Fiat Chrysler Hit With Record Fine Over Slow Vehicle Recalls

The National Highway Traffic Safety Administration (“NHTSA”) has just imposed its largest ever fine against a car manufacturer over allegations of misconduct in 23 recalls covering greater than 11 million vehicles. Fiat Chrysler, the Italian-American automaker, faces a civil fine of $105 million and must also offer to buy back from customers more than 500,000 Ram pickup trucks built between 2008 and 2012. In addition, owners of greater than one million older Jeeps will be able to trade them in or be paid by Chrysler to have the vehicles repaired. The record fine and buyback option is unprecedented.

Greater than half a million of the Ram pickup trucks subject to the buyback option have defective steering parts that can cause drivers to lose control. Since some previous repairs have been unsuccessful, so Fiat Chrysler agreed to the buyback. The Jeep Grand Cherokees subject to buyback have fuel tanks located behind the rear axle, leaving them vulnerable in the case of a rear crash. The tanks can rupture and spill gasoline, thereby causing a fire. Federal documents show that at least 75 people have died in such crash-related fires. For example, on April 5, 2013, Magdaleno and Raymundo Sanchez barely escaped a fire when their 1994 Jeep Cherokee exploded on a Los Angeles freeway after it was rear-ended by a drunk driver. The Sanchez brothers received their recall notice eight months after they were burned in the crash.

Under the consent agreement reached with the government, Fiat Chrysler must notify owners who are eligible for buybacks and other incentives.

Both the Ram and Jeep measures are part of a global settlement between the automaker and government. Besides the civil penalty, including the fine and buyback options, Fiat Chrysler has also agreed to an independent recall monitor approved by the NHTSA that will report on the company’s recall performance over a three year period. It has also agreed to strict federal oversight.

Transportation Secretary Anthony Foxx stated that the penalties “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.” Fiat Chrysler responded to the announcement stating that “[They] . . . accept the resulting consequences with renewed resolve to improve [their] handling of recalls.”

Both parties in Congress have criticized the NHTSA for lapses in its resolving car manufacturers’ deadly defects. As a result, the NHTSA, under its new administrator, Mark Rosekind, has taken a more aggressive stance. The record Chrysler fine comes after a $70 million fine imposed against Honda in January for failure to report injury, death and other claims. Last year, the NHTSA ordered General Motors to pay $35 million for a 10 year delay in reporting defective ignition switches connected to greater than 120 deaths.

Rosekind stated that “Fiat Chrysler’s pattern of poor performance put millions of its customers and the driving public at risk. 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.”