Fiat-Chrysler hit with $105 Million Penalty for Response to over 20 Recalls

7/26/2015

Multiple sources are reporting that the National Highway Transportation Safety Administration (NHTSA) will issue Fiat-Chrysler a record $105 million fine for its lax response to 23 separate recalls involving over 11 million vehicles. The NHTSA conducted a public hearing earlier in the month regarding the company’s multiple safety issues, its first such hearing in three years. The previous record fine was $70 million issued to Honda for its failure to properly address the Takata airbag recall. The agency could issue a Consent Order as soon as Monday, which if signed would require Fiat-Chrysler to cooperate in future probes and regulatory action. During the hearing NHTSA chief, Michael Rosekind indicated that Fiat-Chrysler would be sanctioned; with a penalty that some speculated could have reached over 700 million. The maximum fine that the agency can level is $35 million per recall; therefore despite the record amount, it is merely a fraction of what it could have been. During the hearing, Fiat-Chrysler’s U.S. safety executive Scott Kunselman did not dispute the NHTSA’s accusations. Kunselman agreed that the company had “fallen short” of its duties and said that the NHTSA has “legitimate concerns” regarding the safety of many of its vehicles. The agency is working with Japanese airbag maker, Takata, under a similar Consent Order.

The most controversial of the multitude of recall issues involves a fire hazard on over 1.5 million Jeep models, primarily among its Cherokee line, in which several deadly fires have been started due to rear-end collisions. Investigators found that the placement of the fuel system too close to the rear of the vehicle and six deaths have been attributed to the defect, most notably the 2012 death of 4 year-old Remi Walden and the ensuing jury trial in which gruesome details of the boy being burnt alive in his aunt’s 1999 Jeep Grand Cherokee after being rear-ended. Although former NHTSA Administrator David Strickland agreed to the makeshift solution of attaching a trailer-hitch to the rear bumper to create more distance between the rear and the gas tank, many have found that solution to be inadequate and makeshift at best. As part of the settlement with the NHTSA, Fiat-Chrysler will offer cash incentives to encourage Jeep owners to take their vehicles to dealers for repair, or add money on top of the vehicle’s value for trade-ins. Despite the controversy, the company maintains that the trailer-hitch solution is a safe and effective fix for the recall, and will not buy back the affected Jeep products. Some believe, however, that it is difficult for the NHTSA to find fault with the solution considering that it was sanctioned by the agency’s previous leadership.

Although Fiat-Chrysler has remained somewhat defiant toward the Jeep gas tank issue, a source with inside knowledge indicated that the NHTSA will require the company to buy back an undisclosed grouping of vehicles, which may lead to a reduction of the record penalty. Although Fiat-Chrysler has yet to comment publicly on the fine, CEO Sergio Marchionne acknowledged earlier in the month that his company and the NHTSA have been negotiating a settlement since the end of the July 2^nd hearing. With potential sanctions looming, Fiat-Chrysler has ramped up their recall efforts to include an additional 3.4 million vehicles just this weekend over hacking concerns on computer systems and false airbag deployments, despite no injuries or deaths reported. This follows several other proactive recalls in recent months that the company has issued, attempting to make good with regulators. Although Kunselman acknowledged that “some of the things we’ve done were sloppy. We absolutely had no misintent,” he added, “The plan is to move forward.”

Sources:

The Detroit News – David Shepardson

U.S. News and World Report/AP – Tom Krisher

Wall Street Journal – Mike Spector