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Feds to impose $105M fine on Fiat Chrysler

David Shepardson
Detroit News Washington Bureau

Washington — Fiat Chrysler Automobiles NV is expected to be slapped with a record setting $105 million fine by federal safety regulators in the government’s investigation into nearly two dozen recall campaigns covering 11 million vehicles, a person briefed on the deal said late Saturday.

The National Highway Traffic Safety Administration is expected to announce the fine as part of a settlement Monday with the automaker that will include an independent monitor to oversee its safety actions. Under the terms of the settlement, Fiat Chrysler will be able to recoup part of the fine if it meets certain conditions. It’s not clear how much or for what specific conduct the fines cover.

Fiat Chrysler declined to comment on the settlement late Saturday, but CEO Sergio Marchionne acknowledged recently that settlements talks have been ongoing since a July 3 public hearing. Transportation Secretary Anthony Foxx on Friday wouldn’t directly answer if a deal was coming in response to a Detroit News question, but confirmed that settlements talks were ongoing.

Still the fines are a fraction of the $700 million or more Fiat Chrysler could have faced. The auto safety agency could have fined Fiat Chrysler $35 million in each of 23 recalls under investigation if the agency had determined the failed to meet legal requirements in each of the campaigns.

Under the expected settlement, the Italian-American automaker has agreed to repurchase some vehicles, but the details of the program aren’t clear.

The Wall Street Journal first reported details of the settlement Saturday evening, including that Fiat Chrysler will offer cash to some Jeep owners to get recall repairs made or extra money if they trade a vehicle in.

This is the latest sign of NHTSA's get-tough attitude with automakers. The agency came under withering criticism from the Transportation Department's Office of Inspector General in a recent audit for failing to hold automakers accountable and properly investigate safety issues.

Fiat Chrysler has been rapidly recalling vehicles in recent weeks. On Friday, it agreed to recall 1.4 million vehicles for hacking concerns — a callback that came under government pressure. On Saturday, it agreed to recall 2.2 million trucks in two separate recalls for inadvertent airbag deployments. NHTSA said it is opening an investigation into the hacking recall to ensure the fix works and that all vehicles are covered.

NHTSA has also opened a number of recent investigations into Fiat Chrysler vehicles. In June, NHTSA opened an investigation into 630,000 Jeep Wrangler SUVs for an electrical problem that may cause air bags to not work properly. It also launched a probe into 121,000 2013 Dodge Darts after it received 18 complaints that the brake pedal can suddenly become hard to depress and that braking distance unexpectedly increased and a separate investigation into 20,000 model-year 2014 Jeep Grand Cherokees for problems with automatic braking systems.

And it’s reviewing whether Fiat Chrysler's recall fix of nearly 900,000 SUVs worldwide for sun visor fires were enough after reports of eight incidents in repaired vehicles.

In June, NHTSA chief Mark Rosekind said the agency planned to penalize Fiat Chrysler, after it found sweeping problems with its recalls — and the agency accused the automaker of misleading the auto safety agency. He said he planned to take action before the end of July. He said the agency could demand vehicle buybacks as well.

At an unprecedented hearing, NHTSA detailed widespread problems in Fiat Chrysler's handling of 23 recalls covering more than 11 million vehicles since 2013. The agency said Fiat Chrysler repeatedly violated laws governing auto safety defects and often kept NHTSA “in the dark.” It said those problems hindered NHTSA from properly doing its job and potentially put car owners at risk.

The agency says Fiat Chrysler failed to properly notify car owners and NHTSA of recalls in a timely fashion, and did not ensure there were adequate parts. It said Fiat Chrysler initiated recall fixes that did not work. In one case the automaker suspended a recall campaign and asked dealers to return parts for quality verification without notifying NHTSA. Fiat Chrysler owners have waited 18 months for replacement parts to get some recall repairs completed.

Scott Kunselman, senior vice president of vehicle safety and regulatory affairs at Fiat Chrysler's U.S. unit, didn't dispute the allegations during the hearing. He admitted the company has “fallen short” in handling recalls and acknowledged the agency's “legitimate concerns.” He instead focused on the company's efforts to reform and improve how it addresses safety issues.

In a Detroit News interview in June, Kunselman denied the company had intentionally misled the agency. “The plan is to move forward,” he said, noting the company has restructured its safety efforts. Kunselman acknowledged “some of the things we've done were sloppy. We absolutely had no mis-intent.”

The entire auto industry is watching the Fiat Chrysler NHTSA fight as it girds for a new level of scrutiny by federal regulators.

NHTSA and Fiat Chrysler began to clash more than two years ago, when the agency demanded the recall of 2.7 million Jeeps linked to more than 60 deaths because of gas tank fires that have occurred when the Jeeps are hit from behind.

After secret talks between the company’s CEO and then-Transportation Secretary Ray LaHood, NHTSA abandoned the recall request and the automaker agreed to a limited recall of 1.56 million Jeep SUVs to install a protective trailer hitch assembly. Over the last year, the agency has questioned a growing number of Fiat Chrysler actions, including its handling of vehicles with potentially defective Takata airbags.

The vehicle buyback program as part of the settlement is not expected to include the Jeep SUVs recalled for rear gas tank fires. Fiat Chrysler has insisted that the vehicles are safe and perform like their peers — and NHTSA in May said it was not reopening its probe of the vehicles.

The settlement is similar to the three-year consent order reached with General Motors Co. last year over its ignition switch defect that is now tied to nearly 125 deaths and more than 265 injuries.

In settlement talks last year, NHTSA initially sought a $70 million fine by GM and an independent monitor, but agreed to settle for just $35 million — then a record fine — and no independent monitor, a person involved in the talks told The Detroit News. Earlier this year, NHTSA exercised its right to extend the agreement through at least May 2016.

NHTSA imposed a $70 million fine on Honda Motor Co. in January for failing to disclose more than 1,700 reports of deaths, injuries and other "early warning" information to NHTSA over more than a decade — then the largest auto safety fine in U.S. history.

The Japanese automaker initially admitted in November it violated two sections of a 2000 federal law that requires automakers to disclose reports to the National Highway Traffic Safety Administration.

Under the consent agreement, Honda must for at least a year submit reports to NHTSA every 60 days updating the agency on its creation and implementation of new written procedures. Honda must submit information on all prior incidents to update NHTSA's early warning database with its missing death-and-injury reports. One year after the agreement is in effect, Honda must submit to an independent third-party audit of its reporting system and submit the results to NHTSA.

DShepardson@detroitnews.com