Federal regulators hit Fiat Chrysler Automobiles NV with a
record $105 million fine for recall lapses covering millions of
vehicles, adding to mounting scrutiny of the auto maker's safety
practices.
The National Highway Traffic Safety Administration slapped the
Italian-U.S. company with the financial penalty and assigned an
independent monitor to audit the company's recall processes for up
to four years as part of a sweeping settlement unveiled Sunday
evening. In some cases, the auto maker agreed to repurchase
recalled automobiles as part of the deal, including more than half
a million with defective suspension parts that can cause the
vehicle to lose control.
Fiat Chrysler signed a consent order agreeing to the penalties,
which were previously reported by The Wall Street Journal on
Saturday. Fiat Chrysler will have to pay $70 million up front and
steer an additional $20 million to industry outreach efforts such
as educating manufacturers on meeting legal safety obligations and
encouraging suppliers to alert the company to possible defects. The
remaining $15 million is deferred but could become payable if Fiat
Chrysler violates the consent order or federal law.
Regulators said Fiat Chrysler violated federal law governing
motor-vehicle safety on a variety of fronts. "This civil penalty
puts manufacturers on notice that the Department will act when they
do not take their obligations to repair safety defects seriously,"
U.S. Transportation Secretary Anthony Foxx said.
Fiat Chrysler in a statement acknowledged the lapses outlined in
the consent order. "We also accept the resulting consequences with
renewed resolve to improve our handling of recalls and re-establish
the trust our customers place in us," the company said, adding it
wants to identify best recall practices and research obstacles that
discourage owners from getting repairs.
The penalties, the largest ever levied by regulators against an
auto maker, target lapses spanning nearly two dozen recalls
affecting more than 11 million vehicles, including older Jeeps with
rear gasoline tanks linked to numerous fatal fires. Toyota Motor
Corp. faced a $1.2 billion penalty over sudden acceleration in a
Justice Department criminal case in 2014.
Fiat Chrysler's fines are tied to legal violations in three
areas: misleading and obstructing regulators; inadequate and
lagging repairs; and failing to alert car owners to recalls in a
timely manner.
With repairs, regulators said Fiat Chrysler failed to fix
vehicles in a timely manner in three recalls involving defects that
could cause axles to lock and left tie-rod assemblies to fail, all
of which could cause a driver to lose steering power and crash.
With 1.56 million recalled Jeeps linked to fires, the agency has
accused Fiat Chrysler of lagging in installing trailer hitches on
the backs of vehicles for added protection in lower-speed
collisions. Fiat Chrysler has said vehicle owners are often
unwilling to get repairs despite much outreach.
Under terms of the settlement with regulators, Fiat Chrysler
will start offering cash to Jeep owners to encourage them to go to
dealerships for repairs, or additional money on top of the value of
their vehicles if they trade them in. The Jeep Grand Cherokee and
Liberty SUVs covered in the recall have model years from 1993 to
2007.
Chief Executive Sergio Marchionne earlier this month said Fiat
Chrysler hadn't adapted as well as it could have to increasingly
activist regulators and he expected consequences. Shortcomings
managing recalls weren't intentional, he said, adding that the
company will work with the government to improve.
At a hearing before regulators in early July, the executive in
charge of vehicle safety and regulatory compliance outlined
measures the company has taken to improve its handling of safety
problems and said NHTSA raised legitimate concerns. Fiat Chrysler
had unsuccessfully sought to have the hearing canceled.
The penalties come days after regulators separately started
probing Fiat Chrysler's handling of recalled vehicles with possible
cybersecurity flaws, after hackers commandeered controls of a
moving Jeep. Those vehicles aren't part of the settlement.
The fines top the $70 million the government assessed against
Honda Motor Co. a few months ago for lapses in reporting possible
safety problems, as well as a $35 million fine paid by General
Motors Co. in 2014 for not alerting regulators in a timely way to a
faulty ignition switch now linked to over 120 deaths.
Car makers and auto-safety regulators have faced persistent
criticism on Capitol Hill and elsewhere for problems handling
safety defects. GM and Takata Corp. of Japan face Justice
Department probes for deadly flaws with ignition switches and
rupturing air bags, respectively. The companies have said they are
cooperating with the probes.
Regulators have become more aggressive after facing criticism
for failing to spot safety problems. NHTSA Administrator Mark
Rosekind, who took over in December, has decried what he views as
an auto industry that reacts to defects instead of taking a
proactive approach.
"Fiat Chrysler's pattern of poor performance put millions of its
customers, and the driving public, at risk," he said Sunday.
Mr. Rosekind has faced resistance on requests for an increased
budget from lawmakers who want auto-safety regulators to first
undergo reforms, after a Transportation Department inspector
general's report found problems with how the agency polices car
companies.
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