FCA agrees billion dollar settlement over diesel breach

The cross-continental carmaker Fiat Chrysler Automobiles (FCA) has agreed to a US$800 million settlement over illegal diesel software that produced dodgy emissions-test results.

While Volkswagen is North America’s poster child for illegal behaviour, FCA has agreed to pay US$311 million in civil penalties to national and Californian regulators, US$280 million in owners’ claims and another US$105 million in extended warranty reserves.

Sued by both the state of California and the US Department of Justice, FCA has agreed to pay more per car than the Volkswagen Group’s US$25 billion settlement did.

The total settlement breaks down to US$6,692 for each of its 104,000 Ram 1500 and Jeep Grand Cherokee diesels it sold from 2014 to 2016. Both Volkswagen and FCA paid around US$2500 per car for the California and DOJ settlements, and FCA’s customers will each receive about US$2800.

FCA had set aside US$800 million in reserves to cover the case, which emerged as regulators insisted it had used “defeat” devices to cover up its true emissions figures, even though FCA insisted it had done nothing illegal.

"Fiat Chrysler tried to evade these standards by installing software to cheat emissions testing,” California Attorney General Xavier Becerra said.
“The company not only violated the law and our trust, but did so at the expense of our environment."

And that may not be the end of it with the DOJ insisting the settlement did not end its criminal investigations into the emissions cheat, while the US stock market watchdog, the Securities and Exchange Commission, was also investigating FCA.

"Fiat Chrysler deceived consumers and the federal government by installing defeat devices on these vehicles that undermined important clean air protections," said acting Environment and Protection Agency (EPA) administrator, Andrew Wheeler.

"The settlement sends a clear and strong signal to manufacturers and consumers alike – the Trump administration will vigorously enforce the nation’s laws designed to protect the environment and public health."

And FCA wasn’t the only company in trouble over its defeat device, with the ubiquitous German supplier Robert Bosch GmbH – the same company that supplied the illegal software for Volkswagen’s 11 million emissions-cheater cars – also settling with diesel owners for US$27.5 million.

Bosch also agreed to a US$103.5 million settlement with 47 US states, which accused it of “enabling” the cheat and the New York Attorney General’s office argued it had a duty of care to know its customers could have used the built-in shortcut.

Unlike Volkswagen, which pleaded guilty to three counts of felony, neither Bosch nor FCA have admitted any guilt.

The supplier instead argued it settled because of: "Bosch’s desire to move forward and to spare the company the very substantial costs and the burden on the company’s resources that would be required to litigate these issues."

In a statement, FCA also refused to acknowledge any wrongdoing.

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,” FCA argued.

“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,” FCA's head of North American safety and regulatory compliance, Mark Chernoby, 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.

“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.”

That didn’t inspire confidence or credibility with justice officials in the US, though, with US Assistant Attorney General Jeff Clark hitting back at a news conference.

"You wouldn't pay $311 million total dollars to the federal government in civil penalties if there were not a serious problem," Clark insisted.

But the emissions-cheating investigations haven’t finished in North America and the next company in the crosshairs is Daimler AG, the parent company of Mercedes-Benz.

In the final year of Dr Dieter Zetsche’s Chairmanship, Daimler is also under investigation for diesel-emission irregularities and its annual reports show it has set aside hundreds of millions of dollars to deal with the issue.

While the DOJ and the EPA refused to comment, Daimler admitted it was being investigated in both Germany and the US, predicting in October that its financial year profit would fall 10 percent because of “government proceedings and measures”.