the system works in our relationships with both the States of Arizona and California.

A contractor is selected by the State as a result of competitive bidding. He then invests his own funds under close State supervision for the design and construction of the diagnostic inspection network.

In return, the State guarantees the contractor work, namely, vehicle testing, for a fixed period, such as 5 or 7 years. If the contractor performs the work to the satisfaction of the State, he is allowed to: First, recover his investment for the original network design and construction; second, to pay network operating costs; and, third, to make a reasonable profit, which is negotiated in advance by the State.

The use of a contractor for this public service function eliminates the need to expand Government in order to perform the function. As in the case of both Arizona and California, the contractor may be prohibited by statute from being in any form of the repair business, and, again, this eliminates any potential conflict of interest.

On the subject of the state-of-the-art technology associated with automotive design and technology associated with automotive testing and diagnostics, I think we agreed this morning that design technology from an automotive standpoint has become more sophisticated and promises to become even more complex with the introduction of computers or processors to control fuel, ignition systems, new emission control technology and designs for safer vehicles, vehicles that consume less fuel. But what about the equipment and the procedures to test, diagnose, and repair these vehicles?

What of the plight of the consumer and the honest mechanic who strives toward quality work? What equipment and training are necessary for him to be capable of a thorough test and diagnosis of even one manufacturer's current line?

The answers to some of these questions are frightening. The centralized inspection diagnostic system surely does not offer a complete solution in some of these categories, but one principal advantage lies in the ability of the test and diagnostic centers to employ a variety of state-of-the-art test equipment which could cost, from our experience, between $80,000 to $150,000 per lane.

Such equipment would fall into two general categories: That which is generic in nature, such as for testing emissions, tire condition, front-end condition, lighting and communications systems, and for dynamic brake testing. This type of equipment could test any vehicle type, although acceptance standards may vary between models.

The other category of equipment would be special-purpose in nature, such as for diagnosing engine problems, testing the processors for fuel or emission control, electrical systems, and the like. Incidentally, periodic modifications in equipment and test procedures would have to be made to accommodate changing vehicle designs.

Another conclusion: Most elements of the repair industry, according to earlier testimony, find it impossible to keep up with changing automotive designs and efficient repair techniques. They find it difficult to obtain service manuals and related training courses. With the valuable output of a diagnostic inspection center, their challenge is lessened, but not eliminated.

The test center, with its high throughput objectives, cannot resort, for example, to disassembly of vehicle subsystems for diagnostic purposes. The repair industry must, in certain cases, continue to precisely pinpoint and repair the problem.

Most significant, however, is the fact that the cost and the effectiveness of that work will be assessed at the time of reinspection. Therefore, a substantial effort must be devoted to upgrading the repair industry through training, better access to auto manufacturers' data, both domestic and foreign, and appropriate surveillance. Consumer protection mechanisms are essential, consisting of carefully trained personnel using diagnostic inspection data, comparing it to repair costs and results and obviously consumer inputs directly.

I will give an example in a moment of this type of approach in describing the operational scenario of the Arizona/California programs.

A final conclusion is that the Federal and State government. must play vital roles. The Federal Government can provide technical guidance in the area of overall program design, methods for repair industry training, such as repair standards, instructions and manuals, and consumer protection program specifications.

Further, the Federal Government may have the ability to establish and maintain better communications between the auto manufacturers and the various diverse elements of the repair industry. Funding for a State to initiate a diagnostic inspection program or seed money could be provided by Federal grants.

Such funds would defray the cost of (a) the procurement process leading to selection of inspection diagnostic contractors; (b), the design and implementation of repair industry training and surveillance programs, and, (c) the design and implementation of a Staterun consumer protection operation.

Each State would retain the responsibility with Federal assistance, as previously described, for overall detailed program design, supervision of the contractor and operation of the repair industry training and surveillance, and the consumer protection programs.

The State would provide for and monitor the important communications between the inspection diagnostic system, the consumer, and the repair industry.

To quickly review those conclusions, first, the high technology diagnostic inspection network will provide, at a low cost, immense benefits to consumers and to the repair industry.

Second, the inspection diagnostic functions and the repair functions must be separated to avoid conflict of interest. This will result in consumer protection and consumer confidence.

Third, a network of diagnostic inspection centers would help upgrade all elements of the repair industry, and, in particular, would help preserve a market share for the quality-oriented small businessman.

Next, Government should contract the design for the diagnostic inspection function through private enterprise after competitive bidding.

Next, as automotive design technology grows more complex, a centralized high technology network has the ability to keep up. Next, the capability of the repair industry must be upgraded. Consumer protection mechanisms are essential. And, finally, Federal and State government must provide the overall direction and management of an effective diagnostic inspection repair system. To digress for a moment, I shall briefly explain the consumers' view of the Arizona and California inspection programs. I think that they represent at least a framework and sufficient evidence that the kind of Government-private enterprise relationship that we have suggested can and does work.

The Arizona program began with the State appropriating $133,000 to conduct competition and negotiate the contract. The contractor was selected. In this case, Hamilton Test Systems invested $9 million to build and equip 12 inspection centers in the greater Phoenix and Tucson areas. Each year in Arizona and California, motorists receive an application for renewal of registration. Prior to completing the transaction of renewal, the motorist must have an inspection and must pass the inspection, at which time he would be given a certificate which would be filed with the application for registration renewal.

I should point out that these programs deal with emissions testing. They do provide diagnostic advisory information to the consumer. Also, vehicles which transfer registration, such as a sale of a used car, are also required to be tested as a further consumer protection mechanism.

The testing is done for emissions of hydrocarbons and carbon monoxide. There is a $75 repair cost ceiling built into the Arizona statute and a $50 ceiling in the case of California.

What this means is that no motorists must spend more than the $75 in attempting to meet the State's standards.

Reinspections, after having failed, are free. Repair data is collected at the time of the free reinspection and analyzed by the State to determine the cost to the motorist of the program and the effectiveness of the program.

In the case of California, for example, the Bureau of Automotive Repair has designed and will be implementing early next year a very intense consumer protection-oriented program surrounding its

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