Fiat Chrysler Hit With Record $105 Million Fine Over Botched Recalls 83
An anonymous reader writes: The U.S. National Highway Traffic Safety Administration has levied a record fine against Fiat Chrysler Automobiles to punish them for failing to adequately recall and fix defective cars. (If Fiat sounds familiar, it's the same company that issued a 1.4 million-vehicle recall on Friday over a remote hack.) The NHTSA's $105 million fine is half-again as much as the next biggest fine (given to Honda last year over faulty airbags). Fiat Chrysler "admitted to violating federal rules requiring timely recalls and notifications to vehicle owners, dealers and regulators." The company will be forced to buy back hundreds of thousands of vehicles (at the owners' discretion, of course) that have problems with the suspension that could lead to a loss of control. A million more Jeep owners will be given a chance to trade in their vehicle at a higher rate than market value because of rear-mounted gas tanks that are prone to catching fire.
Made in Italy... (Score:1)
... Wrong product, buy wine!
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... Wrong product, buy wine!
As TFA [bloomberg.com] says:
(emphasis mine).
I was unaware that Ram pickups and Jeeps were "made in Italy"; I was under the impression that those
Chrysler is propping up Fiat currently (Score:3)
Chrysler didn't manage to get Daimler bankrupt, perhaps it can destroy another europan company?
You are aware that Chrysler's profits are actually propping up Fiat [dallasnews.com] at the moment right? Fiat got control of Chrysler in a sweetheart deal. If they screw it up then the fault is on Fiat.
Oh, and Daimler's problems were because Daimler bungled the acquisition and completely disregarded the importance of culture. They never seriously tried to make it a unified company and basically drove Chrysler into the ground. The German management completely screwed up the Chrysler brand. That was a European company f
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They never seriously tried to make it a unified company and basically drove Chrysler into the ground.
Basically. Chrysler was hugely profitable at the time of acquisition. Daimler seemed to suck money and cut jobs out of the Chrysler branch, to fund the Daimler branch. They were stingy with the return of shared technology promised (only a few pieces of last gen technology made it to Chrysler), ruined the culture and scared good workers away. When they were done they sold the husk to Cerberus for pennies on the dollar.
Fiat at least seems to be trying to make good cars. For example they noticed right away wha
Sounds impressive, but is it? (Score:4, Insightful)
Ok, so $105 Million sounds like a lot... and of course it isn't chump change...
But they just issued a recall of 1.4 million vehicles. So $105 Million works out to $75 per vehicle.
I suspect the cost of doing the recall on each vehicle is more than $75.
Frankly, that is less per vehicle than you pay in documentation fees when you buy it (at least here, we pay about $150 for that).
This is a trivial amount of money if the point is to punish a company that has over $22 billion in cash on hand and a profit of $4.1 billion in 2014.
http://www.autonews.com/articl... [autonews.com].
They'll pay it and move on, nothing will change. Fine them a billion dollars and then it would actually be real money.
Re:Sounds impressive, but is it? (Score:5, Informative)
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Personally, I'm not a big fan of fining companies. I'm more a big fan of executing company executives.
Although, I don't mind that shareholders take a hit as they share a part of the blame. The biggest repercussions are felt in other areas such as employees, suppliers, and potentially the customers. Meanwhile, the execs waltz away freely with extra bonuses for having conducted these actions. Rinse and Repeat.
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Or mandate that if a company if given a government fine then the directors/executives of that company are not allowed to receive *any* bonuses or share options for that financial year. Hit the executives where it hurts.
Re:Sounds impressive, but is it? (Score:5, Informative)
You're dividing the fine by the number of recalls, but that makes no sense. The company is already being penalized by the cost of the recalls, so I think you'd need to *add* that to the fine.
The agency said the civil penalty was broken down into a cash penalty of $70 million, and an agreement that Fiat Chrysler would spend at least $20 million on meeting performance requirements detailed in the consent order. An additional penalty of $15 million will be assessed on the company if an independent monitor, who has yet to be announced, discovers further violations of safety laws or the consent order.
Under the order, Fiat Chrysler is required to buy back as many as 500,000 vehicles with defective suspensions that can cause drivers to lose control. Also, owners of more than one million Jeeps with rear-mounted gas tanks that are prone to fires will be given an opportunity to trade in their vehicles at rates above market value.
All in all, this may end up costing them well over a billion dollars, especially if a significant number of people take them up on that buy-back offer.
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That depends on the person's ability to pay. As it is paying for the house either directly or via increased insurance costs may be enough punishment.
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For a non US-citizen can you explain what the buy-back is exactly? Do they have to refund the purchase price or simply pay market rate for the vehicle? The Jeep offer is a trade-in, so presumably you have to then buy another car from the same company to trade it against.
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This article [usatoday.com] gives some details:
Nevertheless, the automaker said it will offer to repurchase the trucks and SUVs that have not yet been fixed for a price equal to the original purchase price minus a reasonable allowance for depreciation plus ten percent.
So, essentially, the buyback amount in this case is roughly the market value plus ten percent. My understanding is that a buyback is not a trade-in, so there's no obligation to purchase the same make of vehicle.
Under typical lemon laws, for example, if the dealer can't fix serious problems with a new vehicle in three visits within the first 60 days, you're eligible for a buyback. In those cases, I believe the consumer is eligible for the full purchase price. In this partic
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Thanks, that was informative. It looks like a fairly good deal for buyers of these lemons.
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I suspect quite a few of them will chose to do just that, everyone I know who's owned a Jeep will rabidly warn you off them.
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What is this them that you talk about? Them, the company with personhood? The ones that need to get fined are the execs who oversaw this. So how are the investors supposed to 'fine' the people managing their company? How is the government going to get the execs as an example to other execs not to do this behavior?
Normally I side with the engineers when management makes stupid decisions, but in this instance, I just don't see how this could possibly be the execs fault. Did they direct the Engineers to design faulty suspension? Did they direct the Engineers to make cars wireless systems vulnerable to hacking? Did they direct engineers to make the gas tank likely to catch on fire?
The execs probably share some blame on the wireless thing because they probably read all about wireless stuff in some stupid management mag
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"I just don't see how this could possibly be the execs fault. Did they direct the Engineers to design faulty suspension? Did they direct the Engineers to make cars wireless systems vulnerable to hacking? Did they direct engineers to make the gas tank likely to catch on fire?"
I dont know, but I can see how it might be the execs fault:
Eng: We should have engine management, steering management, antilock brake management control systems in these airgap'd modules
Exec: Oh, dear, well, but wont that cost more?
Eng
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Did they direct the Engineers to design faulty suspension?
Management is *always* at fault, any time there's a problem. That's why they're called "management"; if they can't properly manage, they should get another job, like janitorial work. Engineers are employees, and just do what they're told, under threat of losing their job. So yes, management did direct the engineers to design a faulty suspension, one way or another, either by demanding that it be cheap, that it be done too quickly, that important a
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If you bothered to read my post, it would have been obvious that I inferred the owners of the effected vehicles.
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Exactly what I came here to post. Fiat-Chrysler reported a net income of about six times this fee for three months alone. This isn't a fine, it's a tiny insignificant operating expense.
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That can't be right - if 105 million USD is 2 weeks net income, then that would suggest that their yearly net income is 2.7 billion USD. Yet their operating profit was 4.1 billion USD [autonews.com] - that would suggest that their cost of goods and operating expenses are negative.
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- that would suggest that their cost of goods and operating expenses are negative.
Sounds about right, gotta remember that they've had some massively bad quarters and several years and they're still paying off their loans to other parties(not the government ones).
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http://www.media.chrysler.com/... [chrysler.com]
http://www.autonews.com/articl... [autonews.com]
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Except that the fine is only part of the penalty. They are also required to offer to buy the car back from every person which would equate to $1000s of losses on every vehicle, with some of those vehicles having a premium placed on the buy back price, fix the vehicle, and then pay the fine. Overall this will hurt a huge amount.
In total we are talking close to 2 million vehicles. If you assumed 50% buy back rates, assume $500 per car costs to buy back, $500 to rectify problem, $1500 to get the vehicle bac
Not with Asymmetric Information (Score:5, Interesting)
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"unregulated free markets."
We should stop giving the anti-capitalists even this much daylight. An unregulated market *cannot* be a free market, and anyone trying to tell us different has given themselves away as an attempted thief.
There are reasonable arguments about particular regulations, but no one has ever shown a rational path to satisfying the conditions of a free market with no regulatory framework to maintain those conditions.
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Re:Ever heard of the FREE MARKET? (Score:5, Insightful)
Undoubtedly, the free market will ultimately decide these things. However, I'd prefer that someone I care about NOT be the collateral damage that helps determine this. Many corporations lack values beyond profits
If they were truly motivated by profits, they would make a safe product. A safe product does not result in hundreds of millions of dollars in lawsuits over wrongful deaths.
Unfortunately, they are not JUST motivated by profits, but by profits THIS QUARTER. Who cares what happens the quarter after that. Nevermind that the guy in charge two quarters ago had the same mentality and now there is probably a sword of Damocles hovering above somewhere. We can't even really blame the company for this attitude. It is the company's investors, aka the American public, that demand profits every quarter at the expense of the future. America used to invest their money for long term growth, and this ultimately fed the growth of technology from the 50s through the 70s, but then Americans turned into Traders instead of Investors, and by demanding short term growth, we cripple, if not kill, long term growth. It has resulted in companies having to make poor decisions like eliminating research, outsourcing work to other countries, where it will be performed more cheaply this quarter, but result in huge maintenance costs due to poor quality in the next quarter, and so on and so forth.
To change this attitude, the majority of American public has to change their mindset about investing. We have to decide that we would rather have our money multiply by 10 over a 10 year period, than go up by half a percent this quarter. That a bird in the hand is not necessarily worth more than 1000 in the bush. That "me, me me, now, now now" is not a sustainable or desirable attitude.
Re:Ever heard of the FREE MARKET? (Score:4)
"If they were truly motivated by profits, they would make a safe product."
In the real world corporations and the rich have always been happy to trade lives for profits or quarterly bonuses; hence we have FTC, FDA, OSHA, MSHA, FRRC, EPA, as well as state level agencies. See also the recent BP oil spill, the Piper Alpha disaster, salmonella outbreaks, and a host of others.
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What if the defect is deadly. Sure if I am dead I cannot buy the product but being dead is not a solution.
God Bless America (Score:1)
So 'Jeep', which is an American brand (presumably manufactured in the US), fucks up again, following the recall/remote hack issue reported on /. on Friday, yet the summary decides to highlight Chrysler's Italian partner company FIAT.
Just as well some American administration can line their pockets with the proceeds from a few more fines, and screw the consumers who end up paying them 'cos they won't see them as a tax.
Whilst I'm all for selling safe products and abiding by whatever rules are in place for a pa
Partner?? Please... (Score:2, Informative)
Chrysler is not a partner of fiat, its a subsidiary and was sold to it by Merc a few years ago for a song.
If your company has been bought by Fiat... (Score:2)
... you know things are going badly.
The company has never had a good reputation wrt quality control or longevity of its vehicles. Seems like little has changed when they stick a chrysler or jeep badge on some bodge up they designed in Turin.
Disclaimer: I'm neither an american nor italian, just someone who likes properly built cars.
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Recalls, according to TFA, are for models from 2003 to 2012. Chrysler acquisition started in 2009, but was completed only in 2014. Just to have our facts right.
Disclaimer: I'm Italian (near Turin, too). Jeep and RAM models where never designed here. Other (even worse) cars, yes, but not those.
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As opposed the american habit of telling anyone who'll listen where their ancestors came from and prepending their nationality with it? italian-american, irish-american etc. The world still thinks of you as american, just because your granny & grandad came from a goat farm in sicilly doesn't make you italian.
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As opposed the american habit of telling anyone who'll listen where their ancestors came from and prepending their nationality with it? italian-american, irish-american etc. The world still thinks of you as american, just because your granny & grandad came from a goat farm in sicilly doesn't make you italian.
That's true, if you have white ancestry from overseas one or two generations back, then you are just a plain old American and expected to behave as such.
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"Jeep and RAM models where never designed here"
Not 100% correct. The new jeep renegade is a rebodied 500X.
Jeep and Ram content from Italy (Score:2)
I'm Italian (near Turin, too). Jeep and RAM models where never designed here. Other (even worse) cars, yes, but not those.
Not true. The Jeep Renegade [wikipedia.org] is built entirely in Melfi, Italy and is based on the GM Fiat Small platform [wikipedia.org].
The Ecodiesel engine in the current model Ram pickups and the Jeep Grand Cherokee was designed and built by VM Motori [wikipedia.org]. They also have made engines for the Jeep Wrangler and Jeep Cherokee.
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Well google it then you idiot. There have been plenty of incidents, Ferraris are far from reliable.
Not for their reliability (Score:2)
That'll be the FIAT that owns Ferrari and Maserati, which are quite well thought of.
They are well thought of because they are cool looking and very fast cars. Their reputation has NOTHING to do with their reliability or longevity. Most Ferrari's and Maseratis spend the majority of their life sitting in a garage somewhere not being driven. Nobody buys a Ferrari because they think it is going to have amazing reliability.
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That'll be the FIAT that owns Ferrari and Maserati, which are quite well thought of.
Quite well thought of by teenagers who have no clue as to the ongoing cost and other things that go along with owning them.
A Ferrari has to be taken in for a "tune up" every 15,000 miles. That "tune-up" will set you back about $7000. I can buy a new crate engine from GM for my base model Corvette for $5K and the labor to have it installed will be less than $2K.
Ferrari also neglected to set the change interval for the coolant in may late models. So once the anti corrosives in the coolant breakdown, the rad
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The other intesting thing is that before $4/gal oil Ford retooled to modernize and create options so they could move away from over reliance on SUVs. People at GM and Chrysler thought they were nuts. Then the recession hit and $4/gal gas. Of the big 3 they did not require a bail out.
I attribute it to being largely controlled by the Ford family which often produces motivated and capable execs. for the Company.
And this is why I dont have a 500 abarth. (Score:3)
I was going to buy one, but after looking at owner forums and discovering the problems and horrible service that most people are getting I ran away.
I really like the idea of a small sporty car, and I really wanted one, but not if Fiat cant figure out that you have to bend over backwards for customers and make sure they are happy. Apologize while you fix your screwups and do not try and push back fixing them.
I do give honda plusses there. Recalls are done fast and mostly right. Except the pain recalls. Honda has the crappiest paint in the entire automotive industry, and the recalls are repainting with the same low grade crap that will fail in another 5 years.
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Honda has the crappiest paint in the entire automotive industry, and the recalls are repainting with the same low grade crap that will fail in another 5 years.
Maybe this is a regional thing, and it could be worse where roads are salted in the winter or near oceans. Neither of these applies to me. I have never really noticed any issues with any Honda factory paint job. Aftermarket paint jobs, on the other hand, I have never seen a good looking aftermarket paintjob on a Honda.
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Aftermarket paint jobs, on the other hand, I have never seen a good looking aftermarket paintjob on a Honda.
That probably has to do with the owners of those cars. If you did see a good-looking aftermarket paintjob, would you even know? Would you be able to tell it wasn't a factory job?
I had an Integra years ago that got hit in the door, and so insurance paid for a new door skin and repainting (which covered the door and the surrounding portions). That paint looked great until I sold the car. But this wa
500 Abarth and Honda (Score:2)
I was going to buy one, but after looking at owner forums and discovering the problems and horrible service that most people are getting I ran away.
My brother-in-law owned an Abarth for a few years just recently. It was fine and fun to drive. To my knowledge he had no substantial problems with it. One data point of course but a positive one.
Except the pain recalls. Honda has the crappiest paint in the entire automotive industry, and the recalls are repainting with the same low grade crap that will fail in another 5 years.
My daily driver right now is a Honda which I've had since 2009 and I've owned several over the years. Never had a problem with the paint. Again one data point but I'm not aware of any systemic problem with Honda's paint worse than any other major brand.
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Honda has the crappiest paint in the entire automotive industry
You mistyped "GM" there.
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FIAT (Score:1)
What the FIAT acronym means: Fix It Again Tony.
Fine should be bigger (Score:2)
Add a zero to the dollar amount of the fine, and you're finally out of the 'Cost of Doing Business' category and into bottom-line devastation that will command the attention of both C-levels and shareholders. The government needs to grow a pair and serve notice to industry that business-as-usual just won't cut it.
Alternatives? (Score:2)
So given this... and Honda's mention about a big fine... What company(s) has the best track record for A) Fewest required recalls, B) Fewest recall violations, and C) Safety record?