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DETROIT — Fiat Chrysler must offer to buy back from customers hundreds of thousands of Ram pickup trucks and other vehicles — the biggest such action in U.S. history — as part of a costly deal with safety regulators to settle legal problems in about two dozen recalls.
The Italian-American automaker also faces a record civil fine of up to $105 million. In addition, owners of more than a million older Jeeps with vulnerable rear-mounted gas tanks will be able to trade them in or be paid by Chrysler to have the vehicles repaired.
The settlement is the latest sign that auto safety regulators are taking a more aggressive approach toward companies that fail to disclose defects or don't properly conduct a recall.
The Ram pickups, which are the company's top-selling vehicle, have defective steering parts that can cause drivers to lose control. Some previous repairs have been unsuccessful, so Fiat Chrysler agreed to the buy-back, according to the National Highway Traffic Safety Administration (NHTSA). Owners also have the option of getting them repaired, the agency said in documents released Sunday.
You can read the entire consent decree and find more background information on the government's safercar.gov website.
It was not immediately clear how many pickups will be subject to the buy-back offer. The automaker sold more than 500,000 vehicles that would theoretically qualify, but only about 193,000 have not yet been repaired, according to quarterly reports FCA files with NHTSA.
The older Jeeps have fuel tanks located behind the rear axle, with little to shield them in a rear crash. They can rupture and spill gasoline, causing a fire. At least 75 people have died in crash-related fires, although Fiat Chrysler maintains they are as safe as comparable vehicles from the same era.
"Today's action holds Fiat Chrysler accountable for its past failures, pushes them to get unsafe vehicles repaired or off the roads and takes concrete steps to keep Americans safer going forward."
Both the Jeep and Ram measures are part of a larger settlement between the government and the automaker over allegations of misconduct in 23 recalls covering more than 11 million vehicles. Besides the civil penalty, which was reported Saturday by The Associated Press, Fiat Chrysler agreed to an independent recall monitor and strict federal oversight. It's another step in NHTSA's effort to right itself after being criticized for lapses in some highly-publicized safety recalls.
"Today's action holds Fiat Chrysler accountable for its past failures, pushes them to get unsafe vehicles repaired or off the roads and takes concrete steps to keep Americans safer going forward," Transportation Secretary Anthony Foxx said in the statement.
In a separate statement, Fiat Chrysler said it accepted the consequences of the agreement "with renewed resolve to improve our handling of recalls and re-establish the trust our customers place in us."
NHTSA has been involved in vehicle buy-backs in the past, but never one of this size. A buy-back usually happens when a problem is so serious that it can't be fixed and the vehicles need to be removed from service.
Under the agreement, Fiat Chrysler has to buy back the Ram trucks for the purchase price, minus depreciation.
Specific details of the buy-back program have not yet been released but are expected to be revealed in the coming weeks. Owners are expected to receive some sort of premium should they choose to sell the vehicles back to Fiat Chrysler, rather than having them repaired.
Vehicles eligible for buy-back offer
Models included in the buy-back offer are certain Ram 1500s from 2009 to 2012; the Ram 1500 Mega Cab 4 by 4 from 2008; and the Ram 2500 4 by 4, 3500 4 by 4, 4500 4 by 4, and 5500 4 by 4, all from 2008 through 2012. Also part of the offer are 2009 Chrysler Aspen and Dodge Durango SUVs and the Dodge Dakota pickup from 2009 through 2011.
The cash outlay could be substantial. 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 60,000 miles on it and is in "good" condition. At that rate, if Chrysler had to buy back even a quarter of the trucks at issue, it could spend $2.5 billion.
Fiat Chrysler said more than 60 percent of the trucks already have been fixed, and the company is allowed to repair and resell the trucks it buys back.
“If we repurchase them we will resell them after performing the necessary service,” spokesman Eric Mayne told TheDetroitBureau.com.
The complex agreement was hammered out in the wake of what NHTSA Administrator Mark Rosekind called an “unprecedented” hearing early this month to examine how Fiat Chrysler handled 23 separate recalls. It was determined that the maker didn’t meet federal guidelines on a number of those, including failing to notify customers of recalls, delaying making and distributing repair parts and in some cases failing to come up with repairs that fix the problems. Some of the recalls date to 2011.
Even when it did issue recall orders, as required, NHTSA raised concerns about the low rate of consumer follow-up. Only 21 percent of owners impacted by the 2013 recall involving Jeeps that can catch fire in rear-end crashes have so far had their vehicles repaired.
Under the consent order, the automaker will take several steps to either improve the repair rate or take off the road Jeep Grand Cherokees sold during the 1993 to 1998 model-years. SUVs that have not already been repaired will be eligible to receive a $1,000 incentive “over the fair market value of the vehicle,” it states.
That money will be available to use for the purchase of either a new Fiat Chrysler vehicle, or for parts or service. In other words, the agreement with NHTSA effectively requires those owners to buy something new if they expect to get the maximum payout.
The total payout could strain the parent company, Fiat Chrysler Automobiles NV. The company posted a first-quarter net profit of $101 million and had more than $20 billion in cash and securities on March 31.
The fine that FCA must absorb ties the record of $70 million assessed against Honda Motor Co. for lapses in recalls of air bags made by Takata Corp.
But Fiat Chrysler also must spend at least $20 million to meet performance requirements detailed in the agreement. Another $15 million could come due if the recall monitor finds any further violations.
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