Why Fiat-Chrysler May Pay Up to $105 Million in Fines

Source: Chrysler
Source: Chrysler

If anything, 2015 has been a year of extremes for Fiat Chrysler automobiles. Its Jeep brand is on pace to sell 1.2 million vehicles worldwide this year, Chrysler brand sales were up 28% through June, and its getting ready to launch a full Alfa Romeo lineup by 2017. On the other hand, FCA boss Sergio Marchionne has drawn ire for aggressively pursuing an industry-wide merger that no one else wanted, and just last week, Wired ran an exposé on how the Jeep Grand Cherokee’s internal computer network is vulnerable to hackers (FCA has since fixed the issue). Now, The Wall Street Journal is reporting that the National Highway Traffic and Safety Administration has FCA with up to $105 million in fines for failing to recall millions of vehicles for potentially fatal defects.

Under the law, the NHTSA can only levy a maximum $35 million in fines, so it’s hitting FCA with no less than three separate ones, with the possibility of a fourth. The first $35 million fine is for failing to appropriately recall for a faulty axle that has the potential to seize in late-model Ram pickups, and Dodge and Chrysler SUVs. The second is for selling vehicles with broken tie rods. Another $20 million has been pledged to create public service announcements and create outreach programs for affected owners. If FCA does not comply with the standards handed down by the feds, it could be faced with an additional $15 million in fines.

2014 Jeep Grand Cherokee Limited
Source: Jeep

This latest set of fines comes on the heels of a $150 million wrongful-death lawsuit against the company in April, where a jury in Georgia found FCA to be responsible for the death of a four year old boy who was killed when his family’s Jeep Grand Cherokee was rear-ended and burst into flames. What makes this case so egregious is that the company turned down the NHTSA’s recommendation that it recall 2.7 million Jeeps for this issue back in 2013.  While the company relented somewhat and recalled 1.56 million of them later on, there’s no evidence that its shockingly low-commitment solution of bolting a trailer hitch in front of the fuel tank did anything to decrease the risk.

Source: MARK RALSTON/AFP/Getty Images

In a statement given after the ruling, NHTSA Administrator Mark Rosekind said, “Fiat Chrysler’s pattern of poor performance put millions of its customers, and the driving public, at risk,” adding “This action will provide relief to owners of defective vehicles, will help improve recall performance throughout the auto industry, and gives Fiat Chrysler the opportunity to embrace a proactive safety culture.” FCA’s fines come on the heels the agency’s $70 million decision against Honda in January, which concluded that the automaker had given purposefully misleading data on the safety of its cars with Takata-built airbags.

Unlike Honda, however, FCA’s punishment is a bit more unorthodox. On top of the initial fines, the owners of 1993-2004 Jeep Grand Cherokees and 2002-2007 Liberty SUVs will get a $100 gift card just for bringing their SUVs in for the necessary work (paid for by the $20 million portion of the fines). For owners of nearly 200,000 vehicles that haven’t had the recall work done, the company will offer to buy them outright, “at a price equal to the original purchase price less a reasonable allowance for depreciation plus ten percent.” The vehicles up for buyback are the 2008-’12 Ram 1500, 4500, and 5500 pickups, 2009-’11 Dodge Dakota, 2009 Dodge Durango, and 2009 Chrysler Aspen.

Source: Dodge

Last month, the NHTSA came under fire in a damning internal audit by the U.S. Department of Transportation, where it was alleged that poor management, lack of oversight, and overworked staff have led to several potential safety hazards. In light of its recent findings against FCA, it looks like the agency is looking to flex its muscle and get back on track. While the situation at the NHTSA may be dire, recent actions by GM, Honda, Chrysler, and Takata prove that without any oversight, we’d be in a lot of trouble.

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