$2 Billion Not Enough for Auto Makers to Comply with TREAD Act

AMR Research Claims Government Cost Estimates 50 Times Too Low

BOSTON, Sept. 30 -- Despite an anticipated $2 Billion in last minute spending, AMR Research predicts the automotive industry will be unable to comply with the TREAD Act's December 1, 2003 deadline. The TREAD Act was passed to force automotive companies to better tie field reports to manufacturing of vehicles and components.

The National Highway Traffic Safety Administration (NHTSA) has dramatically underestimated the time, cost, and complexity of the data collection, clean-up, and analysis required to comply with the Act. The real problem for companies is not the content format but the actual coding of the documents. Added to the fact that information for TREAD reporting tends to be fragmented, decentralized, and contained in an average of six systems. This process to gather the information is not only labor intensive, it requires a significant data extraction and transformation effort as well.

"The government has underestimated the complexity and significance associated with this type of data extraction for TREAD Act compliance," said, Kevin Mixer, Research Director, AMR Research. "Without adequate time and funding, deadlines will not be met and the project will result in a multimillion dollar black hole for companies -- while missing the goal of the TREAD Act -- saving lives."

What Should Vehicle Manufacturers and Suppliers Do?

AMR Research has identified four key steps auto makers should take to protect themselves from government penalties and ad hoc customer requests associated with the TREAD Act.

  -- Plan to be pulled into TREAD -- even if your company is not in the
    Act's scope now:  The ability to answer customer data requests and fix
    internal problems before the government starts asking is a considerable
    driver.  There have been indications that the list of companies in the
    first reporting group will be expanded.  Especially if a company's
    product is safety-related or involved with the "handling" of a vehicle
    (e.g. brakes) then those companies should plan on being more involved
    with TREAD.
  -- IT should lead the initiative: There is a critical need to use enabling
    technology in order to meet compliance timetables and to effectively
    manage costs.  Survey results show that IT leadership on compliance
    teams dramatically increases chances of success.
  -- Secure Funding: Nearly 85 percent of companies surveyed by AMR Research
    do not have budget specifically allocated for TREAD compliance.
    Without funding, more than 50 percent of projects will fail to meet the
    December deadline.  Budgets can be found by aligning Tread Act
    compliance projects with other initiatives.
  -- Proactive Notification: If you are behind schedule, communicate to the
    government and your customers as soon as possible that deadlines will
    not be met and why.

Read more about TREAD Act challenges and how leading companies are approaching the issue proactively in: TREAD: A Multibillion Dollar Black Hole, available at www.amrresearch.com .

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