Fiat Chrysler to pay $500M for emissions cheating

Source: Maxine Joselow and Ellen M. Gilmer, E&E News reporters • Posted: Friday, January 11, 2019

Fiat Chrysler Automobiles will pay more than $500 million to settle allegations that it violated the Clean Air Act by cheating on auto emissions tests, EPA and the Justice Department announced today.

This marks a major enforcement action and the second settlement between an automaker and the U.S. government over emissions-cheating allegations. The first settlement notoriously involved Volkswagen AG.

In a rare agency news conference during the ongoing partial government shutdown, EPA and DOJ officials emphasized the seriousness of the alleged offense.

“Today’s settlement should make it abundantly clear that anyone who skirts environmental laws to gain a competitive advantage will be caught and will be prosecuted,” acting EPA Administrator Andrew Wheeler said at DOJ headquarters.

Jeffrey Bossert Clark, assistant attorney general for DOJ’s environment division, called the penalty “highly significant” and said it would deter similar corporate misbehavior.

“A multinational corporate bad actor seriously violated American laws to the detriment of the health and welfare of the people of the United States,” he said. “That is a very serious offense.”

According to government officials, FCA manufactured more than 100,000 Jeep SUVs and Ram pickup trucks with diesel engines that spewed more pollution on the roads than during EPA lab tests. The allegations cover model years 2014 through 2016. EPA’s investigation began during the Obama administration.

The vehicles were allegedly equipped with software — known as “defeat devices” — that would activate pollution controls in the lab but not in certain real-world conditions.

FCA must pay a $305 million penalty to settle claims that it cheated on emissions tests, and it must recall vehicles and implement a mitigation program to address the impacts — efforts expected to cost $185 million.

EPA enforcement chief Susan Bodine said it’s difficult to measure the level of increased pollution spewed from the affected vehicles, but Clark said FCA’s efforts would “more than mitigate for” an estimate of 3,500 excess tons of nitrogen oxides (NOx).

Separately, U.S. Customs and Border Protection will require FCA to pay a $6 million penalty for illegally importing vehicles, and a settlement with California requires the company to pay $19 million to mitigate excess emissions in that state. A related class-action settlement would require FCA to provide around $300 million in consumer relief.

On a press call this morning, California Attorney General Xavier Becerra (D) and California Air Resources Board Chairwoman Mary Nichols faulted FCA for the alleged release of harmful NOx in the state.

“You just can’t cheat and get away with it,” Nichols said.

Becerra noted that nitrogen oxides contribute to ground-level ozone and are associated with health conditions including asthma, respiratory illness and cardiovascular disease.

“California, as much as we’ve been doing, still has some pretty dirty air in some parts of the state,” he said. “So for us, it’s important to make progress … and get a settlement that will make things right.”

As part of the deal, FCA will not admit any wrongdoing. The company maintains that its vehicles adhered to federal standards and that it never intended to break the law.

“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,” Mark Chernoby, FCA’s head of North American safety and regulatory compliance, said in a statement.

“We acknowledge that this has created uncertainty for our customers, and we believe this resolution will maintain their trust in us,” he added.

For environmentalists and auto industry insiders, the deal contains strong echoes of the infamous VW emissions-cheating scandal, which began to unfold in 2015.

Still, there are some important differences between the predicaments of the two automakers.

First, the VW case was greater in scope. It affected 500,000 vehicles in the United States and eventually involved $1.5 billion in civil penalties and $2.8 billion in criminal penalties. FCA could still be subject to separate criminal claims.

Second, VW was quick to admit wrongdoing, while FCA repeatedly reassured the federal government that it was following the law.

“Part of the problem with FCA was that they kept reassuring us they were not cheating,” Wheeler said. “Volkswagen came forward much earlier.”

EPA and DOJ noted that staff were able to work on finalizing the agreement during the government shutdown because a court order set a deadline of today for filing proposed settlements. Staff working to meet a court order are not subject to furlough.

The DOJ settlementis subject to 30 days of public comment and must be approved by the U.S. District Court for the Eastern District of Michigan. The related settlements must be approved by the U.S. District Court for the Northern District of California.