Feds send message to 'bad actors' with $800M Fiat Chrysler settlements

Keith Laing
The Detroit News
Fiat Chrysler Automobiles world headquarters in Auburn Hills.

Washington —  Fiat Chrysler Automobiles NV will pay about $800 million to settle allegations from federal regulators that the company used software on about 104,000 diesel-powered pickups and SUVs that's similar to “defeat devices” used by Volkswagen AG to cheat U.S. emissions-testing, the U.S. Department of Justice and Environmental Protection Agency announced Thursday.

The government said the stiff penalties were intended as a warning to other "bad actors" that might be tempted to violate laws protecting the environment and health.

The settlement requires the Italian-American carmaker to pay $515 million in civil penalties to the DOJ, EPA and California Air Resources Board. That figure includes $305 million in fines; $185 million for recalls and repairs; $19 million to California to mitigate violations of that state's environmental laws; and $6 million to United States Customs and Border Protection to resolve allegations of illegally importing 1,700 noncompliant vehicles.

As part of the settlement, FCA will pay $72.5 million to a group of 52 local jurisdictions that includes Michigan and 48 other states, as well as Puerto Rico, Guam and Washington, D.C. Attorney General Dana Nessel said $2.1 million of the money earmarked for states will go to Michigan.  

In a separate settlement with a steering committee that was set up to represent drivers who were affected by the alleged emission cheating, FCA will pay $280 million to compensate drivers of Jeep Grand Cherokees and Dodge Ram 1500 pickups from the 2014-16 model years with 3-liter V-6 diesel engines.

German auto supplier Bosch, which designed the software for FCA, will pay an additional $27.5 million as part of the plaintiffs' settlement. Bosch will pay $2.7 million to Michigan. 

Drivers of the affected models could receive as much as $2,800 each under the settlement. FCA will be subjected to additional penalties if at least 85 percent of the affected vehicles are not repaired within two years of the final court approval of the proposed settlement. 

Acting EPA Administrator Andrew Wheeler said in a conference call with reporters the settlement with Fiat Chrysler "sends a clear and strong signal to manufacturers and consumers" that "the Trump administration will vigorously enforce the nation's laws designed to protect the environment and public health."

"Fiat Chrysler’s use of defeat emissions controls is a clear violation of the Clean Air Act," he said. "But not only did they violate the law, they tried to hide their actions. 

"Today’s settlement should make it abundantly clear that anyone who skirts environmental laws to gain a competitive advantage will be caught and they will prosecuted," Wheeler continued. "The message we are sending today is clear: We will enforce the law. We will protect the environment and public health, and if you try to cheat the system and mislead the public, you will be caught. Those that violate public trust in pursuit of profits will forfeit both."

Assistant Attorney General Jeff Clark added: "A multinational corporate bad actor... seriously violated American emissions laws, to the detriment of the health and welfare of the people of the United States. That is a very serious offense, and we will ensure to the extent we can with the enforcement tools we have that will remediate and block attempts do that again."

FCA will not be required to admit wrongdoing as part of the settlement and the company is not going to be required to buy back any of the affected vehicles. 

"We acknowledge that this has created uncertainty for our customers, and we believe this resolution will maintain their trust in us,” Mark Chernoby, FCA’s Head of North American Safety and Regulatory Compliance, said in a statement.

“We have implemented rigorous new validation procedures and updated our training programs to ensure continued compliance with the increasingly complex regulatory environment,” Chernoby continued. “Such measures are consistent with our mission to deliver advanced technologies that deliver value to our customers and that enhance the environmental performance of our products.”

Federal regulators alleged that FCA did not disclose at least eight auxiliary emission control devices on the Jeeps and pickups covered under the settlement. Automakers can legally deactivate a vehicle’s emission control system under certain conditions, but regulators require the disclosures when companies apply for certificates that are required to sell cars in the U.S.

The automaker has contended for years that its vehicles were fully in compliance with regulations, even as it worked toward a settlement, and took pains to note the differences between its case and that of Volkswagen AG. It has noted that its affected vehicles require only a software fix, unlike Volkswagen, which had to provide new hardware to satisfy federal regulators. 

FCA warned investors in the third quarter of 2018 of a possible $810 million (700-million euro) charge related to the diesel investigation. The company initially feared it could face fines of up to $4.6 billion. 

In the aftermath of the Volkswagen scandal, six of the German automaker's present and former executives were indicted, and Volkswagen itself was charged with three criminal felony counts for what regulators called a 10-year conspiracy to rig hundreds of thousands of diesel cars to evade U.S. emission standards.

Volkswagen was forced to pay $2.8 billion in criminal fines and $1.5 billion in civil penalties related to the fraud.

That’s in addition to a $14.7 billion settlement the company reached last year with the EPA that calls for Volkswagen to spend $10 billion to either buy back or repair about 475,000 2-liter diesel cars sold between 2009 and 2015; the company also was required to contribute $4.7 billion to federal efforts to reduce pollution.

Elizabeth Cabraser, lead counsel for the plaintiffs in the FCA litigation, said in an interview with The Detroit News that the carmaker had an obligation to compensate drivers who believed they were getting better fuel efficiency from their diesel vehicles. 

"Folks paid a few thousand dollars per vehicle to get the diesel premium," said Cabraser, who also represented Volkswagen drivers in that company's emissions case. "What they think they're getting is performance, better miles-per-gallon and torque, and because those were marketed as 'EcoDiesels,' they thought they were getting environmental benefits as well. They got everything else besides the environmental benefits." 


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Twitter: @Keith_Laing