Fiat Chrysler won’t face criminal referral in recalls

David Shepardson
Detroit News Washington Bureau

Washington — Fiat Chrysler Automobiles NV will not face a criminal investigation after its record $105 million settlement in the government’s review of safety problems in 23 recall campaigns involving more than 11 million vehicles.

Transportation Secretary Anthony Foxx said regulators had not referred Fiat Chrysler to the Justice Department for a criminal investigation, even though the National Highway Traffic Safety Administration accused Fiat Chrysler of misleading the agency on safety issues at a July 2 public hearing.

“We believe that the very strong fines that we are issuing today coupled with the remedial measures ... will allow us to move forward,” Foxx told reporters on a conference call Monday.

Separately, Fiat Chrysler said about 193,000 recalled trucks and SUVs are eligible for a buyback under the settlement — not the 578,000 reported Sunday by NHTSA. That’s because only vehicles that haven’t been repaired are eligible for the buyback, and Fiat Chrysler said it has fixed about 67 percent of them.

At potentially $15,000 or $20,000 per vehicle repurchased — plus a 10 percent premium over the fair market value — buybacks could require Fiat Chrysler to lay out hundreds of millions of dollars, if not more. But under the terms of the agreement with the government, the automaker can resell those vehicles after making repairs, so it is impossible to know what the company’s net costs will be.

Fiat Chrysler said it didn’t think the costs would be “material” to its financial outlook.

Still, the Italian-American automaker’s $105 million settlement tops the company’s $101 million in net first-quarter profits. And it has had hefty recall costs in the past: Last year Fiat Chrysler took a $140 million charge against first-quarter earnings for nearly 870,000 SUVs with brake problems.

Foxx says the settlement sends a strong message to automakers: The government will take aggressive steps to ensure compliance with the law aimed at rehabilitating manufacturers who don’t follow the rules. He declined to say if other automakers are facing investigations. NHTSA has signed similar consent agreements with General Motors Co., Honda Motor Co. and two small heavy-truck manufacturers.

The consent deals have gotten tougher and more extensive since the safety agency first reached a deal with GM in May 2014.

“We are sending an unambiguous signal to industry that if you skirt the laws or you violate the laws or you don’t live up to the responsibility that consumers need and expect, we’re going to penalize you,” Foxx said.

Unlike Fiat Chrysler, GM faces a criminal investigation for its delayed ignition switch recall linked to at least 124 deaths, as does Takata Corp. for faulty air bags linked to at least eight deaths.

Fiat Chrysler will undergo at least three years of oversight by an independent monitor; must hire an independent consultant; and is required to conduct sweeping training and safety reforms. It must hold regular meetings with NHTSA and its monitor to discuss safety issues before they reach the recall stage. Fiat Chrysler must also lead industrywide efforts to boost auto safety.

As part of the consent agreement, Fiat Chrysler had to agree to buy back unrepaired trucks that are part of three recalls of 578,000 trucks and SUVs that can lose control.

Vehicles in the buyback program include the unrepaired 2008-12 Ram trucks for a tie-rod assembly steering problem; 2008-12 Ram 4500 and 5,500 trucks recalled for similar steering problems; and 2009-12 Ram pickups, 2009-11 Dodge Dakotas, 2009 Dodge Durangos and Chrysler Aspen SUVs for a rear axle pinion nut problem that can cause the axle to lock up.

NHTSA has a report of one death and 32 reported crashes related to the steering defects since the recalls were announced.

It’s not clear why some other similar truck recalls are not included in the buyback program, including a similar 2013 recall covering about 700,000 older Ram trucks. NHTSA didn’t immediately offer an explanation on its conference call.

In a recall not covered by the buyback, a driver and his two children reported they “almost died as a result of the powertrain failure” of the 2005 Dodge Ram 1500 in July 2013. The driver was on a highway near Elkhart, Indiana, traveling about 70 miles per hour when the driver heard a loud bang. He said the rear pinion nut came loose, locking up the rear end “and throwing the drive shaft completely off my vehicle with no warning” in heavy traffic.

“I lost immediate control of the vehicle. I fought to regain control of my truck, just missing being rear-ended and broadsided by several vehicles,” the driver said in the complaint.

The agency also didn’t require buyback offers for 1.56 million older Jeep SUVs linked to at least 60 deaths from gas tank fires. Instead, Fiat Chrysler will offer $100 gift cards to owners as encouragement to get protective trailer hitch assemblies installed to protect the gas tank in rear-end collisions — and will offer a $1,000 bonus to owners of 1993-98 Jeep Grand Cherokees owners to trade in their vehicles.

Clarence Ditlow, chair of the Center for Auto Safety, criticized the settlement: “NHTSA handed Fiat Chrysler a gift on Jeeps with defective fuel tanks that explode in rear impacts by not requiring a buyback as it did with Dodge Rams with defective tie rods and axle pinion nuts.”

He said few owners of older Jeep SUVs can afford a new car. He cited a Ford Explorer rollover class-action settlement in which just 148 out of 1 million Ford Explorer owners redeemed $1,000 coupons on new vehicles.

“To suggest Jeeps are being bought back under this settlement is patently false. People will die in these unremedied, recalled Jeeps like Kayla White,” Ditlow said, referring to a pregnant Michigan woman who died in a Jeep fire last year.

Fiat Chrysler stock fell sharply in heavier than normal trading Monday, down 4.9 percent, or 74 cents a share, to $14.41 on the New York Stock Exchange.