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Fiat Chrysler agrees to potential $800 million settlement over emissions cheating charges

The FCA (Fiat Chrysler Automobile) logo displayed at the Chrysler Group World Headquarters in Auburn Hills, Michigan. CREDIT: Bloomberg photo by Jeff Kowalsky
The FCA (Fiat Chrysler Automobile) logo displayed at the Chrysler Group World Headquarters in Auburn Hills, Michigan. CREDIT: Bloomberg photo by Jeff Kowalsky

Fiat Chrysler Automobiles agreed Thursday to a settlement with U.S. regulators and other plaintiffs that could cost the automaker roughly $800 million to resolve allegations that it cheated on emissions tests.

“By concealing this software, Fiat Chrysler deceived regulators and violated environmental law,” Jesse Panuccio, principal deputy associate attorney general, told reporters in a briefing at Justice Department headquarters. “Fiat Chrysler’s conduct was serious and egregious. Its deception robbed the public of the clean air we work hard to protect and put law-abiding competitors at a disadvantage.”

Under the terms of the settlement, the automaker agreed to implement a recall program to repair more than 100,000 out-of-compliance pickup trucks and SUVs, offer an extended warranty on those vehicles and pay a civil penalty of $305 million to settle claims of “cheating on emission tests and failing to disclose unlawful defeat devices,” the Justice Department said. Separately, the company agreed to pay certain vehicle owners $990 to $3,075 each — an amount that could total more than $300 million — to settle class-action claims.

The agreement includes $70 million to improve the efficiency of 200,000 catalytic converters that will be sold in the 47 states that do not require as efficient automotive technology as California, along with $19 million the firm will provide California to offset its vehicles’ harmful emissions. Environmental Protection Agency officials said these measures would eliminate at least 35,000 tons of nitrogen oxides, a smog-forming pollutant that causes heart and lung disease.

Fiat Chrysler admitted to no wrongdoing on its part in the settlement, but government officials noted the deal does not resolve any potential criminal liability.

The company said Thursday the settlements do not change its position that it did not engage in any deliberate scheme to cheat on emissions tests.

“We acknowledge that this has created uncertainty for our customers, and we believe this resolution will maintain their trust in us,” Mark Chernoby, the company’s head of North American safety and regulatory compliance, said in a statement.

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Thursday’s settlement, while substantial, pales in size to the more than $15 billion in penalties levied against German automaker Volkswagen in 2016 to resolve its own emissions-cheating scandal. The company admitted to programming millions of vehicles to activate emissions controls only during laboratory testing, vowed to spend billions to fix or buy back cars from customers and to invest in U.S. clean energy technology.

The Fiat Chrysler case dates to the final days of the Obama administration in early 2017, when the EPA accused the company of installing software that enables certain diesel trucks to emit far more pollutants than emissions laws allow. The company, which is based in London and was formed by a 2014 merger between U.S. automaker Chrysler and Italian automaker Fiat, denied those accusations, insisting its software met regulatory requirements.

The allegations involved 2014 to 2016 model year Dodge Ram 1500 pickup trucks and Jeep Grand Cherokees with 3.0-liter diesel engines. U.S. officials said the software reduced the amount of nitrogen oxide emitted during emissions tests, obscuring the fact that the vehicles actually spew more of the pollutant than is allowed under the Clean Air Act.

Acting EPA Administrator Andrew Wheeler told reporters that EPA career staffers had to go to extraordinary lengths to identify how the automaker had deceived regulators. “Part of the problem with FCA was that they kept reassuring us that they’re not cheating,” Wheeler said. “VW came forward much earlier.”

Wheeler and other top officials emphasized that Fiat Chrysler is a multinational corporation, as opposed to a U.S. one. Referring to the agreement, he said, “It also advances another key goal of President Donald Trump: leveling the playing field for American business. Hardworking Americans who follow the law, and play by the rules, should not suffer a competitive disadvantage.”

In May 2017, the Justice Department filed a civil complaint saying Fiat Chrysler installed software designed to evade emission controls in its popular vehicles. The complaint said the vehicles were “equipped with software functions that were not disclosed to regulators during the certification application process, and that the vehicles contain defeat devices.”

A defeat device is any technology that disables or interferes with a vehicle’s emissions controls in a way that allows a vehicle to meet government standards in a lab setting, even if it emits more pollution during real-world driving conditions.

Company officials have denied that the vehicles contained defeat devices or that their case was analogous to the charges against Volkswagen, arguing instead that the automaker had never attempted to create software to circumvent emissions rules. The company vowed at the time “to defend itself vigorously, particularly against any claims that the company engaged in any deliberate scheme to install defeat devices to cheat U.S. emissions tests.”

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Fiat’s technology came to light after the EPA expanded its vehicle testing to look for so-called defeat devices in September 2015, following the Volkswagen scandal.

FCA did not disclose the software to regulators, the EPA asserted when it first announced its accusations.”

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,” Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance, said at the time.

While the company did not acknowledge wrongdoing, Assistant Attorney General for Environment and Natural Resources Jeffrey Bossert Clark argued the settlement makes it clear that the automaker engaged in wrongdoing.

“There’s nothing to be disappointed about that,” Clark said. “You wouldn’t pay $331 million to the federal government if there were not a serious problem.”

In addition to the federal penalties, California will receive $78.4 million as part of the settlement. The state’s attorney general, Xavier Becerra, and Mary Nichols, who chairs the California Air Resources Board, told reporters in a phone call that Fiat Chrysler caused tangible harm to the environment through its actions.

Nichols said that while the company maintained that its action was inadvertent or not done on purpose, “We disagree with this.”

“The basic cheat here was that the company failed to disclose exactly what they were doing with this software. That’s illegal, the companies know that it’s illegal,” she said, adding, “It’s an important case in advancing the proposition that these standards mean what they say.”

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The settlement drew measured praise from Obama-era officials — a rare occurrence in the Trump era. “It is good to see some signs of life over there at EPA,” Giles said in an email.

In a regulatory filing last fall, the company warned of likely penalties to come if it settled the legal fights over its emissions technology, and disclosed that it was setting aside $825 million, based on estimates of the liabilities it might face.

The company also acknowledged that more than money was at stake.”

Resolution of these matters may also adversely affect our reputation with consumers,” it wrote, “which may negatively impact demand for our vehicles which in turn could have a material adverse effect on our business.”

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