EPA accuses Fiat Chrysler of emissions cheating

Keith Laing, and Michael Wayland
The Detroit News

Fiat Chrysler Automobiles NV and U.S. government officials are at odds over the company’s compliance with federal fuel emissions regulations on about 104,000 diesel-powered pickups and SUVs.

The U.S. Environmental Protection Agency on Thursday issued a “notice of violation” accusing the automaker of failing to disclose software that it says could be similar to the so-called “defeat devices” Volkswagen AG used to cheat emissions testing on millions of its diesel cars.

Fiat Chrysler CEO Sergio Marchionne on Thursday adamantly denied that the company’s diesel engines have any kind of illegal software or defeat devices. He said drawing comparisons between Fiat Chrysler’s software and the Volkswagen software that purposely deceives testing equipment is “absolute nonsense.”

“There is nothing in common between the VW reality and what we are describing here,” he told reporters during a conference call shortly after the EPA’s announcement. “The dispute that is going on now between the EPA and the FCA is whether the calibration that was filed (during testing to certify emission requirements) was a calibration that met all regulations.”

At the heart of the dispute appears to be the company’s use of auxiliary emission control devices (AECDs), which automakers can legally use to deactivate a vehicle’s emission control system in certain conditions. The company contends the vehicles are fully in compliance with regulations; however, Marchionne did not completely dispute some software may not have been disclosed.

“Anything which is undisclosed by definition is a defeat device, and if I use that standard, that would encompass our case and a gazillion other cases where so-called undisclosed AECDs have been established,” he said. “There are defeat devices that are designed to defeat the test cycle. Those are two different things. And this software doesn’t look for anything. It just runs. All the time.”

The EPA contends that the automaker did not disclose at least eight AECDs on the Jeep Grand Cherokees and Dodge Ram 1500 pickups from the 2014-16 model years with 3-liter diesel engines that are in question. Regulators require the disclosures when companies apply for certificates that are required to sell cars in the U.S.

“Some of the devices appeared to cause the vehicles to perform differently when being tested than in normal operations and use,” Giles said. She said the agency was still investigating their nature and impact, but said “there is no doubt that they are contributing to illegal pollution.”

Giles said the EPA wants Fiat Chrysler to clearly demonstrate why “the hidden software” is not a defeat device. She said meetings to date “have not produced a viable explanation of how the AECDs conform with the law.”

He said the company has been in talks with the EPA about the testing for more than a year. He called it “strange and unfortunate” that federal officials decided to file the notice of violation — particularly “in the last few days” of the Obama administration.

Giles said Thursday they are holding Fiat Chrysler to the same standards to which other automakers are held when it comes to U.S. pollution rules.

“This is a clear and serious violation of the Clean Air Act,” she said. “The undisclosed software results in increased emissions of nitrogen oxides from the vehicles, threatening public health by polluting the air that we breathe.”

FCA may be liable for civil penalties and injunctive relief, the EPA said in a statement.

Stock nosedives

The vehicles in question remain safe and legal to drive, federal officials said. The company has no plans to put a stop-sale on any of the vehicles. However, vehicles with the EcoDiesel engines in question have not been produced since at least September, Marchionne confirmed, because the EPA has not certified the engines for the 2017 model year.

Trading was halted on Fiat Chrysler’s stock for a short period Thursday after shares plunged more than 15 percent on the EPA’s announcement. They closed at $9.95 per share, down 10.3 percent.

Marchionne on Monday declined to comment on class-action lawsuits about its diesel vehicles. But he did say the company stands behind its products. “We wouldn’t have sold them otherwise,” he told members of the automotive press Monday during the Detroit auto show.

The automaker faces class-action lawsuits for both light-duty and heavy-duty vehicles with diesel engines.

One suit accuses Fiat Chrysler of installing software made by Robert Bosch GmbH that masked excess exhaust emissions in 140,000 Ram 1500s and 9,000 Jeep Grand Cherokees. Defending the company in the suit is Robert Giuffra Jr., a lead attorney involved in Volkswagen AG’s diesel emissions-cheating scandal.

At least two other lawsuits allege that diesel-powered heavy-duty pickups made by the automaker used defeat devices intended to cheat emissions testing. The latest lawsuit names FCA US, the company’s North American-based operations, as well as engine supplier Cummins Inc. It accuses the companies of using software designed to conceal its vehicles’ emissions in more than 450,000 heavy-duty 2500 and 3500 Dodge and Ram pickups with 6.7-liter diesel engines from the 2007-12 model years.

VW differences

Fiat Chrysler is the second major automaker to face accusations of installing defeat devices on its diesel engines to cheat federal emission standards.

The U.S. government announced Wednesday it is indicting six present and former Volkswagen AG executives and charging the company with three criminal felony counts for what regulators called a “10-year conspiracy” to rig hundreds of thousands of diesel cars to cheat U.S. emission standards. Volkswagen is also being 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 earlier this 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 must contribute $4.7 billion to federal efforts to reduce pollution.

Rebecca Lindland, senior analyst for Kelley Blue Book, noted there are differences between Volkswagen’s emission scandal and Fiat Chrysler’s situation.

“It’s important to note that this is not exactly the same issue as VW faced, but any mention of a recall related to diesel engines and emissions casts a pall on a company celebrating recent industry accolades for its Chrysler Pacifica and a high-profile investment in U.S. manufacturing,” she said in a statement. “We’ll have to wait and see what comes of it, but at this point it’s only an investigation into NOx emissions, not an accusation of deliberate cheating by FCA.”

Environmentalists praised regulators for investigating FCA’s diesels.

“No profit margin is worth poisoning our neighborhoods with toxic smog,” Sierra Club Executive Director Michael Brune in a statement, noting recent accusations against Volkswagen, Mercedes and Mitsubishi in Japan, and Chevrolet in Europe.

“This deceit is as dangerous as the sickening smog these vehicles leave behind,” he continued. “Consumers deserve corporate accountability and clean cars that don’t make our families sick.”

Fiat Chrysler started selling the Ram 1500 EcoDiesel in 2014 to achieve better fuel economy. The vehicles, which are touted as achieving a segment-leading 29 mpg, were met with high praise from media and consumers.

In September 2014, the company said it planned to increase production of the diesel pickup from 10 percent to 20 percent of its light-duty pickup mix.