Ottawa 'blindsided' by Fiat Chrysler recall and $105M fine

Transport Minister Lisa Raitt said she still doesn't know the impact on Canada of a major recall of Fiat Chrysler vehicles in the U.S. that is resulting in a $105 million US fine for the company.

"I simply was left blindsided on this issue," Raitt told CBC News, when asked how many vehicles in Canada might be affected by a recall of millions of vehicles in the U.S. announced Monday.

The U.S. National Highway Traffic Safety Administration fined the Italian-American automaker a record $105 million for poorly executing 23 vehicle safety recalls covering more than 11 million defective vehicles over several years.

As part of that deal, Fiat Chrysler has been ordered to fix or buy back 500,000 Ram pickup trucks and 1.5 million Jeeps that that might be vulnerable in rear-end collisions.

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In an interview, Raitt said she only became aware of the U.S. recall when she read about it in media reports Monday morning. "These are things that are important," she said. "They are matters of public safety and it is something we are getting the information on now as we speak. We will take swift action when we know what we are dealing with."

"I understood there were some investigations with regard to Fiat in the U.S." Raitt said. "I didn't have a memo as to what the ramifications or implications are for Canada, or even if there is any. That's what the department is putting  together for me now."

A spokesman for Fiat Chrysler Canada said it is working closely with regulators on both sides of the border on the issue, but does not have a firm number of how many — if any — cars might be added to its recall list in Canada, in addition to those that were already recalled in the first place.

"We are reviewing the consent order and the potential volume equivalent for Canada," a spokesman with the company told CBC News.

Analyst expects similar buyback in Canada

Auto analyst and consumer advocate Phil Edmonston is confident that the company will eventually make a similar recall and buyback offer in Canada.

"There's no doubt that the buybacks will happen in Canada because Chrysler has admitted they had the problem," he said in an interview.

Unlike the U.S., there are no laws in Canada that give the government the power to force recalls on car manufacturers. "In Canada all we can do is wait for the manufacturer to say 'Yes, we will do something,'" Edmonston said.

The U.S. settlement is the largest such fine in American history and a 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 Fiat Chrysler'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 buyback, according to the National Highway Traffic Safety Administration. Owners also have the option of getting them repaired, the agency said in documents released Sunday.

The company will make payments to owners of 1.56 million recalled older-model Jeeps with gas tanks behind the rear axle to bring them to dealers to install trailer hitches to help protect the tanks. The tanks are vulnerable and can leak gasoline if damaged in rear collisions. The company maintains the Jeeps are as safe as comparable vehicles built at the time, and it will not buy them back.

Besides the civil penalty Fiat Chrysler agreed to an independent recall monitor and strict federal oversight.

'Past failures'

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 buybacks in the past, but never one of this size. A buyback 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.

It's unclear just how many Rams the automaker will have to repurchase, but 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 per cent of the trucks already have been fixed, and the company is allowed to repair and resell the trucks it buys back.

Record fine

The Jeep trade-ins could add to the tab, but they also could generate more new vehicle sales by getting customers into showrooms. Still, the total 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 consent order that Fiat Chrysler agreed to requires it to notify owners who are eligible for buybacks and other incentives.

Models included in the buyback 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 fine against FCA beats the old record of $70 million assessed against Honda Motor Co. for lapses in recalls of air bags made by Takata Corp.

Earlier this month, the safety agency held a rare public hearing where regulators detailed a litany of shortfalls: failure to notify customers of recalls, delays in 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.