Analysts Say Fiat’s Emission Scandal Tiny Compared To VolksWagen Scandal
Accusations that Fiat Chrysler duped regulators about fuel emission levels pales in comparison to that of the Volkswagen scandal, analysts told Reuters.
Analysts estimate that Fiat will have to pony up around $800 million at most if the government can prove the company knowingly used so-called cheat devices to downplay emission levels. Fiat continues to deny allegations it used software to cheat emission rules. Authorities must prove the company purposely administered the devices.
The Department of Justice filed a lawsuit Tuesday accusing FCA of illegally using the software on 104,000 diesel-powered vehicles sold since 2014, which it said led to higher than allowable levels of nitrogen oxide (NOx).
The Environmental Protection Agency believes Fiat took a page out of VolksWagen’s book. The German automaker, for its part, pleaded guilty in March to placing cheat devices on more than 500,000 vehicles. VolksWagen was sentenced to three years of probation and forced to pay billions of dollars in penalties.
VolksWagen’s devices would only kick on during road conditions when emission measuring tools were not engaged.
The company agreed to spend up to $25 billion in the U.S. to address claims from owners, and environmental regulators. Fiat sits on net debt of $5.70 billion and lacks VolksWagen’s economies of scale and cash.
Analysts noted Fiat’s vehicles are equipped with selective catalytic reduction (SCR) systems for cutting nitrogen oxide emissions, so fixing the problem would be a simple as installing a software update.
“Should this be the case, we estimate a total cost per vehicle of not more than around $100, i.e. around $10 million in aggregate,” Evercore ISI analyst George Galliers said in a note.
The company said Friday it plans on updating the software systems of more than 100,000 late model Jeep Grand Cherokees and Dodge Ram 1500 diesels. Fiat is making the move despite maintaining it has not engaged in a scandal like the one that has engulfed Volkswagen since 2015.
Fiat sold more than 50,000 light duty diesel Rams in 2015 and 2016, a number far outmatching those sold by other competitors in the diesel market. EPA has yet to approve and certify the company to sell those models this year until Fiat can rig up a fix sufficient to satisfy the Justice Department.
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