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Overturned fuel-economy penalty rollback could cost FCA $583M

Breana Noble
The Detroit News

Fiat Chrysler Automobiles NV could be on the line for almost $583 million following a court of appeals decision in August that overturned the Trump administration's fuel-economy penalty rollback.

The disclosure was made in a quarterly filing this week with the U.S. Securities & Exchange Commission after the Italian American automaker shared record financial results. In August, the U.S. Court of Appeals for the Second Circuit in New York had determined that the Trump administration's efforts in July 2019 to delay because of its negative economic impact a more-than-double increase in the penalty automakers must pay for not meeting fuel-economy standards was unlawfully too late.

Jeep in September debuted the 2021 Wrangler 4xe, the first plug-in hybrid Jeep in North America.

The exact effect of that ruling is unknown, the automaker noted in the filing, as it is unclear if the mandate will be applied retroactively to the 2019 model year for which the National Highway Traffic Safety Administration has not made final determinations. 

If it is, the company said it may need to accrue additional amounts in order to pay the increased penalties and additional funds owed under agreements for the purchase of regulatory emissions credits from competitors that went above and beyond the standards.

NHTSA could appeal the decision. A spokesman for the agency declined to comment due to the pending litigation. An FCA spokesman referred The Detroit News to the statements in the filing when asked for further comment.

As a part of wide-ranging reforms to civil penalties ordered in 2015 by Congress, the safety administration issued rules to raise fines to $14 from $5.50 for every 0.1 mile per gallon of fuel more that new vehicles use over the standard.

"Each vehicle has to meet its own miles per gallon for that footprint" segment, said John Heywood, professor of mechanical engineering at the Massachusetts Institute of Technology. "If Chrysler's numbers are accurate, they're in trouble in some of the footprints where they sell quite a few number of vehicles."

A group of states that did not include Michigan and two environmental groups challenged the Trump administration's decision to delay the increase. They noted that the penalties had increased once in more than 40 years — to $5.50 from $5 in 1997 — and their value had declined due to inflation.

The overall industry has not met fuel-economy standards since 2015, according to the Environmental Protection Agency. Detroit manufacturers for the 2018 model year, the most recent year for which the data is available, lagged behind their foreign-owned competition. General Motors Co., Ford Motor Co. and FCA ranked 12th, 13th and 14th respectively among the 14 manufacturers measured.

Ford did not make a similar disclosure in its quarterly filing this week regarding the court decision, and the company doesn't have an estimated cost to report, a company spokeswoman said. GM reports quarterly earnings next week. The Detroit automaker is in compliance for 2019, spokeswoman Jeannine Ginivan said.

For the 2019 calendar year, according to its annual report, Fiat Chrysler paid $495 million in regulatory expenses and regulator credits mostly in North America and Europe.

bnoble@detroitnews.com

Twitter: @BreanaCNoble