7/28/2015
The National Highway Transportation Safety Administration (NHTSA), the nation’s top auto-regulator, released additional details surrounding its consent order with Fiat-Chrysler involving 23 separate recalls. The agency is requiring the company to buy back Dodge Ram pickups and other Dodge and Chrysler SUV’s involved in three of the recalls due to the agency’s inability to fix the vehicles in a suitable and timely manner. Multiple sources reported over the weekend that the NHTSA would fine the company a record $105 million for their lax and often insufficient solutions to the deluge of defects. Details of the penalty have now emerged, including that $70 million of the fine must be paid within 60 days. The company can apply $20 million of the fine towards the cost of complying with the consent order, and $15 million can be waived if the company reaches certain performance benchmarks regarding its future cooperation with regulators. In total, the company has sold over 11 million vehicles involved in the 23 recalls.
According to a quarterly filing from Fiat-Chrysler to the NHTSA, the company indicated that it sold over 500,000 of the vehicles involved in the buyback, including 193,000 that have yet to be repaired. The vehicles contain a defect that can shut down the steering mechanism as well as ruin the axles. The Ram pickups are the company’s top selling vehicles. Although the terms of the buyback include “a reasonable allowance for depreciation,” Kelly Blue Book estimates that it could cost Fiat-Chrysler between $900 million and $1 billion overall. Many Ram owners have waited between 18 months and two years for repairs, with some attempted repairs deemed to be insufficient or faulty. At least one death and 32 injuries have been attributed to the steering defect. In addition to the Ram vehicles, Fiat-Chrysler is also offering cash incentives and trade in allowances for owners of several models of Jeep Cherokees involved in the controversial gas tank recall. The company and previous NHTSA leadership agreed upon a makeshift solution for a defect in which the fuel system could catch fire upon rear-end impact. The repair involved installing a trailer hitch on the rear bumper to create more distance from the impact zone to the gas tank. Six deaths have been attributed to the gas tank defect, most notably the burning death of 4 year-old Remi Walden, in which the company was hit with $150 million jury verdict.
Transportation Secretary Anthony Foxx held Fiat-Chrysler up as an example of the tougher stance that the NHTSA has taken since Administrator Michael Rosekind assumed office in December. Foxx said, “We are sending an unambiguous signal to industry, that if you skirt the laws or violate the laws or you don’t live up to the responsibility that consumer need or expect, we are going to penalize you.” Fiat-Chrysler and especially CEO Sergio Marchionne maintained a defiant attitude toward former NHTSA head David Strickland and interim Administrator David Friedman. The company softened its stance, however, after Rosekind threatened to re-open the controversial Jeep gas-tank investigation as well as potentially levy over $700 million in NHTSA penalties instead of the agreed-upon $105 million. In addition to paying the $70 million NHTSA penalty, the company also has 60 days to submit the names of three individuals to the NHTSA who could potentially serve as an “independent monitor” to oversee Fiat-Chrysler’s recall efforts. The NHTSA gets to choose one of the three.
The vehicles eligible for the buyback program are:
- 2008–2012 Dodge/Ram 1500 pickups (265,000 vehicles)
- 2008–2012 Dodge/Ram 45oo and 5500 heavy-duty pickups (35,942 vehicles)
- 2009–2011 Dodge Dakota
- 2009 Dodge Durango
- 2009 Chrysler Aspen
Sources
Car and Driver (blog) – Robert Sorokanich
Detroit Free Press – Brent Snavely
NBC News – Associated Press
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