AP is reporting today (July 26) that Fiat Chrysler (FCA LLC) must offer to buy back from customers more than 500,000 Ram pickup trucks and other vehicles in the biggest such action in U.S. history as part of a costly deal with the National Highway Traffic Safety Administration to settle legal problems stemming from the handling of about two-dozen vehicle recalls campaigns.
FCA U.S., in a press release also issued today, says that they have entered into a consent order with the National Highway Traffic Safety Administration (NHTSA) which resolves the issues raised by NHTSA with respect to FCA U.S. execution of 23 recall campaigns in NHTSA’s Special Order issued to FCA US on May 22, 2015 and further addressed at a NHTSA public hearing held on July 2, 2015.
Further, according to FCA U.S., the consent order includes an admission by FCA US that in three specified campaigns it had failed to timely provide an effective remedy, and that it did not timely comply with various reporting requirements under the National Traffic and Motor Vehicle Safety Act of 1966.
As part of the consent order, FCA US has agreed to make a $70 million cash payment to NHTSA and to spend $20 million on industry and consumer outreach activities and incentives to enhance certain recall and service campaign completion rates. An additional $15 million payment will be payable by FCA US if it fails to comply with certain terms of the consent order.
Lastly, the consent order will be supervised by an independent monitor and will remain in place for three years subject to NHTSA’s right to extend for an additional year in the event of FCA US’ noncompliance with the consent order.
The Ram pickups involved in the buyback have defective steering parts that can cause drivers to lose control. Under the agreement, FCA U.S. has to buy back the Ram trucks for the purchase price, minus depreciation. Owners will have the option of getting them repaired if they wish according to the agreement documents.
Ram pickups covered in the buyback offer include certain Ram 1500s from 2009 to 2012; the Ram 1500 Mega Cab 4×4 from 2008; and the Heavy Duty Ram 2500 4×4, 3500 4×4, 4500 4×4, and 5500 4×44, models from 2008 through 2012. Also included in the buyback offer are 2009 Chrysler Aspen and Dodge Durango SUVs and the Dodge Dakota pickup from 2009 through 2011.
The consent order also deals with the widely known problem of older Jeeps with fuel tanks located behind the rear axle that be punctured and catch fire in collisions. Though FCA U.S. continues to maintain that these vehicles are safe when compared to other similar vehicles from the period – they have agreed to allow owners to trade them in for above the market value or be paid by FCA U.S. to have them repaired.
FCA U.S. believes that upwards of 60 percent of the Ram trucks have already been fixed and the company will be allowed to repair and resell the trucks they buy back according to the consent decree.
The financial implication of this consent agreement, including penalties buyback, trade in and repairs, to FCA U.S. is still to be determined, but it could be substantially above a billion dollars according to some early estimates by observers.
The consent order requires FCA U.S. to notify, within 60 days, owners who are eligible for buybacks and/or other incentives called for in the consent agreement – depending on the vehicle they own.
More information is expected to be available in the next several days.
Source: FCA U.S., AP and NHTSA