Fiat Chrysler Faces Possible $4.6 Billion Fine Over Emissions Issues

On Thursday, January 12, 2017 the Environmental Protection Agency set forth motions to open an investigation against automaker Fiat Chrysler over allegations of cheating emissions regulations with their diesel engines models.

The EPA stated that the automaker knowingly used undisclosed software that allowed excess emissions on 104,000 diesel powered Jeep SUVs and Dodge Ram Trucks between model years 2014-2016.

The scope of the investigation isn’t limited to the United States and also includes French/British authorities who are examining diesel engine manufacturer Renault as well.

The news has hit Renault hard with share prices falling more than 4% in one day bottoming out at the lowest levels in over a month. French regulators are clamping down hard on diesel engine manufacturers admit the VW Diesel Scandal of 2015.

The allegations are in light of the Volkswagen Scandal that cut the automaker to pieces when it was discovered that over 11 million light duty diesel vehicles were outfitted with devices that concealed the true level of the emissions exhaust produced. The recall included 600,000 vehicles in the United States and sparked a tough “no tolerance” stance from regulatory commissions to fight knowing polluters.

The software made VW diesel engines run much cleaner during emissions testing but shut off those control features when the engine was under normal driving conditions. The technology allowed the vehicles to emit NOx exhaust well beyond the acceptable limits set forth by the EPA.

Mary D. Nichols, head of the California Air Resources Board was disappointed with the new investigations stating, “Once again, a major automaker made the business decision to skirt the rules and got caught.” The California Air Resources Board and the EPA work closely to monitor any emissions related issues and in wake of the VW Scandal have collaborated more closely to go after violators. California has the strictest emissions standards in the country; so strict in fact that many trucking companies have decided to not do business in the state anymore. Used diesel engines and generators are also governed by Tier Ratings in California.

From the initial look of the investigation it doesn’t appear the charges against Fiat Chrysler will be as severe as those against VW. Fiat Chrysler (FCA) is accused of failing to disclose certain engine management software to the EPA in violation of the Clean Air Act. The EPA is still uncertain whether the device in question is illegal and designed to bypass emissions testing.

FCA believes they have done nothing wrong and this issue will be cleared up shortly. The company considers the engine computer management (ECM) system in question to fall under the guidelines put forth by the EPA. The law states that ECM software is in compliance if it is needed to protect the engine from damage or an accident. The software being examined in the FCA investigation is designed to relieve stress on the engine when run at full load for too long. The ECM shuts down the selective catalytic reduction system when it gets too hot. The SCR is responsible for reducing NOx by injecting ammonia into the exhaust. If FCA can prove that excessive overheating will cause the engine to fail and that by temporarily turning off the SCR would save the engine, technically the device will fall into the legal limit set forth by the EPA.

FCA US released a statement saying that it intends to work with the incoming administration to present its case and resolve the matter as quickly as possible. The company went on to say it has spent the past few months working with the EPA and has presented volumes of information to prove that its ECM Software is not a “cheating device”. Still the enforcement and governing bodies of the EPA are proving difficult to work with.

FCA’s stock has risen roughly 70% this year since election of Donald Trump. The company is hoping the new administration will roll back strict emissions regulations (Tier Rating System). Rolling back emissions regulations will save the company billions of dollars a year annually on expensive and complicated emissions technology.

Automakers in Europe will not be as lucky as those in the United States. Emission rules will only stand to get tougher. Diesel is big business in Europe with 2x-3x more diesel cars on the road as in the United States. The European Commission incorporated the Italian Government with a German probe to investigate the Fiat 500x, Fiat Doblo and Jeep Renegade models for the questionable SCR software.

After the VW Scandal German’s motor vehicle commission, KBA, began testing the vehicles of all foreign auto manufacturers as part of new process to curb emissions issues. It was KBA and the transport ministry which asked the European Commission to investigate Fiat after being ignored by the Italian Government.

It will be interesting to see if FCA will only be forced to recall vehicles in Europe as the Trump Administration could give the company a free pass in the United States. If Fiat Chrysler is found guilty the company faces roughly $44,000 per vehicle totaling $4.6 billion dollars. Consequently, VW is currently paying $4.3 billion in penalties on top of the $17.5 billion it agreed to pay to resolve lawsuits, recalls and refunds to customers and dealers.