For How Long Did Fiat-Chrysler Hide its EPA Diesel Fiasco? Investors Found out the Hard Way Today

For How Long Did Fiat-Chrysler Hide its EPA Diesel Fiasco? Investors Found out the Hard Way Today

Just days ago, CEO Marchionne tried to soften up Trump.

Today, the EPA disclosed that Fiat-Chrysler was neck-deep in the diesel-gate fiasco pioneered by Volkswagen. When Volkswagen settled claims in a Canadian court in December for C$2.1 billion, it brought total costs so far to $18 billion, and it’s still not over. So these things can get expensive.

Volkswagen’s strategy at the outset had been to keep investors in the dark, and deny, deny, deny, until it finally buckled. Fiat-Chrysler (FCA) appears to follow the same time-honored corporate strategy.

The EPA today issued a notice of violation to FCA, alleging violations of the Clean Air Act…

…for installing and failing to disclose engine management software in light-duty model year 2014, 2015 and 2016 Jeep Grand Cherokees and Dodge Ram 1500 trucks with 3.0 liter diesel engines sold in the United States. The undisclosed software results in increased emissions of nitrogen oxides (NOx) from the vehicles. The allegations cover roughly 104,000 vehicles.

EPA is also investigating whether the auxiliary emission control devices constitute “defeat devices,” which are illegal.

“We continue to investigate the nature and impact of these devices,” said Cynthia Giles, Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance. “All automakers must play by the same rules, and we will continue to hold companies accountable that gain an unfair and illegal competitive advantage.”

At the bottom of the press release is the key (emphasis added):

In September 2015, EPA instituted an expanded testing program to screen for defeat devices on light duty vehicles. This testing revealed that the FCA vehicle models in question produce increased NOx emissions under conditions that would be encountered in normal operation and use. As part of the investigation, EPA has found at least eight undisclosed pieces of software that can alter how a vehicle emits air pollution.

FCA, in its response, even admitted that it has been in negotiations with the EPA for “months”:

FCA US has spent months providing voluminous information in response to requests from EPA and other governmental authorities and has sought to explain its emissions control technology to EPA representatives. FCA US has proposed a number of actions to address EPA’s concerns, including developing extensive software changes to our emissions control strategies that could be implemented in these vehicles immediately to further improve emissions performance.

On December 1, 2016, FCA and German engineering company Bosch were hit by a lawsuit seeking class action status, filed by law firm Hagens Berman. It alleged that FCA’s vehicles equipped with “Ecodiesel” engines and “Bosch EDC17″ emissions controlling software produce up to 10 times as much NOx as the legal limit, and were sold “under false pretenses.”

The profit motive? According to the lawsuit:

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.