[UPDATE 3 p.m. EDT] In an unexpected about-face, Chrysler Group LLC announced Tuesday that it would "conduct a voluntary campaign with respect to the vehicles in question that, in addition to a visual inspection of the vehicle will, if necessary, provide an upgrade to the rear structure of the vehicle to better manage crash forces in low-speed impacts."

Earlier reports said Chrylser would outline its case against questions about the safety of its Jeep Grand Cherokees made between 1993 and 2004 and Jeep Libertys made between 2002 and 2007, and that it would oppose a pricey recall to strengthen the vehicles' gas tanks. The company maintains that the SUVs "are among the safest in the peer group" but that customer concerns compel it to comply with a request from the U.S. National Highway Traffic Safety Administration (NHTSA) to recall some 2.7 million of these vehicles. 

"Chrysler obviously calculated the risks and benefits and concluded that the cost to repair these vehicles isn't as expensive as the potential long-term damage that could come from bad PR," Edmunds.com senior analyst Michelle Krebs said. 

Jared Rowe, president of Kelley Blue Book, says the automaker has been gradually improving market share and the agreement "shows how important they want the drivers in their vehicles to feel safe.”

Original story begins here:

Chrysler Group LLC is refusing to comply with a demand by the U.S. National Highway Traffic Safety Administration (NHTSA) to institute a major recall of Jeep Grand Cherokees made between 1993 and 2004 and Jeep Libertys made between 2002 and 2007.

The company, which is owned primarily by Italy’s Fiat SpA (BIT:F), contested the recall request, saying in a June 4 statement that it “does not agree with NHTSA’s conclusions and does not intend to recall the vehicles cited in the investigation.”

But that refusal is about to become official, according to the Associated Press, which says the company will file papers offering more details on its position.

It’s an unusual showdown as auto companies tend to abide by recall requests. The last time a company challenged federal safety regulators was in 2011, when Ford Motor Co. (NYSE:F) was asked to recall 1.2 million pickup trucks over faulty airbags; the company initially refused but relented after the NHTSA threatened a public hearing. The same thing could happen with Chrysler.

The government contends that plastic gas tanks in these Jeeps, which are situated between the rear bumper and the rear axle, pose a serious fire hazard in the event of rear collisions. The government claims 51 people have burned to death in accidents involving punctured fuel tanks that led to avoidable fires. It wants Chrysler to recall about 2.7 million vehicles and add about $100 worth of modifications to each affected vehicle’s gas tank, a significant expense for a company that’s currently involved in costly restructuring that would give Fiat full ownership of the company.

Chrysler denies there is inordinate danger from the gas tanks and says the government is trying to retroactively enforce fuel-tank standards that came into effect after these cars were made and sold. The cars made after the dates of the recall request were modified to place the gas tank in the front of the rear axle, which both protects it and shortens the length of the hose to the tank.  

The issue is reminiscent of the deadly Ford Pinto rear-gas tank design flaw that led to a famous recall in the late 1970s (read about that case here).