When Chrysler ignored the calls from the U.S. National highway Traffic Safety Administration to perform a recall of 2.7 million Jeeps, the automaker – one of the three largest in the country – took an unusual tactic. It simply said no.
According to Fox Business, the decision quickly led to confusion among the public as to why such a major auto manufacturer could outright ignore a recall suggested by a national agency over a fuel tank problem that has allegedly caused dozens of car fires. However, analysts quickly pointed out that Chrysler’s decision was not a brash act of defiance, but rather a deliberate business decision that most likely saved it billions of dollars. This, however, comes with the risk of a tarnished reputation, but it appears this is a risk Chrysler is willing to take.
Also, the automaker could potentially face fines as high as $17 million if the NHTSA finds hard evidence in an upcoming inspection that the Jeeps that are, in fact, a danger to the public. Such a finding would also most likely lead to billions of dollars in legal costs if accidents in the Jeeps can be linked to the potential defect.
“It is bad publicity weighed against any liability they appear to admit by doing a voluntary recall,” said Jack Nerad, executive market analyst Kelley Blue Book. “It’s largely a business decision, and which is of greater harm is probably among discussions that go on in the halls of car companies.”
Potential backfire
However, such a business decision could have unfortunate results for Chrysler. According to USA Today, if the NHTSA and the company can’t come to an agreement, and the agency determines Chrysler made light of the potential defect, it could lead to a mandatory recall of all 2.7 million Jeeps – a rare occurrence in the auto world.
Still, Chrysler is standing firm in its decision to ignore the recall, explaining its position in a letter to the agency.
“These cars are absolutely safe and in line with what the industry was producing at the time,” Chrysler CEO Sergio Marchionne told reporters on Friday.
Some experts say the decision is a strong business move, considering recalls come with enormous costs, and often, they drive up warranty costs. What’s more, most analysts agree Chrysler has more than enough liquidity to pay whatever costs may come from making the wrong decision.
Thorough testing of products can help companies avoid these situations all together, keeping costs down in the long term.