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FCA hit with historic penalties over Jeep/Ram recalls

Ruling on FCA recall campaigns results in fines and buyback orders.

The National Highway Traffic Safety Administration (NHTSA) and Fiat Chrysler US (FCA US) have entered into a consent order that resolves the complaints brought against the automaker for its handling of 23 recall campaigns.

Among the recall programs singled out by the NHTSA order were those for Ram pickup steering failures and Jeep Grand Cherokee fuel tank fires, both of which have been prominently criticized by the regulatory agency for not aggressively pursuing owners who have not yet had the defects remedied.

As part of the consent agreement, FCA US will pay a $70 million fine to NHTSA and spend $20 million on industry and customer outreach to improve recall response rates. In addition, Ram must offer to buy back defective pickups that have not yet been repaired and Jeep must offer customers trade for their defective Grand Cherokees or pay to have them repaired.

An additional $15 million penalty will be assessed if FCA fails to comply with the terms of the order, making the company responsible for as much as $105 million in total fines and penalties if they are unable to comply with the NHTSA order.

FCA US says more than 60% of affected Ram vehicles have already been repaired. However, if even 25% of owners opt for the buy-back offer, if could cost the company more than $2 billion according to the AP. The costs associated with the Grand Cherokee defects are murkier, but since Jeep is only required to offer a trade (rather than buy the vehicles back, as is the case with Ram), it may net out for the SUV manufacturer if buyers take advantage of the mandatory offer to purchase a new Jeep vehicle.

"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," FCA said in a statement Sunday night announcing the terms of the agreement.

In an attempt to avoid a public hearing on the campaign, FCA US previously argued that its overall recall completion rate was "nearly the best in the industry," second only to BMW, with 77 percent of recalled vehicles brought in for service. The company also claimed to be compliant with existing regulations, insisting it was already implementing programs to further improve completion rates. However, it did admit to exceeding the mandatory 60-day owner notification window for five of the campaigns highlighted by NHTSA.

Prior to the hearing, FCA's outspoken chief executive, Sergio Marchionne, publicly downplayed the growing friction between the automaker and the NHTSA.

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