How Fiat Chrysler's diesel woes differ from VW scandal

How Fiat Chrysler's diesel woes differ from VW scandal

Ram 1500 EcoDiesel is one of the vehicles singled out by the EPA

After the U.S. Environmental Protection Agency took action, Fiat Chrysler Automobiles found itself with its own diesel emissions debacle on its hands Friday -- the possibility of fines, repairs and a publicity black eye that go with it.

But even through EPA says the automaker is in violation of the Clean Air Act because of excessive diesel emissions in 104,000 Jeep Grand Cherokee SUVs and Ram 1500 EcoDiesel pickups, Fiat Chrysler insists there are vast differences between its case the scandal that has engulfed German maker Volkswagen.

Perhaps the biggest: So far, the EPA has not accused Fiat Chrysler of intentionally installing devices to cheat on emissions tests. But it still might. For the start of its troubles, Volkswagen admitted to intentional rigging of cars to try to beat the regulations.

Instead, EPA has accused Fiat Chrysler of installing eight undisclosed pieces of software that can alter how a vehicle emits air pollution.

"The fact that the company failed to disclose these (emission control devices) is, in itself, a violation of the Clean Air Act," said Janet McCabe, acting assistant administrator for the EPA's Office of Air and Radiation.

The EPA also has not asked the automaker to stop selling the vehicles.

Here are three key questions that remain unanswered:

•Did Fiat Chrysler intentionally develop the software to cheat on emissions? This is potentially the most important question. EPA did not accuse Fiat Chrysler of willful violations on Thursday, but it's still investigating. Fiat Chrysler CEO Sergio Marchionne said he believes the U.S. Justice Department is assisting with the investigation, a foreboding sign.

Fiat Chrysler has had more than a year to prove to EPA that the devices it installed were essential for the engine's operation but has not yet satisfied the agency.

Marchionne repeatedly said the automaker did not intend to defeat emissions testing.

"We are having a difference of opinion of whether the calibration met the regulations or did not meet the regulations," he said. "The reality is we are not trying to break the bloody law."

•Is Fiat Chrysler's exposure as big as Volkswagen's exposure? Probably not, but Fiat Chrysler still faces a serious financial threat.

The EPA and Justice Department's investigation into Volkswagen has led to the ouster of longtime CEO Martin Winterkorn, a host of other top executives, and a global shakeup of the company. It has deeply damaged the company's image, which was built on its clean diesel offerings.

In addition, Volkswagen pleaded guilty this week to criminal charges and agreed to $4.3 billion in fines and penalties. That was in addition to separate civil settlements worth about $17 billion for U.S. consumers and dealers who own diesel vehicles affected by the scandal, authorizing buybacks and free fixes.

But the Volkswagen investigation applied to more than half-a-million vehicles compared with 104,000 at issue with Fiat Chrysler. Vehicles with diesel engines are only a small fraction of Fiat Chrysler's sales.

Still, the EPA has the authority to fine automakers up to $44,539 per vehicle for the worst violations of the Clean Air Act. It's also clear that investors are taking the automaker's exposure seriously because shares of FCA's stock fell 10%.

•What will happen next? This also is unclear. McCabe said the agency will "continue to have discussions with Fiat Chrysler about how to fix these violations and all other enforcement choices are still things down the road that have not yet been determined."

But the EPA is running out of time. On Jan. 20, President-elect Donald Trump will take office and will appoint a new EPA administrator, and Marchionne is clearly banking on a less-aggressive regulatory environment.

"We'll work with the new administration to try and get this issue behind us, but I think to be perfectly honest I think it's been blown out of proportion," Marchionne said.



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