Chrysler responds to request to recall 2.7 million Jeeps

Michael Cary/CNN

Managers at car dealerships, like Buerge Motors Chevrolet Jeep in Los Angeles, on Monday, August 8, k2011 say they're concerned consumers won't buy due to the S&P downgrade of the U.S. and expected interest rate increases.

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by Katie Hustad


NEW YORK (CNN) -- Chrysler Group will formally respond Tuesday to the government's request for a recall of 2.7 million Jeeps that safety officials say pose too great a risk of fire in a rear-end accident.


Chrysler stated last week that it will not comply with the recall demand, arguing that the vehicles are safe.


The automaker also claimed the National Highway Traffic Safety Administration's analysis is faulty and that most of the deaths involved high-speed accidents in which modifications to the gas tank of the vehicles would not have made a difference.


But if it does not comply with the recall, it faces the prospect of high-profile public hearings with testimony from both car safety advocates who have pushed for the recall, as well as the parents of children who burned to death in fires. Experts say the hearing will cause Chrysler's reputation to take a hit, even if it is able to avoid the recall.


"It's a very risky gamble," said Michelle Krebs, senior analyst at Edmunds.com. "Maybe Chrysler will be proven right. But it's still an uphill battle for Chrysler in the perception of quality and this could set it back."


The J.D. Power & Associates survey of car owners found that the number of problems reported by Jeep owners has fallen by about a third between 2008 and 2012. It has moved up in approval rankings from dead last out of 36 brands in 2008 to 23rd out of 34 last year.


An online survey by Kelley Blue Book last week found 64% of those answering the survey would not consider any vehicle from an automaker who fights a recall.


However a week of used car auctions tracked by Kelley shows no measurable change in average pricing or sales volumes of the affected vehicles. Used car site AutoTrader.com also reported no change in interest in the affected vehicles by potential car buyers visiting its site. But Alec Gutierrez, senior analyst at Kelley, said it might just be too soon to see an impact on pricing.


"This is the kind of thing that can take weeks, if not months, before we see it," he said.


There are also liability risks in numerous wrongful death suits if Chrysler agrees with the recall. NHTSA says there have been least 37 accidents that caused fires and resulted in at least 51 deaths.

The automaker's statement says it stands willing to fix any vehicle shown to have a defect or be unsafe, usually without any prompting from NHTSA or customers in many cases. It said it has been talking to NHTSA about the risk posed by these vehicles since 2010.


"All of us remain committed to continue working with NHTSA to provide information confirming the safety of these vehicles," said Chrysler CEO Sergio Marchionne in his statement last week.

Since it rejected the call for a Jeep recall, it has announced a series of smaller recalls of other vehicles. But it says there is no need to redesign the vehicles to move the gas tanks in front of the rear axle, or to put a metal shield over the plastic tank, as the Center for Auto Safety, a public safety group, has advocated.


"These Jeep vehicles have proven to be safe in operation and the company's analysis shows the incidents at the focus of this request occur less than one time for every million years of vehicle operation," said a white paper from the company released the day it announced it wouldn't comply with the recall.


After the expected public hearing by NHTSA, the agency could either agree with Chrysler's argument and drop the request for a recall or order an involuntary recall. If the automaker again refused to issue a recall, NHTSA could go to federal court to force a recall, though that process could take years.


There have been 17,000 recalls involving over 500 million vehicles since NHTSA started the recall process in 1966. It is rare that automakers challenge NHTSA on a recall and even rarer that one wins. Chrysler -- under different management than it is now -- was the last automaker to win such a challenge when it fought a 1996 recall of 91,000 cars in a dispute over its seat belt system.