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From Products Liability Law Daily, July 27, 2015

Fiat Chrysler agrees to pay $105 million penalty and buy back cars to settle MVSA violation allegations

By Pamela C. Maloney, J.D.

Acknowledging that it violated the Motor Vehicle Safety Act’s requirements to repair vehicles with safety defects, Fiat Chrysler Automobiles (FCA) agreed to pay a civil penalty of $105 million, which represents the largest penalty ever imposed by the National Highway Traffic Safety Administration (NHTSA). FCA also agreed to buy back some defective vehicles and to submit to rigorous federal oversight. Under the terms of the agreement, within 60 days of the Consent Order’s execution, FCA must make a lump-sum payment of $70 million (which equals the record $70 million civil penalty NHTSA imposed on Honda in January [see Products Liability Law Daily’s January 8, 2015 analysis]. In addition, FCA must spend at least $20 million on meeting the performance requirements included in the Consent Order. Finally, another $15 million could come due if an independent monitor, which is required under the terms of the Consent Order, discovers additional violations of the Safety Act or the Consent Order (In re FCA US LLC, July 24, 2015).

Background. In announcing the consent order, U.S. Transportation Secretary Anthony Foxx explained that the enforcement action came after a July 2 public hearing at which NHTSA officials outlined problems with Fiat Chrysler’s execution of 23 vehicle safety recalls covering more than 11 million defective vehicles [see Products Liability Law Daily’s July 2, 2015 analysis]. The Consent Order resolves an Audit Inquiry opened by NHTSA’s Office of Defect Investigations in October 2014 to evaluate the timeliness and efficiency of two Chrysler recalls, including the manufacturer’s oversight and management of its parts division Mopar [see Products Liability Law Daily’s October 28, 2014 analysis).

Allegations against FCA. In addition to alleging that FCA failed to remedy defective vehicles in a timely manner, NHTSA’s staff charged the automaker with issuing untimely owner notifications and with failing to provide copies of owner and dealer notifications to NHTSA in a timely manner. According to the allegations listed in the consent order, FCA also failed to provide timely, accurate, and complete notice to NHTSA about vehicle defects and recalls as required by federal law. Fiat Chrysler admitted to violating the Safety Act in all three of these areas.

Repurchase agreement. In addition to the civil penalty payment, FCA also agreed to institute a repurchase program for vehicles covered by recalls 13V038, 13V527, and 13V529. Specifically, FCA will take the following actions to get defective vehicles off the roads or repaired: (1) eligible owners of more than half a million vehicles with defective suspension parts that could cause the vehicle to lose control will have the opportunity to sell their vehicles back to Fiat Chrysler; and (2) eligible owners of more than a million Jeeps that are prone to deadly fires will have the chance either to trade their vehicles at an amount above market value or the owners can choose to receive a financial incentive to get their vehicle remedied. FCA will notify vehicle owners eligible for buybacks and other financial incentives that these new options are available.

Independent monitor. FCA also agreed to unprecedented oversight for the next three years, which includes hiring an independent monitor approved by NHTSA to assess, track and report the company’s recall performance. The Consent Order also sets out details regarding payment of the deferred amount of the penalty in the event the independent monitor or NHTSA determine that FCA has violated the Safety Act or the terms of the Consent Order.

Additional performance obligations. Finally, FCA agreed to execute a number of performance obligations designed to mitigate the risks of harm and to promote safety by, among other things, improving the company’s processes and procedures for complying with reporting requirements; making safety-related defect determinations, reporting defects to NHTSA, notifying dealers, owners, and purchasers of defects and non-compliances, and improving the pace and effectiveness of its recall campaigns. FCA must develop a Best Practices plan that contains written procedures on these performance allegations and must allocate worktime for employee training on these best practices.

Companies: FCA US LLC

MainStory: TopStory MotorVehiclesNews

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