In another sign of the National Highway Traffic Safety Administration’s (NHTSA) renewed life, the agency and Fiat Chrysler Automotive (FCA) have reached a record-setting settlement in a far-reaching agreement that, for the moment, settles 23 mishandled safety recalls, some dating back several years. According to the Associated Press, the agreement between the automaker and the safety agency covers 11 million vehicles, including pickups and Jeeps.
Under the agreement, announced yesterday, the $105 million fine breaks the record set last year when Honda was fined $70 million for errors in its reporting of Takata airbag recall information. Under the settlement, the automaker also agreed to the largest potential vehicle buyback in history. Vehicle buybacks are used when recall problems cannot be fixed and the vehicles must be taken off the road and out of the auto fleet. In addition, FCA has agreed to increased federal oversight and to an independent recall monitor to keep an eye on the automaker to ensure that it meets the requirements set by the agreement.
Transportation Secretary Anthony Foxx said in a statement that the agreement “holds Fiat Chrysler accountable for its past failures, pushes them to get unsafe vehicles repairs or off the roads and takes concrete steps to keep Americans safer going forward.” The automaker okayed the agreement and promised to “improve our handling of recalls and re-establish the trust our customers place in us.”
By far, the agreement which covers:
2009-2013 RAM 1500 pickups
2008 RAM 1500 MegaCab 4X4s
2008-2012 RAM 2500, 3500, 4500 and 5500 4X4s
2009 Chrysler Aspen and Dodge Durango SUVs
2009-2011 Dodge Dakota pickups
Older Jeep models
The AP story estimated that FCA may have to buyback as many as 500,000 pickups, light trucks and SUVs because of a steering defect that may cause a loss of control. The automaker did come up with a fix for the issue that apparently was not wholly successful. NHTSA called the automaker on the issue and they agreed to give owners the option of letting FCA buy back the defective trucks or of having the automaker attempt to repair the problem. If FCA is faced with buying back the entire lot of pickups, it could cost an estimated $2.5 billion, based on Kelly Blue Book estimated truck values. FCA maintains 60 percent of the impacted vehicles have been repaired.
This figure does make this a very costly agreement for the automaker. It comes at a time when FCA has turned a major corner in its march to profitability as it reported a net first quarter profit of $101 million. AP reported that the automaker had $20 billion in cash and securities on hand at the end of the first quarter.
The 1.56-million vehicle Jeep recall, begun two years ago, that has been creeping along with only 320,000 vehicles repaired, could pose another profitability problem for the carmaker. At issue in this recall is the placement of gas tanks. The location makes the gas tanks vulnerable to rupture and fire in a rear-end accident. So far, 75 deaths have been linked to this problem, however, FCA continues to maintain that its vehicles were as safe as other vehicles on the road when they were manufactured. Some of the vehicles were made in the 1990s.
Under terms of the Jeep recall agreement, the automaker will either trade the Jeep owners out of their vehicles or will repair them. This recall is potentially has less impact than the buyback because it will likely build more showroom traffic and increase sales to replace the vehicles impacted.
The agreement follows a hearing earlier this month where FCA was lambasted for its shortcomings by regulators, lawmakers and consumer critics. It is also a part of the NHTSA’s renewed vigor as it tries to overcome lapses in major recalls that include:
Faulty Takata airbag inflators that can rupture and fling shrapnel throughout a passenger compartment; eight deaths have now been linked to this.
Faulty General Motors ignitions switches that have resulted in 124 deaths and more than 250 injuries.
Faulty Jeep vehicle gas tanks that have resulted in 75 deaths and many injuries