Fiat Chrysler could pay $700M for poor handling of recalls. What does it mean for customers?

Fiat Chrysler could face severe penalties for being slow to launch recalls and communicate with government officials and customers about vehicle problems, including steep fines and a period of close regulatory oversight. 

Last week, representatives from the Fiat Chrysler Automobiles (FCA) were summoned to Washington, D.C., to explain the way that they'd handled recalls over the past couple of years. According to Automotive News — and to official hearing testimonies — things didn't go so well for FCA.

WHAT WENT DOWN

In a nutshell, NHTSA wanted to know whether FCA followed U.S. regulations with regard to 23 recent recalls. All told, those recalls have affected over 11 million vehicles from coast to coast since 2013.

As you can see from NHTSA's handy overview, the agency was often troubled by the slow speed with which FCA launched recalls and the company's poor track record of communicating with NHTSA and vehicle owners. A common complaint was with "Timeliness of Remedy; Adequacy of Recall Administration/Execution".

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Is FCA the only automaker that bends NHTSA's rules? During the hearing, Scott Yon with NHTSA's Office of Defects Investigation noted that FCA seems to suffer from a unique set of internal problems. For example, he noted that FCA has trouble getting repair/replacement parts for recalled vehicles, and that dealers, in turn, have trouble getting those parts from FCA.

Mr. Yon also cast doubt on the effectiveness of some FCA fixes—and to be fair, he's not alone. Even the courts have questioned FCA's approach to repairing vehicles.

In response, FCA's Scott Kunselman said that, yes, the automaker could've done better in those 23 instances. However, he also noted that in the fall of 2014, the company began taking a long, hard look at itself and the way it handles recalls. He assured NHTSA that FCA was working to revamp its internal processes to meet best practices in the industry.

Interestingly, Kunselman didn't respond directly to any of NHTSA's specific complaints. Yet Chrysler has responded to the Special Order with a summary of its actions, outreach plans, and direct responses to them.

NHTSA's Mark Rosekind said that it was very likely that NHTSA would impose some kind of penalties against FCA. What sort of penalties might those be?

1. Fines: FCA could be ordered to cough up more than $700 million for failing to follow federal recall and safety regulations.

2. Oversight: FCA could be put on a short leash, with close government oversight for a period of years, until NHTSA is sure that FCA is operating by the books.

3. Buybacks: FCA could be ordered to buy back or replace a number of recalled Chrysler, Dodge, Jeep, and/or Mitsubishi vehicles from as far back as the 1993 model-year.

OUR TAKE & WHAT IT MEANS FOR YOU

We are not dealers or fleet-managers. We are car-owning individuals who, from time to time, have to take our vehicles in for repairs — sometimes, because they've been recalled.

Our experiences are varied on that front. All of us have great stories to tell, and horror stories, too — many of which depend on how well or how poorly we were treated by our dealership.

On that point alone, surveys are telling. J.D. Power's most recent Sales Satisfaction Index ranked four of FCA's five brands below the industry average. A similar study from Pied Piper published today isn't much better, with three of the five still in the bottom rungs.

So, to us, there are three major things to keep in mind:

1. FCA has had serious troubles with customer service. That in itself doesn't mean that FCA is guilty of wrongdoing. However, it does suggest that FCA needs to do more to create a culture in which customers and their concerns come first. If it doesn't, those attitudes can infuse other aspects of corporate action — or inaction.

2. FCA isn't alone. Just a year ago, General Motors was in the hot seatover its own slow response to recalls. Worse, NHTSA had to shoulder some of the blame because it failed to spot problems with GM's flawed ignition switches. By all accounts, GM has now made huge strides in improving its safety monitoring systems. There's no reason to think that FCA can't do the same.

3. FCA probably won't be buying your car, but you could pay more for your next one. It seems unlikely to most of us that NHTSA would require FCA to buy back recalled vehicles. Though FCA may have carried out recalls slower than NHTSA would've liked, in most cases, the recalls have already been conducted or are well underway. However, fines are a likelihood -- and we wouldn't be surprised if FCA passed the cost of those fines on to consumers.

NHTSA's investigation of FCA wraps up on July 17. We'll know more about the agency's actions then.