US fines Fiat Chrysler $105 million, they must buy back 500,000 trucks

[jimmy olsen]

Lay down the hammer!

http://www.bloomberg.com/news/articles/2015-07-28/u-s-forces-fiat-chrysler-to-buy-back-trucks-in-rarely-used-move

U.S. Forces Fiat Chrysler to Buy Back Trucks in Rarely Used Move
by Jeff Plungis

Of the 23 Fiat Chrysler recalls that U.S. regulators investigated, three were so dangerous that the government invoked its most potent power: requiring the company to buy back the vehicles.

Owners of hundreds of thousands of pickups and SUVs will be able to get rid of their trucks and get cash. In addition, owners of about 1 million older Jeeps with exposed fuel tanks could be able to trade them in for $1,000 above fair market value toward another Fiat Chrysler vehicle.

"Consumers are at the heart of this enforcement action," U.S. Transportation Secretary Anthony Foxx said. "Automakers have a heavy responsibility to make sure their vehicles are safe."

Forcing automakers to repurchase defective vehicles is a rarely used requirement by regulators and hasn't been invoked on this scale in decades. The move is part of a corrective action and $105 million penalty against Fiat Chrysler Automobiles NV announced Sunday following a Transportation Department investigation into how the company handled fixes on 23 recalls involving more than 11 million cars and trucks.

The Fiat Chrysler agreement is the largest penalty ever imposed by the National Highway Traffic Safety Administration, which is stepping up enforcement efforts following criticism that it has acted too slowly on other auto recalls.

The vehicles subject to repurchase -- mostly Ram pickups -- have defective suspension parts could cause a loss of control, according to the NHTSA. The truck owners will be able to receive the original purchase price, minus depreciation, plus 10 percent, according to the agreement.
60 Percent

Fiat Chrysler estimates more than 60 percent of the estimated 500,000 vehicles involved have already been repaired, leaving fewer than 200,000 eligible for a buy back. The company expects to repair and resell any purchased vehicles, recovering some of those costs.

NHTSA compelled Fiat Chrysler to repurchase the vehicles because the agency wasn't confident in the company's plans to fix the defect, Mark Rosekind, the agency's current chief, said Monday.

The agency hasn't been able to verify Fiat Chrysler's estimates for how many vehicles haven't yet been repaired, NHTSA spokesman Gordon Trowbridge said. The company's inability to track recalls accurately was one of the key issues in a July 2 hearing, and that led to restarting one of the Ram pickup repair campaigns, he said.

"The consent order provides the buyback option for those vehicles that have not been remedied," Trowbridge said. "How many vehicles fit that description is unclear."
Comparable Action

The only comparable action in scale occurred in 1981, when 140,000 Fiat 124 sedans were eligible for buy back because of undercarriage corrosion that affected the cars' suspensions, according to the Center for Auto Safety.

In the latest order, Fiat Chrysler will notify vehicle owners eligible for buy backs and other financial incentives about their options. The offer is for various model-year 2003 to 2012 Rams, plus some Aspen, Dakota, and Durango vehicles.

Other options are available for owners of Jeep models subject to a gas-tank recall. For owners of 1993 to 1998 Jeep Grand Cherokees, consumers who want to keep their vehicles will get a $100 gift card as an incentive to do the repair. Owners of those models may be eligible for the trade in to be applied to another Fiat Chrysler vehicle or service.

Owners of other vehicles, including the 1999-2004 Grand Cherokees and the 2002-2007 Jeep Liberty, will get the gift cards.

Customers haven't come in looking to trade in or sell back vehicles, according to John Powell, service manager at Kernersville Chrysler Dodge Jeep Ram in North Carolina.

'Too New'

"It's too new," Powell said. "Typically, we don't start hearing from customers until they receive official word in the mail from FCA that their specific model or car might be affected."

Consumers can determine whether their vehicles are covered by one of the recalls under investigation can visit NHTSA's recall website, safercar.gov, which lists makes and models for the 23 recalls.

NHTSA's moves fell short for a consumer advocate who had been pushing for the agency to compel Fiat Chrysler to also buy back the Jeeps. Consumers need more protection from these vehicles, which have been involved in fatal fires when struck from behind, said Clarence Ditlow, executive director of the Center for Auto Safety.
Lemon Laws

Jeep owners will only be able to get a credit that they'll have to spend at the dealer, either on a new model or on services they may not want, Ditlow said. That part of the agreement isn't as much as consumers typically get under various state lemon laws, he said.

"The mission is to get the defective vehicles off the road," Ditlow said. "If you don't, you've failed."

In additional to the cash penalty, Fiat Chrysler was ordered to spend at least $20 million to meet NHTSA's performance requirements. That can include the costs of buying back vehicles.

Fiat Chrysler said in a statement Monday total costs for buy-backs and reimbursements to Jeep owners won't be material to its financial results.

The company, whose North American operations are based in Auburn Hills, Michigan, acknowledged three violations of U.S. auto-safety laws in a statement Sunday. It also said it accepted the need to improve its handling of recalls and re-establish trust with its customers.

Latest Penalty

The penalty is the latest in a series of record-breaking fines. The $70 million cash portion of Fiat Chrysler's penalty is equal to one that Honda Motor Co. paid last year.

NHTSA stepped up its enforcement efforts after criticism that it acted too slowly on reports about failed General Motors Co. ignition switches that caused air bags to lose power. The agency faced similar complaints over its response to reports that air bags supplied by Takata Corp. could explode, sending shrapnel toward front-seat occupants.

"We finally have someone in charge of the agency who likes to enforce the law," said Joan Claybrook, a longtime Washington-based consumer advocate who headed NHTSA in the 1970s. "I'm really happy to see it's being used to protect the public."

Fiat Chrysler agreed to unprecedented oversight for the next three years. This includes hiring an independent monitor approved by NHTSA to assess, track and report the company's recall performance.

"We're trying to get the best out of each one of these agreements," Rosekind said. "They're building on each other."