Consumers may shoulder costs of frequent recalls, says Fiat CEO

Article by Christian A., on May 22, 2014

Fiat Chrysler chief executive Sergio Marchionne remarked that consumers could be made to pay costs linked to handling recalls if the current pace and volume of callbacks become the norm. Vehicle recalls are costing the auto industry billions of dollars annually, and 2014 seems becoming one of the most expensive years for callbacks.

GM took a $1.3-billion charge to cover the cost of recalling vehicles – including the 2.6 million vehicles with faulty ignition switches – in the first quarter of 2014. The carmaker said it may take a $400-million charge to cover recalls in the second quarter.

GM recalled more than 2.6 million vehicles this week in the United States, which means that it has so far recalled 13.8 million US units this year. Marchionne remarked that the cost of frequent recalls would be transferred over onto the selling price of the vehicle, adding that carmakers will become more prudent in handling vehicle defects.

He disclosed that Chrysler has already commenced a review of its recall processes with the help of outside consultants. He quipped that while Chrysler’s vehicle recall committee and the work done by its technical staff are already world-class, they would improve it if they could.

The US Department of Transportation has imposed a $35-million fine against GM -- the maximum allowable -- for delaying the recall of small cars with faulty ignition switches.

Marchionne quipped that the fines will have little impact on how carmakers handle recalls, noting that a brand’s image or reputation is more at stake when recalls are issued. [source: automotive news - sub. required]

Topics: fiat, ceo, recall

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