The Justice Department yesterday filed a $1.6 million lawsuit against Fiat Motors of North America contending that the automaker failed to recall and buy back 1970-71 model 850 Fiat autos because of a safety-related defect.

The suit filed in U.S. District Court, also asks the court to order Fiat to recall another 133,500 1970-74 124 model Fiats, because of the same defect -- rust corrosion that weakens the car's underbody.

The government contends that Fiat knew that the 124 models had the safety-related defect, but failed to notify all owners of the vehicles for the purpose of inspection and repurchase.

Last March, when Fiat agreed to repurchase the $1,000 model 850s, the company became the first major automaker to agree to buy back plan as a result of a vehicle defect. According to the agreement then, Fiat was to refund the full purchase price, minus on allowance for depreciation of the car if Fiat considered the car beyond repair.

In the lawsuit yesterday, however, the government alleged that during the recall campaign, Fiat used "coercive tactics" to persuade car owners to accept "inadequate repurchase offers" for defective vehicles. Recall notices were sent to owners last June, the suit said.

The National Highway Traffic Safety Administration began receiving complaints about the repurchase offers shortly after the recall began, the lawsuit said.

A year ago, the NHTSA determined that the 1970-1974 model 124 Fiats also contained rust and corrosion defects but postponed action until further investigation, the suit said.

Afterwards, Fiats began contacting owners, of those cars, who had complained of corrosion, and offered to repurchase the vehicles. According to the lawsuit, the NHTSA reopened its investigation based on Fiat's repurchase activity and receipt of 359 rust complaints from owners.

Because Fiat knew, or should have known of the safety defect in the 124 models, the manufacturer should have fully notified owners and remedied the defect, the government suit contends. Instead only some owners were contacted, the suit said.

In addition, the government alleges, Fiat tried to induce owners to take less money for their cars and to release Fiat from any legal liability for continued use of the automobile.

The rust and corrosion in the 124 model Spyder, sedan, coupe and station wagons has caused the cars' suspension system, steering system or the floor pan where seats are attached to separate from the car's undercarriage, the lawsuit said, resulting in loss of vehicle, control. Those defects, similar to the ones found in the 850 model Spyders and Racer autos for the recall years, can result in accidents, the NHTSA contends.

The $1.6 million in civil penalties sought against Fiat is the maximum allowable under the law.

Fiat President Claudio Ferrari said in a statement yesterday that the 850 model recall has been carried out in full compliance with applicable regulations and guidelines.

Ferrari said that the automaker's investigation of Fiat 124 models showed "no deficiency in rustproofing of Fiat cars "as compared to other cars sold during the same years. "Indeed, until this date the government has not asserted that any corrosion-related, accident has involved Fiat cars," Ferrari said in the statement.

"If the lives of Fiat owners were being placed in jeopardy by any inadequacies in our products we would not hestitate to carry out a recall," Ferrari said. "We are confident however, that this is not the case in this instance."