BUSINESS

Top US auto safety regulator says Fiat Chrysler will face sanctions for conduct in recalls

07/02/2015 12:50 EDT | Updated 07/02/2016 05:59 EDT
WASHINGTON - The chief U.S. auto safety regulator says Fiat Chrysler will face sanctions for violating safety laws in multiple recalls.

National Highway Traffic Safety Administration chief Mark Rosekind says the agency will act before Labor Day and that the automaker will face enforcement action.

But Rosekind, speaking to reporters after a public hearing Thursday on Fiat Chrysler's handling of 23 recalls, wouldn't say more until a comment period closes on July 17.

"There's a pattern that's been going on for some time," Rosekind said, referring to the automaker's conduct. "It's the law; this is what you're supposed to follow."

Rosekind said a number of options for agency action are "on the table," including fines against the company and requiring it to buy back vehicles subject to recall.

Depending on how NHTSA rules, the company could face millions in fines and could be ordered to repurchase faulty vehicles, accounting for depreciation. The agency has authority to fine companies as much as $35 million per infraction, and could find several infractions in one recall. But it's unlikely the maximum fine would be assessed on all counts.

Rosekind spoke after NHTSA safety officials at the hearing painted an alarming picture of an automaker that repeatedly failed to provide correct information to the government, refused to carry out requested tests and botched recall repairs in a way that put consumers at risk.

"The evidence seems very straightforward," Rosekind said.

Responding to the testimony of the regulators and victims of safety defects, Fiat Chrysler safety chief Scott Kunselman didn't dispute the agency's allegations. He acknowledged that the automaker failed to execute the recalls properly. Fiat Chrysler has reorganized its safety operations so that he now reports directly to CEO Sergio Marchionne, Kunselman said.

"We have learned from our mistakes and missteps," he said.

Jennifer Timian, acting director of NHTSA's defect investigation office, accused the company of failing to provide timely and accurate recall data to the agency, and said customers also have problems getting accurate data.

Problems with the company, known as FCA US LLC, are widespread and involve slow response to vehicle defects that have caused deaths and injuries, Timian said.

The agency held the rare hearing to listen to evidence that Fiat Chrysler misbehaved on 23 recalls involving more than 11 million vehicles. NHTSA alleges that the company didn't notify car owners quickly enough, failed to make replacement parts or repairs fast enough, and didn't file paperwork on time in numerous instances.

The recalls involved problems as serious as rear-mounted gas tanks that can leak and cause fires in a crash, air bags that can explode with too much force and spew shrapnel, and ignition switches that can abruptly shut off, causing engines to stall. In one recall, a recommended fix didn't work.

In some cases, the agency has "tentatively concluded" that Fiat Chrysler violated the law. It will take written testimony for another 10 days and issue a ruling after that.

In one case, Fiat Chrysler delayed distribution of parts to fix a nut that can come loose from Ram truck drive shafts, said Scott Yon, chief of vehicle integrity for NHTSA. If the nuts come loose, the shaft can fall off the truck and the wheels can lock up. Owners were notified that parts were available in the fall of 2013, but the agency kept getting numerous complaints, he said.

"Although Chrysler reported that it had completed sending notices to owners in November of 2013 telling them parts were available and repairs could be completed, NHTSA continued to receive owner complaints that parts could not be found," Yon said.

Fiat Chrysler reported three crashes and two injuries in the eight months after the recalls began. One owner complained in July of 2014 — nearly seven months after the company said parts were available — of being told by a dealer that there were no parts. Company records confirmed that parts were often backordered or restricted so dealers could repair only one vehicle per week, Yon said.

Fiat Chrysler already has admitted that it missed legal deadlines to notify customers in five recalls. Automakers must tell customers within 60 days after notifying the government about a recall. Four of the five misses were four days or less, but one was 12 days late, the company has said.

Witnesses testified about the recall of 1.56 million older Jeeps for rear-mounted gas tanks that are vulnerable in rear crashes. At least 75 people have died in post-crash fires involving the Jeeps, which include the 2003-2008 Libertys and 1993-1998 Grand Cherokees. The agency said Thursday that more than two years after the June, 2013 recall, Fiat Chrysler has repaired only 6 per cent of the Grand Cherokees and 32 per cent of Libertys.

Chrysler maintains the Jeeps are as safe as comparable SUVs built during the same years. It also says it has worked hard to reach owners of recalled vehicles.

In the Jeep case, it has tried 4.5 million times to reach owners, a spokesman said. Some of the Jeeps are 22 years old, and it's difficult to find owners through state registration databases because addresses may not exist, the company said.

The recall fix is installing a trailer hitch to protect the tanks in low-speed crashes.