Fiat Chrysler faces its own emissions cheating scandal, EPA says

Last Updated Jan 12, 2017 8:49 AM EST

A day after Volkswagen (VLKAY) agreed to a $4.3 billion fine to settle criminal charges that it cheated on federal and state vehicle emissions tests, Fiat Chrysler (FCAU) faces similar accusations.

According to the U.S. Environmental Protection Agency, Fiat Chrysler installed software on about 104,000 diesel-powered Jeep Grand Cherokees and Dodge Ram 1500 trucks between 2014 and 2016 that enabled the vehicles to emit 10 times the amount of nitrogen oxides (NOx) that allowed under federal limits without detection. NOx is a key ingredient in smog, which causes breathing problems.

“Failing to disclose software that affects emissions in a vehicle’s engine is a serious violation of the law, which can result in harmful pollution in the air we breathe,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “We continue to investigate the nature and impact of these devices. All automakers must play by the same rules, and we will continue to hold companies accountable that gain an unfair and illegal competitive advantage.”

Fiat Chrysler denies the allegations. In a statement, the company also indicated that it hopes to work with the Trump administration “to present its case and resolve this matter fairly and equitably and to assure the EPA and FCA US customers that the company’s diesel-powered vehicles meet all applicable regulatory requirement.”

The automaker may not catch a break under President-elect Trump, who has picked Oklahoma Attorney General Scott Pruitt to head up the EPA, said David Cooke, senior vehicle analyst at the Union of Concerned Scientists. Penalties could top more than $44,000 per vehicle. 

“The other automakers would be very upset,” Cooke said. “I don’t think the Trump administration can let this blow over.”

Fiat Chrysler shares slumped on the news, tumbling more than 12 percent to $9.69 in early afternoon trading.

The EPA says the affected vehicles are safe to drive and that owners can continue to operate them legally even though they may violate the Clean Air Act. Fiat Chrysler can also continue to sell its 2016 models. 

“It’s bad for the industry, but not as bad in terms of emissions as the Volkswagen scandal,” Cooke said, adding that the German automaker’s vehicles were found to have emitted 40 times the legal amount of NOx. “It’s tough to know how widespread this is.”

Fiat Chrysler and Volkswagen area the leading sellers of diesel vehicles in the U.S., and both used Bosch equipment to control emissions, Cooke said, adding he knew of no evidence linking Bosch with either company’s legal problems.

In connection with the VW’s emissions scandal, six German executives and employees with the company have been indicted and charged with conspiracy to defraud the U.S. government.

Volkswagen has also racked up major legal costs stemming from the emissions scandal, as well as seen a dent in sales. Under the federal settlement announced this week, the auto manufacturer is paying a $2.8 billion criminal penalty and a $1.5 billion civil fine. It is also shelling out more than $15 billion in settlements reached last year with federal and California regulators, as well as consumers.

“Even if the new administration brings with it less aggressive EPA enforcement, we can still rely on private law enforcement -- including class actions and other suits filed by individual consumers -- to address alleged misconduct like the VW and Fiat/Chrysler emissions scandals,” said Morris Ratner, a law professor at the University of California Hastings College of the Law. 

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    Jonathan Berr is an award-winning journalist and podcaster based in New Jersey whose main focus is on business and economic issues.