July 2, 2015 / 7:34 PM / 2 years ago

UPDATE 1-Top U.S. regulator expects action on Fiat Chrysler over recalls

5 Min Read

(Recasts with regulator's plans, adds details of hearing and company background throughout)

By David Morgan

WASHINGTON, July 2 (Reuters) - The top U.S. auto safety regulator said on Thursday he will move quickly to take action in response to Fiat Chrysler Automobiles NV's mishandling of recalls involving up to 11 million vehicles.

Mark Rosekind, who heads the National Highway Traffic Safety Administration, said action could come by the end of July and take the form of either a consent agreement with Fiat Chrysler or unilateral enforcement action.

"There will be action," Rosekind told reporters after a two-hour hearing that featured testimony from NHTSA staff, safety advocates, victims' relatives and auto industry representatives including a senior Fiat Chrysler executive.

"What you've heard here is that there's a pattern that's been going on for some time," he said.

The automaker could face more than $700 million in fines and be required to buy back or replace vehicles if regulators find that it failed in its legal obligations. The recalls cover Jeep, Dodge, Chrysler and Mitsubishi vehicles from model years dating back to 1993.

Rosekind said the agency could also determine whether to forward the case to the U.S. Justice Department for possible criminal action.

After testimony in which NHTSA staff catalogued alleged failures in 23 separate recalls, including what they termed misleading behavior, a Fiat Chrysler executive acknowledged that regulators had raised legitimate questions. He pledged to work with the agency to improve the automaker's programs and establish best practices.

"Recall execution is where we have fallen short," said Scott Kunselman, FCA's senior vice president for vehicle safety and regulatory compliance in North America. "We have learned from our mistakes and missteps."

FCA had previously said the hearing was unnecessary.

Kunselman's pledge of cooperation could suggest the automaker is open to a consent order, in which Fiat Chrysler and NHTSA would agree on steps to improve recall performance for vehicles including Jeep Grand Cherokee and Jeep Liberty sport utility vehicles. More than 50 people have died in fiery collisions as a result of fuel tanks that can leak on impact.

NHTSA officials said Fiat Chrysler's recalls showed widespread problems including failure to notify owners about defects within legal deadlines, short supplies of replacement parts and incomplete or misleading reports to regulators about the progress of recalls.

"Problems with the information that Fiat Chrysler reports - or in many cases, fails to report - to keep NHTSA apprised of its recalls obstruct our ability to carry out our statutory oversight responsibilities," said Jennifer Timian, who heads defect investigations at NHTSA.

The day's most riveting testimony came from Unilever employee Todd Anderson, whose 17-year-old son, Skyler, was burned to death in a Jeep collision in November 2013, months after Fiat Chrysler agreed to recall 1.5 million of the vehicles.

"There is only one solution: a buy-back program that destroys these vehicles. Destroying these vehicles now is better than destroying lives later," Anderson told the hearing.

Regulators said on Thursday that the recall has been plagued by a lack of parts to fix the problem and low completion rates.

Only 6 percent of recalled Grand Cherokees and 32 percent of Liberty SUVs have been repaired, according to one NHTSA witness.

The automaker issued a lengthy statement hours before the hearing, underscoring the role that regulators have played in testing the remedy and determining that it provides an incremental safety hitch for vehicles in low-to-moderate-speed collisions. FCA also said NHTSA found the Jeep sport utility vehicles have a safety performance similar to other makes in the most severe crashes.

Days before the hearing, FCA took the unusual step of telling about 65 Grand Cherokee and Dodge Durango owners to stop driving their sport utility vehicles because of an improperly heated suspension component that can break, causing instability and reduced braking power. Another 7,690 vehicles were subject to the recall, including a handful in Canada.

The hearing also posed a test for NHTSA, which is taking a more aggressive stance on automakers under new administrator Rosekind, who took office in January. The watchdog has been blasted by lawmakers and government auditors for long-running internal weaknesses that they say prevented the agency from moving quickly against deadly defects including faulty General Motors Co ignition switches. (Editing by Joe White and Matthew Lewis)

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