Chrysler set aside $151 million to cover NHTSA settlement

Article by Anita Panait, on August 5, 2013

Chrysler Group LLC has allotted $151 million to cover costs related to an agreement that settled a recent row between the carmaker and the United States National Highway Traffic Safety Administration. In June 2013, NHTSA requested Chrysler to recall up to 2.7 million Jeep Grand Cherokees and Libertys after it assessed that the vehicles posed a fire risk when receiving impact from a rear collision.

Chrysler initially declined to honor NHTSA’s request, resulting to a row between the two entities. One source hinted to Automotive News that a remedy on the matter could cost Chrysler around $1,000 per unit, which means the carmaker has to shell out up to $2.7 billion. Some industry experts say a fix could go as high as $1 billion.

Chrysler, however, finally gave in and agreed to issue a recall and install trailer hitch assemblies on up to 1.56 million 1993-98 Grand Cherokees and 2002-07 Libertys that don't already have them. Chrysler booked the $151 million cost in the second quarter, thus lowering the US carmaker’s quarterly profit to $507 million.

Despite the cost involved, Chrysler had to incur it as allows the carmaker to drop the dispute and prevent the row from escalating. However, while the installed trailer hitch assemblies provide some support in low-energy collisions, they would not be enough to address the high-energy crashes NHTSA had cited in its recall request. [source: automotive news - sub. required]

Topics: chrysler, nhtsa

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