Jeep recall costly but so is the PR damage

Jeep recall costly but so is the PR damage

Chrysler's refusal of a government request to recall 2.7 million Jeeps may carry a high public relations price for the company, but doing the recall could be even costlier -- both for Chrysler and for the Obama Administration, experts say.

The National Highway Traffic Safety Administration asked Chrysler late Monday to recall 1993 through 2004 Jeep Grand Cherokees and 2002 through 2007 Jeep Libertys because of a higher rate of fatal fires in rear-end crashes than similar vehicles from those years. Chrysler maintains that the differences in rate are so small as to be statistically insignificant. They now will exchange data and NHTSA ultimately could take Chrysler to court to force a recall.

But the statistical arguments may be irrelevant for Chrysler in the court of public opinion.

"The publicity is going to get worse for Chrysler," says Allan Kam, a former NHTSA senior enforcement attorney. The public relations cost is one reason that in most cases "manufacturers will acquiesce and conduct a recall even if they don't happen to agree with it."

Making matters worse: One of the arguments Chrysler would have to make could be uncomfortably graphic. Because the fires occurred in high-speed crashes, victims may have been killed by the crash forces before the vehicles caught fire. That's an important distinction in product liability lawsuits, but not one likely to make consumers feel better about the product.

So why risk the bad press? "Maybe they don't know quite what the fix. Is," says Kam. And NHTSA did not propose a remedy in its recall request.

In the Jeeps in question, the fuel tank is positioned behind the rear axle and under the rear floor -- a placement not uncommon at the time, but rare now. If there's no practical way to alter the vehicles -- moving the gas tanks is probably not an option -- buying them all back could be the only alternative. That would be prohibitively expensive, even though the vehicles are up to 20 years old. A buyback would cost the company at least thousands for every vehicle a customer wanted bought back.

The cost also would be so large that it likely would generate a public debate over whether government action was justified.

Another possibility could be one discussed, but not applied, in a similar debate over fuel tank placement in General Motors' Chevrolet pickup trucks in the early 1990s: A metal plate for additional protection for the fuel tank in crashes.

The Clarence Ditlow of the Center for Auto Safety -- which made the 2009 complaint that prompted NHTSA to open an investigation of the Jeeps in 2010 -- points out that up to 15% of the affected Jeeps have a three-millimeter steel plate that he believes "does a pretty good job of protecting the tank." Still, he says, the vehicles also should be retrofitted with a safety valve to prevent gas from spilling if the filler pipe is separated in crash.

Even that could be costly given the nearly 3 million vehicles involved.

In the GM pickup case, NHTSA threatened to sue GM to force a huge pickup truck recall because the agency argued the placement of the fuel tank -- ahead of the axle and on the sides of the trucks -- made them more vulnerable to fires in certain crashes. Then-Transportation Secretary Federico Pena overruled his agency staff, requested a recall and threatened a lawsuit. But the White House then, in effect, overruled him when it brokered a settlement with GM.

With the Jeeps, Chrysler is arguing that the difference in their risk of fatal fires in rear crashes and that of comparable vehicles from the period is statistically insignificant. While NHTSA compares frequencies of fires and crashes during defect investigations, there is no number or percentage at which vehicles are considered defective or not.

Investigators make decide whether a vehicle poses "unreasonable risk to safety" based on several factors, including whether a vehicle design is defective. That, along with the fire rate, is why NHTSA says it is ordering a recall.

Randy Whitfield, who owns the statistical research company Quality Control Systems, has analyzed the Jeep fire rate and believes it's high enough compared to similar SUVs to justify a recall. But he also says that is not the point, adding that "the statistical significance of differences in rates by itself tells us nothing about whether the rates reflect reasonable choices in design."