Coverage: EPA accuses Fiat Chrysler of evading regulations

The Environmental Protection Agency on Thursday accused Fiat Chrysler Automobiles NV of illegally using hidden software to allow excess diesel emissions to go undetected.

David Shepardson and Bernie Woodall of Reuters had the news:

FCA shares plummeted as the maximum fine is about $4.6 billion. The EPA action affects 104,000 U.S. trucks and SUVs sold since 2014, about one-sixth the vehicles in the Volkswagen case.

The EPA and California Air Resources Board told Fiat Chrysler it believes its undeclared auxiliary emissions control software allowed vehicles to generate excess pollution in violation of the law and each issued notices of violation.

The U.S. Justice Department is investigating, Fiat Chrysler said Thursday. New York Attorney General Eric Schneiderman said in a statement he is “deeply troubled” by the EPA findings and “will investigate the claims against Fiat Chrysler and stands ready to work with our state and federal partners.”

Fiat Chrysler Chief Executive Sergio Marchionne angrily rejected the allegations at a hastily-assembled conference call with reporters, saying there was no wrongdoing and the company never attempted to create software to cheat emissions rules by detecting when the vehicle was in test mode.

Brent Snavely and Nathan Bomey of the Detroit Free Press focused on Fiat Chrysler contesting the allegations:

In a quickly arranged news conference, Marchionne called the allegations from the U.S. Environmental Protection Agency “unadulterated hogwash” and “absolute nonsense,” and he pushed aside comparisons to Volkswagen.

FCA’s violations as outlined by the EPA involve about 104,000 vehicles, compared with Volkswagen’s more than  half a million vehicles.

“My biggest fear is people will start drawing parallels,” he said.

The automaker’s stock dropped 10.5%, or $1.14 per share, to close at $9.95 per share as investors reacted to the EPA’s announcement. The EPA has the authority to fine automakers up to $44,539 per vehicle for the worst violations of the Clean Air Act.

FCA is accused of installing undisclosed software on its Jeep Grand Cherokee SUVs and Ram 1500 EcoDiesel pickups from the 2014-16 model years, causing increased emissions of nitrogen oxides (NOx) from the vehicles.

“This is a clear and serious violation of the Clean Air Act …There is no doubt they are contributing to illegal pollution,” Cynthia Giles, assistant administrator for EPA’s office of compliance, said Thursday. “Some of the devices appear to cause the vehicle to perform differently when being tested and when in use.”

Joann Muller of Forbes reports that the EPA is making an example of Fiat Chrysler after missing out on Volkswagen’s issues:

The charges are the direct fallout from the sweeping diesel emissions scandal that engulfed Volkswagen after the German automaker admitted in September 2015 that it had installed cheating software on 11 million vehicles, including 600,000 in the United States. VW’s software made its diesel vehicles run cleaner during emissions testing, but shut off those controls during normal driving, allowing the cars to emit Nitrogen Oxide (NOx) exhaust well beyond legal limits.

“Once again, a major automaker made the business decision to skirt the rules and got caught,” Mary D. Nichols, chair of the California Air Resources Board, said about the latest charges against FCA. “CARB and U.S. EPA made a commitment to enhanced testing as the Volkswagen case developed, and this is a result of that collaboration.”

But the charges against FCA don’t appear to be nearly as severe as those against VW. Right now, all that FCA is accused of is failing to disclose certain engine management software to the EPA, in violation of the federal Clean Air Act. The agency has not determined whether the software is an illegal “defeat device” designed to circumvent testing, as in the case of Volkswagen.

The law states that software is not considered a defeat device if it’s needed to protect the engine from damage or accident. A person familiar with the case said FCA believes its engine management software falls into this category because it’s designed to “give a break” to the diesel exhaust system when it gets too hot.