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Bakkies buy-back to cost FCA 'billions'

2015-07-28 09:15

HUGE FINE FOR FCA: Fiat Chrysler Automobiles CEO Sergio Marchionne addresses workers in Detroit, Michigan. FCA will have to pay a record R1.1bn for lapses in recalls of its vehicles. Image: AP / Paul Sancya

DETROIT, Michigan - Fiat Chrysler Automobiles could pay billions to buy back defective bakkies as part of a settlement with US safety regulators but has an option to recover costs by re-selling the repaired vehicles.

The US National Highway Traffic Safety Administration (NHTSA) slapped the automaker with a record fine - the equivalent of R1.1-billion and the most yet levied by US regulators on an automaker - for lapses in safety recalls involving millions of vehicles.

DEFECTIVE TRUCKS

FCA said on Monday (July 27) that about 193 000 Ram bakkies previously recalled for suspension and steering problems had not been repaired and were therefore eligible for the buy-back deal negotiated with the NHTSA.

That could put FCA on the hook for nearly R37-billion, if the average buy-back price is the equivalent of  R188 000 per vehicle. The net cost could be much lower. A company representative noted on Monday (July 27) that the NHTSA agreement gave FCA the option to repair and re-sell vehicles bought back from owners.

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An FCA statement said the net cost of the buy-back programme would "not be material to its financial position, liquidity or results of operations".

FCA shares were down 4.8% at R181.53 on Monday (July 27) in New York trading.

SPOTTY RECORD ON RECALL REPAIRS

The fine and other provisions of the consent order were intended to improve "the entire industry's performance" on safety, said NHTSA boss Mark Rosekind in a conference call with reporters.

Rosekind was joined by US transportation secretary Anthony Foxx, who flagged his own effort to make NHTSA a "much more muscular agency" in dealing with the auto industry's spotty record on recall repairs.

In addition to the R1.1-billion fine and vehicle buy-back provision, FCA agreed to provide financial incentives to more than a million Jeep owners to bring their recalled vehicle in for repairs.

The penalties address lapses spanning nearly two dozen recalls affecting more than 11-million vehicles, among them older Jeeps whose rear fuel tanks have been linked to a number of fatal fires.

In the consent order, NHTSA said FCA had failed to repair recalled vehicles within a reasonable time and had failed to notify owners and the agency in a timely manner. The automaker also agreed to NHTSA's appointment of an independent monitor to provide additional oversight of FCA's recall activities.

In the past week the automaker has recalled more than three-million US vehicles, including 1.4-million to install software to prevent hackers from gaining remote control of the vehicles. The NHTSA said on July 24 2015 it would investigate whether FCA's solution to upgrade software was enough to protect vehicle owners from hackers, although FCA said in its recall announcement that it was unaware of any injuries.

Over the weekend the NHTSA also released details of two new FCA recalls - more than 1.7-million vehicles, among them Ram bakkies from model years 2012-14 for inadvertent deployment of crash bags.


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Read more on:    michigan  |  usa  |  trucks  |  bakkies  |  recall

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