Fiat-Chrysler Settles On Emissions Requirements for Diesels

Fiat Chrysler Automobiles N.V. (NYSE: FCAU / MTA: FCA) announced today that its wholly owned subsidiary FCA US LLC has reached final settlements on civil, environmental and consumer claims with the U.S. Environmental Protection Agency (EPA), U.S. Department of Justice (DOJ), the California Air Resources Board (CARB), the State of California, 49 other States and U.S. Customs and Border Protection, agreeing to pay approximately $400 million in civil penalties to resolve differences over diesel emissions requirements.

FCA US has also settled a putative class action on behalf of private consumers.

Customer compensation, the estimated future cost of the extended warranty and the cost of environmental mitigation efforts also account for approximately $400 million. The resulting $0.8 billion total is in line with the financial charge taken by the Company for this purpose in third-quarter, 2018.

The settlements do not change the Company’s position that it did not engage in any deliberate scheme to install defeat devices to cheat emissions tests. Further, the consent decree and settlement agreements contain no finding or admission with regard to any alleged violations of vehicle emissions rules.

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

FCA US will conduct an emissions recall to update emission control software in an estimated 100,000 model-year 2014-2016 Ram 1500 pickups and Jeep Grand Cherokee SUVs equipped with 3.0-liter EcoDiesel V-6 engines. The software reflash does not affect average fuel economy, drivability, durability or refinement of the vehicles.

Each current and former owner and lessee of these vehicles will be eligible to receive a payment averaging $2,800 as part of the plaintiff steering committee settlement. The affected vehicles will also qualify for an extended warranty in connection with the software update.

“We have implemented rigorous new validation procedures and updated our training programs to ensure continued compliance with the increasingly complex regulatory environment,” Chernoby said. “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.”

The settlements are now lodged with the San Francisco division of the United States District Court, North District of California, where they await judicial approval. The approximately $400 million in civil penalties includes:

  • $305 million payable to the U.S. Environmental Protection Agency (EPA), U.S. Department of Justice (DOJ) and the California Air Resources Board (CARB) for environmental claims
  • $13.5 million to the California Attorney General for consumer claims and mitigation expenses
  • $72.5 million to various other state attorneys general for environmental and consumer claims
  • $6 million to Customs and Border Protection

In addition, FCA US will pay $19 million to the State of California for emissions mitigation initiatives, while also financing the upgrade of 200,000 high-efficiency catalytic converters through the aftermarket.

Affected customers will be advised when they may schedule service appointments. FCA US is in the process of establishing the required logistics to identify vehicle owners and provide service and remuneration.

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