The federal government has fined Fiat-Chrysler $70 million for untimely responses to a series of recalls and forced the automaker to buy back a half-million vehicles, among many strict provisos announced Sunday night by the National Highway Traffic Safety Administration.
In a consent order signed Friday by CEO Sergio Marchionne, FCA could face up to $105 million in civil penalties—the most ever levied against an automaker—except federal law doesn’t allow such a single fine. Instead, NHTSA lumped two $35 million fines—each the maximum under federal law—and FCA agreed to spend $20 million on public service announcements, gift cards, and other consumer outreach. FCA could be fined up to $15 million more if it violates anything within the order.
The penalties come two months after NHTSA opened a review of 23 FCA recalls, all spurred by the automaker’s sluggish response to deadly Jeep fuel tank fires—of which FCA had refused NHTSA’s recall request in 2013—and a corresponding $150 million wrongful death payment ordered by a jury in April. Despite a lengthy NHTSA investigation calling out Chrysler’s questionable fuel tank placement behind the rear axle on 1993-2007 Jeeps, higher-than-average fatality rates, and a dubious fix—a trailer hitch mounted on the back bumper—the Jeep recalls did not warrant any fines.
“Fiat Chrysler’s pattern of poor performance put millions of its customers, and the driving public, at risk,” NHTSA Administrator Mark Rosekind said in a statement. “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.”
Instead, NHTSA called out three recalls for late-model Ram pickups and Dodge/Chrysler SUVs—one for a faulty axle that could lock up, the other for broken steering tie rods—as violating the Safety Act. According to the order, FCA waited too long to react and vehicles were not fixed in a “reasonable” amount of time. More than 540,000 vehicles were affected starting in 2013. FCA must now offer to buy back at a 10 percent premium all of the trucks that weren’t repaired. The company will then be allowed to resell them once they’re fixed.
In what can be construed as an effort to back several Congressional bills, FCA dealers are now barred from selling any used vehicles subject to a recall or they must give up factory incentives and pay for prep fees (currently, the law only restricts sales of new vehicles). FCA must also send detailed reports of every subsequent recall and how it is working toward “maximum completion rates,” plus it has to publicly disclose details of all injuries and deaths above and beyond the Early Warning Reporting data that all manufacturers submit each quarter. Such disclosure and details have never been required by law.
Since most owners of those affected Jeeps (1993-2004 Grand Cherokees and 2002-2007 Libertys) have not repaired their vehicles, FCA will give them $100 gift cards just for bringing in their Jeeps to the dealer. In addition, each dealership’s service manager will pocket $10 for every car (but, strangely, not for 1999-2004 Jeeps).
A 2006 fatal crash involving a 1993 Jeep Grand Cherokee.
It gets stranger. NHTSA is forcing FCA to teach other automakers and suppliers about best safety practices, lead conferences with the Insurance Institute for Highway Safety and the Society of Automotive Engineers, and “scientifically test” ways to make recall notices more effective. It must also set up a consumer recall website and hire a survey company to poll customers on their satisfaction during subsequent recalls. FCA must spend a minimum of $20 million over three years on such “industry education.”
As Toyota is now facing after its $1.2 billion settlement for unintended acceleration, FCA faces a three-year audit during which an independent consultant can interview all employees and comb through every safety-related record. In addition, FCA must meet with NHTSA quarterly to discuss overall progress and monthly to manage the latest technical service bulletins, warranty claims, complaints, and anything the consultant wants to mention. Within three months, FCA must demonstrate how it will expedite replacement parts on future recalls. In six months, it has to publish a best practices list of reforms, and after a year, it must publish an audit by yet another independent consultant chosen by NHTSA.
NHTSA also wants FCA to create two new jobs under Marchionne, similar to what GM CEO Mary Barra initiated on her own after the ignition-switch recalls. A “chief safety officer” will handle all defect-related cases within the company and have direct access to the board, while a “recall management director” will assemble the company troops. Employees will also follow a new training manual.
In a statement today, FCA said it accepts “the resulting consequences with renewed resolve to improve our handling of recalls and re-establish the trust our customers place in us. We are intent on rebuilding our relationship with NHTSA and we embrace the role of public safety advocate.”
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