Fiat Chrysler slammed by US government

The US government department charged with overseeing vehicle safety has smashed Fiat Chrysler Automobiles with a $US70 million fine after investigating its last 23 recalls.

The National Highway Traffic Safety Administration (NHTSA) initially pushed for more, but FCA settled for a consent agreement, which included the fine and the astonishing condition that it buy back anything up to 1.5 million of its own cars.

It has also agreed to the NHTSA's unprecedented demand that FCA allow independent oversight of its operations for three years and spend another $US20 million to meet commitments it has made to overhaul safety and recall practices.

The car-maker risks another $US15 million fine if the independent monitor uncovers further violations of US safety laws that FCA failed to disclose in previous recalls or if it violates the terms of the consent agreement. The NHTSA also has the right to extend the independent oversight by a year if any breaches are detected.

"Today's action holds Fiat Chrysler accountable for its past failures, pushes them to get unsafe vehicles repaired or off the roads and takes concrete steps to keep Americans safer going forward," US Transportation Secretary Anthony Foxx said.

"This civil penalty puts manufacturers on notice that the department will act when they do not take their obligations to repair safety defects seriously."

The NHTSA had been probing FCA's handling of recalls dating back to 2009 and the independent monitor will be approved by the NHTSA.

"Fiat Chrysler's pattern of poor performance puts millions of its customers, and the driving public, at risk," NHTSA Administrator, Mark Rosekind, said.

"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," he admonished.

The buy-back part of the order could be more expensive than the fine. It will see FCA forced to take back more than half a million US-based Jeep SUVs, or about half the total annual Australian car market. The cars were part of a recall over suspect suspension components.

Additionally, though, the consent order forces FCA to compensate owners of Jeep Liberty (Cherokee) or Grand Cherokee SUVs with rear-mounted fuel tanks, which have been linked to fatal fires. FCA has been ordered to offer owners a trade-in at above-market value or a financial incentive to install a trailer hitch, which mitigates the problem.

"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," a statement from FCA said.

It isn't the first time the NHTSA has flexed its muscle over short cuts in recall safety, having stung Honda $US70 million in January for keeping secret 1700 reports of deaths and injuries in its cars and fined General Motors $US35 million last year for failing to inform regulators about faulty ignition switches.

But it reserved its worst verbal and political attacks for FCA, including calling a public hearing on July 2, when it said the company had a pattern of not meeting its legal obligations to cover recalls.

It accused the company of delaying building the parts needed for recalls, taking too long to announce recalls and not doing enough to guarantee customer compliance with recalls.

Rosekind cited the 2013 agreement between FCA CEO, Sergio Marchionne, and the NHTSA’s previous Administrator, David Strickland, to fit trailer hitches to the at-risk Liberty and Grand Cherokee models. Fiat didn't even begin manufacturing the hitches until May, 2014, and only 320,000 of the 1.5 million cars had been fitted with the hitch by May this year.

The Jeep Grand Cherokee, one of FCA's biggest cash cows, is one of the most recalled cars in history, with owners having already been asked back to their dealerships 11 times in Australia since 2011, including eight times last year alone.

The news could not come at a worse time for FCA, which has been plagued by recalls, the latest being a software patch to prevent 1.4 million US-built Jeeps, Dodges, Chryslers and RAMs being hacked by remote control and having steering, braking and other safety features taken over.

While FCA expressed dismay that the professional hackers who demonstrated the vulnerability would make it public and planned to reveal part of the software code, the hackers hit back, insisting FCA knew of the problem nine months earlier and did nothing about it. After their hacking efforts became known through Wired magazine, FCA advised customers to download a security patch from their website, before finally issuing a recall.

And, in what could be ugly news for FCA, the NHTSA has announced it will investigate its handling of the hacking saga, too.

FCA has formally responded to the conjecture with the following statement:

"Certain press reports have misconstrued the scope and therefore the estimated costs of certain remedies contemplated by the consent order entered into by FCA US with NHTSA and announced today. FCA intends to clarify the scope of such remedies.

"In the consent order, FCA US has agreed to additional remedies for three recall campaigns covering approximately half a million vehicles, primarily 2008 through 2012 chassis cab, 2009 through 2011 light duty and 2008 through 2012 heavy duty Ram Trucks. In each of those campaigns, FCA US will offer to owners whose vehicles have not yet been remedied, as an alternative remedy, to repurchase those vehicles at a price equal to the original purchase price less a reasonable allowance for depreciation plus ten percent.

"However, customers responding to the recall may continue to keep their vehicles and have them repaired in accordance with the original recall. As of this date, repairs have been completed on well over 60 per cent of the subject vehicles, leaving less than two hundred thousand eligible vehicles. As is expressly provided for under the consent order, FCA intends that any vehicles repurchased will be remedied and resold.

"In addition, FCA US is offering consumer incentives to encourage owners of vehicles subject to the structural reinforcement campaign to participate in the campaign. With respect to the 1993 through 1998 Jeep Grand Cherokee ZJs, FCA US is also offering to increase the trade-in allowance to be applied to the purchase of another FCA product, service or parts for those owners of these very old vehicles who would prefer this alternative over the installation of a trailer hitch.

"All premiums paid to repurchase vehicles in the three recall campaigns and customer incentives will be applied as credits to the $20 million that FCA US has agreed to spend on industry outreach amounts included in the $105 million referred to in the consent order. While such amounts may exceed the $20 million, contrary to certain reports, FCA US does not expect that the net cost of providing these additional alternatives will be material to its financial position, liquidity or results of operations."