Car-recall fine $105M, a record hit

DETROIT -- In their most aggressive crackdown yet on auto safety, federal regulators levied a record penalty of $105 million against Fiat Chrysler Automobiles for failing to complete 23 safety recalls covering more than 11 million vehicles.

The civil penalty is the largest ever imposed by the National Highway Traffic Safety Administration on an automaker for recall violations, surpassing the $70 million fine imposed last year on Honda for faulty air bags.

It also represents an escalation of the agency's efforts to investigate and punish automakers that do not adequately recall and fix defective models.

"This civil penalty puts manufacturers on notice that the department will act when they do not take their obligations to repair safety defects seriously," said the U.S. Secretary of Transportation Anthony Foxx.

In a consent agreement released Sunday, Fiat Chrysler admitted to violating federal rules requiring timely recalls and notifications to vehicle owners, dealers and regulators.

The steep punishment is a humbling setback for Fiat Chrysler, one of the fastest-growing carmakers in the American market. The sweeping consent order also requires the company to buy back some recalled vehicles and submit to outside oversight of its safety practices.

In a statement, the automaker acknowledged the safety violations and agreed to the record penalties.

"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," according to the company.

The agency said the civil penalty was broken down into a cash penalty of $70 million, and an agreement that Fiat Chrysler would spend at least $20 million on meeting performance requirements detailed in the consent order. An additional penalty of $15 million will be assessed on the company if an independent monitor, who has yet to be identified, discovers further violations of safety laws or the consent order.

Under the order, Fiat Chrysler is required to buy back as many as 500,000 vehicles with defective suspensions that can cause drivers to lose control. Also, owners of more than 1 million Jeeps with rear-mounted gas tanks that are prone to fires will be given an opportunity to trade in their vehicles at rates above market value.

The ultimate cost of the settlement depends on how many pickup and SUV owners join in. According to Kelly Blue Book, a 2010 Dodge Ram 1500 -- one of the smaller, less-expensive trucks involved in the recalls -- could fetch $20,000 in a dealer trade-in, assuming the truck has less than 60,000 miles on it and is in "good" condition. At that rate, Fiat Chrysler could spend $956 million to buy back one-quarter of the vehicles at issue. The company is allowed to repair and resell the trucks it buys back.

Mark R. Rosekind, who took over as the administrator of the National Highway Traffic Safety Administration in December, said the heavy fine was a direct result of Fiat Chrysler's prolonged failures to fix recalled models.

"Fiat Chrysler's pattern of poor performance put millions of its customers, and the driving public, at risk," he said.

The record penalty represents the latest sign that regulators have become tougher cops on the beat, U.S. officials said.

"One of my priorities was to make NHTSA a more muscular agency," Foxx said during a conference call with reporters Monday. "Merely identifying defects is not enough. Manufacturers who don't fix their vehicles will pay a price."

The National Highway Traffic Safety Administration pushed for the vehicle buy-backs when there was doubt that the recall repairs proposed by Fiat Chrysler might not fix the safety defect, the agency's head, Mark Rosekind, said Monday. Consumers who had doubts about the safety of their vehicles can get rid of them.

"There was no effective remedy available," Rosekind said.

National Highway Traffic Safety Administration has stepped up its enforcement efforts after criticism that it acted too slowly on reports about failed General Motors Co. ignition switches that caused air bags to lose power. The agency faced similar complaints over its response to reports that air bags supplied by Takata Corp. could explode, sending shrapnel toward front-seat occupants.

The Transportation Department won't be making a referral to the Justice Department for a criminal investigation based on the fines being paid and Fiat Chrysler's agreement to improve its recall processes, Foxx said.

The agreement requires Fiat Chrysler to notify vehicle owners eligible for buy-backs and other financial incentives about their options. The buy-backs are being offered on various model-year 2003 to 2012 Rams, plus some Aspen, Dakota, and Durango vehicles.

Fiat Chrysler said it agreed to address certain industry objectives, including identifying best practices for executing recalls and researching obstacles that discourage consumers from responding to recall notices.

Consumers wishing to determine whether their vehicles are covered by one of the recalls under investigation can visit the National Highway Traffic Safety Administration's website, which lists makes and models for the 23 recalls. Vehicle owners can also use the agency's recall website safercar.gov.

Information for this article was contributed by Bill Vlasic of The New York Times, Jeff Plungis and Alan Bjerga of Bloomberg News and Tom Krisher and Dee-Ann Durbin of The Associated Press.

A Section on 07/28/2015

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