Fiat Chrysler hit with record $105 million fine

27 Jul 2015 | Author: | No comments yet »

Fiat Chrysler Hit With Record $105M Fine Over Safety Lapses.

A record penalty that could reach $105 million isn’t the only imposition U.S. auto-safety regulators are making on Fiat Chrysler: It’s also getting a house guest. The maker of Dodge pickups and Jeep sport utility vehicles on Sunday, like Toyota before it, agreed to hire an independent monitor to ensure it will no longer delay safety recalls. National Highway Traffic Safety Administration announced Sunday, and it will have a federally approved independent monitor ride shotgun under the terms of a consent order accepted by the automaker.

Including GM and Honda, which have agreed to additional oversight, companies representing more than half of all vehicles sold in the U.S. will be under the yoke of extraordinary regulatory scrutiny. The settlement comes after an investigation into a pattern of problems with 23 vehicle safety recalls covering more than 11 million defective vehicles. Fiat Chrysler admitted to failing to conduct recalls in an effective and timely manner, as well as provide proper notification of safety issues to the NHTSA, vehicle owners and dealers. The $105 million penalty is the largest ever assessed by the NHTSA, trumping a $70 million fine imposed on Honda Motor in January over defective airbags, as the agency has sought to crack down on automakers over compliance with recall rules. “This civil penalty puts manufacturers on notice that the Department will act when they do not take their obligations to repair safety defects seriously,” Transportation Secretary Anthony Foxx said in a statement.

They don’t know where all the closets are, let alone the skeletons.” The agreement announced Sunday represents the largest penalty ever imposed by NHTSA, which regulates the auto industry and investigates safety defects. Under the agreement, the agency could demand another $15 million that will be held in an escrow account if the independent monitor discovers additional violations of safety regulations or the consent order, which will be in force for the next three years. Owners of more than a million Jeeps that are prone to deadly crash-impact fires can either trade their vehicle in for above its market value, or receive funds to repair their vehicle, the NHTSA said. Fiat Chrysler shares fell as much as 3.4 percent to 13.50 euros and were down 2.1 percent at 9:29 a.m. in Milan, making it the third-worst performer on the Euro Stoxx autos and parts index. General Motors’ deadly ignition switch defects and Takata’s faulty airbags have drawn headlines, but Fiat Chrysler has also stood out — in the Jeep case, it initially resisted NHTSA’s 2013 request for a recall to address fire safety concerns on 1.56 million of the SUVs with rear-mounted fuel tanks, which can rupture in a crash.

In late 2014, the agency lambasted the automaker for its slow progress on retrofitting the recalled vehicles with trailer hitches to protect the fuel tanks, labeling its 3% completion rate as “woeful.” “Fiat Chrysler’s pattern of poor performance put millions of its customers, and the driving public, at risk,” NHTSA Administrator Mark Rosekind said Sunday. Last Tuesday, former Forbes writer Andy Greenberg published a story in Wired that established that hackers had discovered how to remotely take over a Jeep Cherokee. NHTSA has been stepping up its enforcement efforts following criticism that it acted too slowly on reports about faulty ignition switches in GM small cars that shut off air bags, leading to more than 100 deaths. The agreement by Fiat Chrysler, which has its North American operations based in Auburn Hills, Michigan, followed a recall announced Saturday of 1.7 million of its late-model Ram trucks to replace air bags that may deploy inadvertently.

The company on July 24 also said it was recalling about 1.4 million cars and trucks equipped with radios vulnerable to hacking, the first formal safety campaign in response to a cybersecurity threat. On July 2, NHTSA held a rare public hearing to go over evidence that Fiat Chrysler had taken too long to initiate safety recalls, delayed producing parts needed to fix defects, and didn’t do enough to ensure that consumers complied. Specific examples NHTSA investigators cited at the hearing included defective pinion nuts in Ram pickups that could cause the wheels to lock and drivers to lose control.

As part of General Motors Co.’s settlement terms with NHTSA, the Detroit-based company sends employees to meet with the administration in Washington every month to talk about progress of existing recalls, show any data that could mean a new recall is needed and give government officials a chance to ask questions, said company spokesman Jim Cain. There are limits on NHTSA’s ability to issue fines, and the Fiat Chrysler agreement is still well below the $1.2 billion Toyota Motor Corp. paid in March 2014 to settle a U.S.

NHTSA’s tougher actions are a response to Congressional criticism that began before Rosekind took over as administrator for the nation’s top safety agency. Large fines and forcing Fiat Chrysler to buy vehicles back are evidence that Rosekind is going to be tough, said Scott Upham, founder and CEO of Philadelphia-based corporate-strategy firm Valient Market Research Inc. “We’ll see more diligence, higher fines and NHTSA recasting themselves as the watchdog,” Upham said in an interview. “Rosekind is really pushing the envelope to empower himself.” Upham said that Fiat Chrysler’s resistance to negotiations — arguing that its track record was better than most automakers — made their situation worse and pressured NHTSA to be tough.

Rosekind told reporters in Detroit last week that he’s trying to get the industry to focus proactively on safety and not wait for tragedies to spur change. “Automakers are saying the right things so far,” he said. “We’ll continue to follow the great words.

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