SANTA ROSA -- Electric vehicle maker Zap (Bulletin Board: Zap), which has headquarters in Santa Rosa and production facilities in China, is facing up to $21 million in federal court civil penalties and refunds to customers over 2009 brake recalls on hundreds of three-wheeled electric vehicles.
Zap Chairman Priscilla Lu on Friday said in a statement that the company is in talks with the National Traffic Safety Administration, which brought the action in a District of Columbia court on May 6, to resolve the matter but isn't allowed to comment until something is worked out.
"It should be finalized in the next two weeks," she said.
The judge on May 31 approved a request by Zap and the administration to have until July 15 to settle the matter, according to court documents.
In its court complaint, the administration accuses Zap of not notifying it in a timely manner about recall notices on insufficient brakes for 2008 Xebra sedans and pickups, incorrectly claiming to have remedies and being "uncooperative and evasive" with the administration. It asked the court for civil penalties of $6,000 to $7,000 per violation -- capped at $17.3 million -- plus $6,000 to $7,000 a day for not complying with a November order to offer refunds.
"Indeed, this was the first time NHTSA exercised its statutory authority to compel a manufacturer to comply with its remedy and notification obligations under the Safety Act," administration attorneys wrote in the complaint, referring to the National Traffic and Motor Vehicle Safety Act of 1966. "Yet, to date, ZAP still has not complied with that order."
"The extent of our financial exposure to this matter is difficult to estimate at this time," the company wrote in its quarterly regularly filing with the Securities & Exchange Commission on May 15. "However, the negative outcome of this complaint could adversely affect the company’s liquidity and resources."
As of March 31, Zap reported current assets of $36 million, including $1.2 million in cash and $16 million in restricted cash.
The civil penalties are on top of a Nov. 13 administration order for Zap to buy back at $3,100 apiece as many as 691 of the 2008 Zap Xebra sedans and pickups, classified as motorcycles because of the three-wheel design. In recent regulatory filings, Zap said it imported that many from Qingqi Group Motorcycle but shipped 627 to dealers and consumers. That would amount to nearly $2 million in refunds.