Chrysler Agrees to Repair SUVs on Fire Risk After Probe

Chrysler Group LLC’s decision to fix some of the 2.7 million sport-utility vehicles linked to 51 deaths in post-crash fires averts what could have been the biggest showdown with U.S. regulators in three decades over a safety defect.

Chrysler, based in Auburn Hills, Michigan, said in a statement yesterday it reached an agreement with the U.S. National Highway Traffic Safety Administration for a “voluntary campaign” on Jeep Grand Cherokee and Jeep Liberty vehicles with fuel tanks mounted behind the rear axles. The company, in a letter to NHTSA yesterday, said the vehicles in question are safe.

“I’m sure they had some legal experts say that with the preponderance of the evidence, it was going to be very hard to tip the scales in their favor given the deference courts give government regulatory agencies,” said David Kelly, an acting NHTSA administrator during the George W. Bush administration who’s now a transportation safety consultant.

Chrysler on June 4 said it would refuse NHTSA’s request to recall the 2.7 million vehicles in question because they didn’t pose a safety risk. Had the company held that position by yesterday’s deadline to respond to the regulator, the standoff could have proceeded to a public hearing and possibly to court.

The auto-safety advocate who pushed the company and U.S. regulator to look at the Jeeps today told Chrysler its intended fix, involving installation or replacement of trailer hitches, is “woefully inadequate” and said it should recall more vehicles.

Lawyers, Engineers

“Chrysler’s proposed recall will not stem the fire deaths due to defective fuel systems in 1993-2004 Grand Cherokees, 2002-2007 Liberty’s and 1993-2001 Cherokees still under investigation by NHTSA,” Clarence Ditlow, executive director of the Center for Auto Safety based in Washington, wrote in the letter to leaders of Chrysler and its majority owner, Italy’s Fiat SpA. The letter included pictures of three young children he said were killed in Jeeps that aren’t part of the campaign.

“Chrysler can best save lives, its image and restore consumer confidence by recalling all the Jeeps with a remedy designed by engineers, not lawyers,” he said.

Chrysler stuck by its defense of the vehicles’ safety, saying in the statement yesterday they aren’t defective and are among the safest in their peer group.

“Chrysler Group recognizes that this matter has raised concerns for its customers and wants to take further steps, in coordination with NHTSA, to provide additional measures to supplement the safety of its vehicles,” the company said.

Vehicle Reputation

The negative publicity that would have persisted through regulatory or court challenges may have pushed Chrysler Chief Executive Officer Sergio Marchionne to change his mind, said Michelle Krebs, a senior analyst for auto-researcher in Santa Monica, California.

“Chrysler can’t afford to have that vehicle’s reputation damaged,” Krebs said in a telephone interview. “It’s the heart and soul of Jeep and a source of big profit to Chrysler.”

The repair involves installing or repairing trailer hitches to enhance protection in a low-speed crash, Chrysler said.

For 1.56 million Liberty and older Grand Cherokee vehicles, a hitch assembly will be installed if one isn’t there now, the company said in an e-mailed statement. If a vehicle has an aftermarket hitch not made by Chrysler, it may be replaced.

The fixes “incrementally improve the performance” of some of the vehicles in low-speed crashes, Chrysler said in the letter.

Pinto Comparison

On about 1.14 million Grand Cherokees from model years 1999 through 2004, no action will be taken on those without a hitch. Vehicles with after-market trailer hitches will be inspected, and the units will be replaced if needed, Chrysler said.

NHTSA will continue its investigation “pending a review of the documents provided by Chrysler in its recall action,” the agency said in an e-mailed statement.

“Consumers impacted by the safety recall and customer satisfaction campaign should have their vehicles serviced promptly once they receive notification from Chrysler,” NHTSA said.

A recall of 2.7 million vehicles would be one of the 20 biggest in U.S. history, Ditlow has said.

Ditlow asked NHTSA to crash test the repaired Jeeps the same way the agency did in 1978 with Ford Motor Co. Pintos that had a similar defect and were fixed by the automaker.

“If the modified Jeeps do not pass, we call on NHTSA to require Chrysler to develop a more effective remedy just as NHTSA did with the Pinto when it failed the first round of tests,” Ditlow said.

Ditlow, in a 2011 letter to Marchionne, called the Grand Cherokee a “modern-day Pinto for soccer moms.”

Two-Year Probe

NHTSA, in letter Chrysler disclosed June 4, proposed recalls for Grand Cherokees in model years 1993 to 2004 and the Liberty in model years 2002 to 2007. Chrysler said yesterday those model years that will be covered in its effort.

NHTSA Administrator David Strickland last week said the Chrysler vehicles in question have safety defects and it’s up to owners to decide whether the SUVs are safe to drive.

The Transportation Department, which includes NHTSA, has investigated the Chrysler SUVs for more than two years. A year ago, NHTSA upgraded a defect investigation into the fuel systems in as many as 5.1 million Jeep vehicles following reports of about two dozen fires. NHTSA opened its probe into the Chrysler vehicles in October 2010.

Before it's here, it's on the Bloomberg Terminal.