WASHINGTON -- Fiat Chrysler Automobiles is expected to face penalties by NHTSA for violating auto safety laws over its handling of some recalls under federal scrutiny.
After a hearing on the company's recall and safety practices today, National Highway Traffic Safety Administration chief Mark Rosekind said he expected the agency to take action against FCA within “days” after the agency's review closes on July 17.
Penalties may include fines and orders that FCA buy back recalled vehicles, or cooperative steps such as consent orders that would require FCA to adopt operating changes or additional federal oversight, Rosekind said.
NHTSA is accusing FCA of violating U.S. laws governing recalls based on how the company administered 23 recalls affecting more than 11 million vehicles since 2013.
FCA came under heavy criticism during a public hearing on the issue today from NHTSA staff, safety advocates and victims whose loved ones have been injured or killed in defective FCA vehicles.
Clear information
After the hearing, Rosekind said he would not prejudge the specific actions that NHTSA might take against Chrysler prior to a review of the public docket.
He also said he could not imagine a scenario in which the agency would fail to take action of some kind.
“The information is so clear. It was so helpful in one day to lay it out for all of us,” Rosekind told reporters after the hearing. “You can look for something absolutely before Labor Day for decisions to be made about what’s going to happen.”
The automaker could face more than $700 million in fines and be required to buy back or replace vehicles if regulators determine it fell short of legal obligations. The recalls cover Jeep, Dodge, Chrysler and Mitsubishi vehicles from model years dating back to 1993.
Rosekind said the agency could also determine whether to forward the case to the U.S. Justice Department for possible criminal action.
NHTSA officials used the roughly three-hour hearing at the Department of Transportation's headquarters to detail and spotlight FCA's safety and recall shortcomings.
"Problems with the information that Fiat Chrysler reports -- or in many cases, fails to report -- to keep [regulators] apprised of its recalls obstructs our ability to carry out our statutory oversight responsibilities," said Jennifer Timian, acting director of defect investigators for NHTSA.
Spotlight on recalls
Scott Yon, chief of the vehicle integrity division at the agency’s Office of Defect Investigations, said FCA’s recall performance “often differs” from competing automakers.
“Fiat Chrysler takes a long time to produce the parts needed to get vehicles fixed," Yong said. "Their dealers have difficulty getting parts for recalls. Their customers have trouble getting recall repairs done. Fiat Chrysler’s recall remedies sometimes fail to remedy the defects they are supposed to fix."
One of the cases under scrutiny is the recall of 1.5 million older-model Jeep Liberty and Grand Cherokee SUVs with fuel tanks located behind the rear axle. The tanks may rupture in a rear-end crash and leak fuel, increasing the risk of a fire. The defect has been linked to at least 75 deaths, according to the closing resume of NHTSA’s investigation into the defect.
Even though the recall began in June 2013, just 320,000 of the Jeeps were repaired as of April 30, 2015, NHTSA said.
The day's most riveting testimony came from Unilever employeeTodd Anderson, whose 17-year-old son, Skyler, was burned to death in a Jeep collision in November 2013, months after Fiat Chrysler agreed to recall the Jeep vehicles.
"There is only one solution: a buy-back program that destroys these vehicles. Destroying these vehicles now is better than destroying lives later," Anderson told the hearing.
The automaker issued a lengthy statement hours before the hearing, underscoring the role that regulators have played in testing the remedy and determining that it provides an incremental safety hitch for vehicles in low-to-moderate-speed collisions. FCA also said NHTSA found the Jeep sport utility vehicles have a safety performance similar to other makes in the most severe crashes.
Days before the hearing, FCA took the unusual step of telling about 65 Grand Cherokee and Dodge Durango owners to stop driving their sport utility vehicles because of an improperly heated suspension component that can break, causing instability and reduced braking power. Another 7,690 vehicles were subject to the recall, including a handful in Canada.
Lack of parts
Regulators said on Thursday that the recall has been plagued by a lack of parts to fix the problem and low completion rates.
Only 6 percent of recalled Grand Cherokees and 32 percent of Liberty SUVs have been repaired, according to one NHTSA witness.
Yon said that FCA’s rate of repairs have fallen below the company’s own expectations. He said the company previously expected to have enough trailer hitches to meet all demand for the Liberty and Grand Cherokee installations by March 2015, and that 80 percent of Liberty and 60 percent of Grand Cherokee SUVs would be fixed by March 2016. However, FCA recently told NHTSA that 6 percent of Grand Cherokees and 32 percent of Liberty SUVs recalled have been repaired.
Another recall under review involves an allegedly inadequate repair plan crafted by the company. The campaign covers 650,000 Dodge Durango and Jeep Grand Cherokee SUVs from the 2011-14 model years called back for fasteners that connect the sun visor to the headliner. The fasteners can pierce a wiring harness, causing a fire.
Yon said NHTSA has received 10 complaints of headliner fires from owners who had the recall repair made in the vehicles, including two complaints per month from February through May of this year.
Deadlines
In other cases, NHTSA says, Chrysler failed to meet legal deadlines for reporting recalls to the agency, and alerting customers.
In an outline of the public hearing published in the Federal Register, NHTSA said that Chrysler admitted it had failed to notify owners within the required 60 days in five recalls covering 1.84 million vehicles.
FCA also “appears” to have missed the 60-day deadline in at least two more recalls affecting about 350,000 vehicles, NHTSA said.
“Fiat Chrysler has repeatedly failed to notify owners of recalls in a timely manner, in some cases weeks or months beyond the deadline to do so,” Timian said. “Problems with the information that Fiat Chrysler reports -- or in many cases, fails to report -- to NHTSA are also widespread.”
In a recall for Takata airbag inflators that may rupture in a crash and spray drivers with metal shards, FCA didn’t notify affected owners for more than five months, NHTSA said. It added that FCA showed drafts of “interim” notices to the agency, but they were never sent to owners.
FCA responds
FCA's top safety official said the company “could have done better” in the 23 recalls.
Scott Kunselman, FCA’s senior vice president of safety and regulatory compliance, says the automaker has “fundamentally reorganized” its vehicle safety and regulatory compliance operations since September 2014.
During the hearing, Kunselman said the company has taken a “critical look” at its past recall performance and reviewed its communications with the NHTSA to improve its handling of safety issues and defect recalls.
For example, Kunselman reports directly to CEO Sergio Marchionne. He said that prior to his appointment, safety and regulatory compliance was contained within the automaker’s product development offices, with a top executive three levels removed from the CEO.
“The agency has raised some legitimate questions about the way FCA US has managed certain safety recalls. We acknowledge and understand those concerns,” Kunselman said in his prepared remarks. “We have learned from our mistakes and missteps and we will continue to revise our processes to meet and exceed the best practices of our industry.”
Kunselman did not directly respond to specific allegations made by NHTSA during the nearly three hour hearing. FCA has 10 business days to file a written response to the hearing.
Frayed relations
The hearing marked a new high in the tension between NHTSA and FCA, which has been building since last year through periodic clashes over the automaker’s responses to the Takata airbag defect and the vulnerability in some Jeep fuel tanks.
While the agency has held such hearings in the past, never before has it probed such a broad pattern of alleged violations across so many recalls in a public forum.
The witness list included:
- Clarence Ditlow, a safety advocate and executive director of the Washington-based Center for Auto Safety.
- Rob Strassburger, vice president of safety and harmonization at the Alliance of Automobile Manufacturers, which represents FCA, Ford, General Motors and nine other automakers.
- Byron Bloch, an auto safety expert who has argued for years that placing fuel tanks behind the rear axle is unsafe.
- Jenelle Embrey, a Virgnia woman who witnessed a Jeep catch fire after a rear end crash in 2012.
FCA is accused of failing to meet several requirements related to recall repairs, communication and timing that amount to violations of U.S. laws governing recalls in the 23 campaigns in question. Each violation carries a potential penalty of up to $35 million.
Changed posture
The hearing reflects a changed posture at NHTSA, which itself has faced heavy criticism for its response to auto safety issues since last year.
Safety advocates say the agency has been too timid in dealing with the auto industry, and an audit report released last week by the Department of Transportation’s Office of the Inspector General lambasted NHTSA staffers for what it called a haphazard approach to screening and analyzing reports of potential safety defects.
NHTSA also faced some heated criticism today. In a presentation given to reporters before the hearing, Bloch, the auto safety expert, said NHTSA has been too slow to recognize the hazard presented by the rear-mounted tanks on some Jeep models.
“From my perspective of about 50 years in the auto safety trenches, I’ve seen that NHTSA has too often been a slowly reactive agency, rather than being pro-active in analyzing vehicle design and performance in real-world accidents,” Bloch said in prepared remarks.
Bloch said the “secret deal” between NHTSA and Chrysler to install trailer hitches on some 1.5 million Jeeps recalled for the defect only protects occupants in low-speed collisions and “makes a mockery of what should be done.”
Under intense pressure from Congress and safety advocates to reform, Rosekind is working to project the agency as a more firm-handed watchdog, ratcheting up the pressure on automakers to repair 100 percent of recalled vehicles, and to do so quickly.
The FCA hearing gave him a platform to underscore his mission.
When the public hearing was announced on May 18, Rosekind said in a statement that “significant questions have been raised as to whether this company is meeting its obligations to protect the drivers from safety defects, and today we are launching a process to ensure that those obligations are met.”
In a June 1 letter responding to NHTSA, FCA detailed several new initiatives to improve its handling of recalls and address the agency’s concerns -- measures that, it said, made the hearing unnecessary. But NHTSA disagreed, and said the hearing would go on.
Culture change
Communication between FCA and NHTSA continued behind closed doors in the weeks leading up today's hearing.
On June 17, Kunselman, FCA global product development boss Mark Chernoby and nine other FCA executives met with eight NHTSA defect investigation and enforcement officials to discuss the “fundamental redesign” of the company’s recall procedures and structure that has taken place since September 2014.
In the meeting, FCA executives told NHTSA staffers of several changes to the company’s safety-related governance processes, improved communications with NHTSA and efforts to “change the culture within the company,” according to a memo outlining the meeting published by NHTSA.
In the one-hour meeting, FCA representatives vowed to be “more aggressive” with replacement part production for recalls. They also outlined several new customer outreach strategies that were to be launched July 1.
The automaker told NHTSA those outreach strategies include an improved smartphone app with recall alert functions, more agents dedicated to answering consumer phone calls, and extensive training at the company’s dealerships to improve recall responses.
Open docket
Today’s hearing was unlike a congressional hearing in that there was no questioning of witnesses. Presentations and written statements will be made and added to a docket that will remain open for 10 days following the hearing. FCA can submit its response to others’ testimony on that docket, and other commenters from the public can supplement their testimony.
The docket will then be reviewed by the agency as it makes its “final determination” about whether FCA violated auto safety laws.
If such violations are found, FCA could face a variety of penalties, including millions of dollars in fines, consent orders that involve additional government oversight or an order forcing FCA to buy back or replace vehicles covered by the recalls.
Reuters and Bloomberg contributed to this report.
