Fiat Chrysler vehicle buyback: Will crackdown keep consumers safe?

The National Highway Traffic Safety Administration ordered that Fiat Chrysler buy back faulty pickup trucks and SUVs from its customers. It's a sign that the agency is stepping up its game in an attempt to crack down on negligent car companies.

Don Ryan/AP/Foto
The Ram logo on a Ram pickup truck at a dealership in Hillsboro, Ore, July 13, 2011. Fiat Chrysler will buy back about 300,000 Ram pickup trucks in the biggest such action in U.S. history as part of a deal with U.S. safety regulators to settle legal problems in about two-dozen recalls, two people briefed on the matter say.

In a rare move, the National Highway Traffic and Safety Administration (NHTSA) required that Fiat Chrysler buy back nearly 200,000 faulty pickup trucks and SUVs from its customers.  

The order, announced Sunday, stems from an earlier recall of about 580,000 pickups and SUVs. The automaker estimates that two-thirds of those vehicles have been repaired, leaving approximately 193,000 eligible for buyback. This is part of the largest penalty the NHTSA has ever imposed on a company. It is also a sign that the NHTSA, which came under fire recently for acting too slowly and failing to protect consumers sufficiently, is stepping up its game in an attempt to crack down on negligent car companies, experts say.

“We finally have someone in charge of the agency who likes to enforce the law,” Joan Claybrook, a longtime Washington-based consumer advocate who headed NHTSA in the 1970s, told Bloomberg Business. “I’m really happy to see it’s being used to protect the public.”

The NHTSA has increased its enforcement efforts after accusations that it did not respond quickly enough to reports last year that the ignition switches in some General Motors vehicles were defective, a flaw eventually linked to over 100 deaths. Similar criticisms were launched over its sluggish reaction to information that air bags supplied by the company Takata Corp to various automakers could explode and send shrapnel shooting towards front seat occupants.

Last year, Toyota Motor Corp. admitted to deceiving the agency and misleading consumers about safety issues in its vehicles, including malfunctions that led to at least five deaths. The company was later slapped with a $1.2 billion criminal penalty from the Justice Department, but the NHTSA still faced its fair share of criticisms coming out of the situation. 

But now the agency is taking a new, harder line, which includes imposing fines and requiring external monitoring of company behavior. In January the agency fined Honda $70 million for failing to comply with laws that protect the public.

Following an investigation into Fiat Chrysler’s implementation of 23 vehicle safety recalls involving over 11 million defective vehicles, the agency acted to impose thorough federal oversight and a $105 million civil penalty, in addition to the requirement to buy back some defective vehicles from owners. Fiat Chrysler is now obligated to hire an independent monitor, approved by the NHTSA, to track and report on its recall performance.  

“This signals that NHTSA is getting serious in its safety watchdog role,” Todd Tracy, an attorney who specializes in product liability cases against automakers, told the Wall Street Journal. “There was a sense that they had kept their head in the sand for far too long. You are going to see far more aggressive tactics from NHTSA.”

Fiat Chrysler has admitted to violations in three separate areas: effective and timely recall remedies, notification to vehicle owners and dealers, and notifications to NHTSA, according to the agency.

“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,” the company said in a statement. “We are intent on rebuilding our relationship with NHTSA and we embrace the role of public safety advocate.”

Some of the vehicles subject to repurchase, which include various 2003 to 2012 Rams, Aspen, Dakota, and Durango vehicles, have defective suspension parts that could cause the driver to lose control of the vehicle.

Owners of the defective vehicles will now be able to trade them in for cash, receiving the original purchase price, minus depreciation, plus 10 percent, according to the agreement. Additionally, holders of around 1 million Jeeps with exposed fuel tanks may be able trade in their vehicles for $1,000 above market value toward another Fiat Chrysler car.

The buyback program will not apply to car owners who already had their vehicles repaired as part of a previous fuel system recall on the Jeeps, or previous recalls on the other vehicles. Fiat is required to notify vehicle owners about their eligibility.

“Consumers are at the heart of this enforcement action,” US Transportation Secretary Anthony Foxx told Bloomberg. “Automakers have a heavy responsibility to make sure their vehicles are safe.”

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