On top of numerous recalls involving 11 million vehicles this year alone, Fiat-Chrysler Automobiles (FCA) has been found to be in violation of federal regulations, requiring automakers to report on safety issues with the vehicles they produce to the National Highway Traffic Safety Administration (NHTSA). As a result, the company will wind up paying a fine in the amount of $70 million to the federal government.
That fine comes on top of an earlier penalty of $105 million that was imposed on FCA for its failure to report defects in vehicles that were subject to recall. On December 10, 2015, Transportation Secretary Anthony Foxx issued the following statement to the media:
Accurate, early-warning reporting is a legal requirement, and it’s also part of a manufacturer’s obligation to protect the safety of the traveling public. We need FCA and other automakers to move toward a stronger, more proactive safety culture, and when they fall short, we will continue to exercise our enforcement authority to set them on the right path.
These hefty fines are indicative of the Obama Administration’s commitment to more rigorous enforcement of federal auto safety regulations, according to Rosekind. He added, “NHTSA’s enforcement actions in recent months have been designed not only to penalize previous actions, but to increase safety going forward.”
FCA responded that company management “takes this issue extremely seriously, and will continue to cooperate with NHTSA to resolve this matter and ensure these issues do not re-occur.” FCA’s total liability presently stands at $175 million, but the government may forgive $35 million of that amount provided the company complies with its obligations as outlined in the consent decree. According to NHTSA head Mark Rosekind, FCA “has expressed a desire to use this situation as a stepping stone to a stronger, more proactive safety posture.” He also adds that the agency is prepared to work with the auto industry in order to improve vehicle safety.
Fiat-Chrysler is not the only automaker that has been targeted by the NHTSA. Over the past two years, makes and models from several car manufacturers have been found to contain defective parts that compromise vehicle safety and even violate environmental standards. Earlier this year, vehicles from over a dozen companies were discovered to have airbags with a design flaw that caused the metal inflator housing to shatter, resulting in serious – and sometimes fatal – injuries to an occupant’s face and upper body. More recently, German automaker Volkswagen was found to have installed illegal software in vehicle computers designed to cheat on emissions tests. This year alone, FCA wound up having to recall nearly 900 thousand SUVs for braking system defects as well as airbags. Another 7,800 were recalled over the vehicles’ vulnerability to hacking. It was possible for someone on World Wide Web to literally hack into the vehicle computer system and shut the engine down. Also subject to recall were 1.7 million Ram trucks for defects in the steering mechanism.
All of this has had a negative effect on consumer confidence in the auto industry and customer satisfaction. According to a story appearing on NBC News this past summer, consumer satisfaction with new car purchases has been in a three-year decline. Currently, it is the lowest it has been in over a decade. 2014 was a record year for vehicle recalls: almost 64 million cars were affected. Between that and the average cost of a new vehicle (currently around $33,500), it is small wonder that auto buyers are disenchanted.
Right now, three FCA makes – Chrysler, Jeep and Fiat – are at the bottom of consumer satisfaction ratings according to the American Customer Satisfaction Index (ACSI) Automobile Report.
Despite its problems, FCA is determined to polish its tarnished image. Last summer, in the wake of being slapped with the initial $70 million fine, a company spokesperson said FCA was moving forward “with renewed resolve to improve our handling of recalls and re-establish the trust our customers place in us.”
Unfortunately, when it comes to rebuilding customer trust and satisfaction, FCA is off to an inauspicious start. Time will tell whether or not FCA, Volkswagen and other automakers will be able to regain that trust.