E.P.A. Accuses Fiat Chrysler of Secretly Violating Emissions Standards

Source: By HIROKO TABUCHI, New York Times • Posted: Friday, January 13, 2017

The Environmental Protection Agency on Thursday accused Fiat Chrysler of installing secret software that allowed more than 100,000 of its diesel vehicles to emit pollutants above legal levels.

The case has echoes of one against Volkswagen, which on Wednesday pleaded guilty to criminal conspiracy as part of a widespread emissions-cheating scheme. In both cases, the government focused on software in vehicles that can adjust emissions levels.

The accusations against Fiat Chrysler also appeared to be part of a last push by the Obama administration to finish investigations and negotiations involving companies.

The emissions breach described by the government “threatens public health by polluting the air we breathe,” said Cynthia Giles, an assistant administrator at the E.P.A. She said the software in question resulted in excess emissions of nitrogen oxides, which have harmful health effects.

Ms. Giles stopped short of describing the software as a so-called defeat device of the sort used by Volkswagen to cheat on diesel emissions tests. But she said there was no doubt that Fiat Chrysler’s software “is contributing to illegal pollution.”

Sergio Marchionne, chief executive of Fiat Chrysler, mounted an impassioned defense, denying that the company had intentionally broken the law.

“There’s not a guy” at the automaker “who would try something as stupid” as cheating on emissions tests, he said on a call with reporters.

“We don’t belong to a class of criminals,” Mr. Marchionne said. “We have done, in our view, nothing that is illegal.”

The 104,000 affected vehicles include the light-duty model year 2014, 2015 and 2016 Jeep Grand Cherokees and Dodge Ram 1500 trucks with 3-liter diesel engines sold in the United States, the E.P.A. said.

At issue is software installed in all modern diesel vehicles that calibrates an engine’s performance and controls emissions levels. Federal regulations allow diesel cars to shut off emissions controls in certain situations — to protect an engine from overheating, for example.

In the Volkswagen case, illegal software caused cars to shut down emissions controls completely during normal driving conditions. In the case involving Fiat Chrysler, emissions controls in the affected cars shut down only during some driving conditions, according to the E.P.A.

Still, the agency believes that the software in the Fiat Chrysler cars caused emissions controls to shut down in too many situations — including normal driving conditions — essentially making it function like a defeat device.

Mr. Marchionne rejected the accusations. Fiat Chrysler’s emissions control systems met legal requirements, he said, and the carmaker had not willfully hidden any aspect of those systems.

“We are having a difference of opinion as to whether the calibrations met the regulations or did not meet the regulations,” he said.

The company said it had spent months responding to questions from federal regulators and had proposed remedies to address their concerns, including extensive software changes to emissions control systems that the automaker said could be made immediately.

John German, senior fellow at the International Council on Clean Transportation, whose initial work on Volkswagen’s emissions levels exposed cheating at the automaker, said the E.P.A.’s case against Fiat Chrysler was not as clear-cut. Nonetheless, he said he expected Fiat Chrysler to have difficulty defending itself against the government’s accusations.

“Fiat Chrysler will not only have to defend their software, but prove that it does the bare minimum to protect the car’s engines,” Mr. German said.

The complexity of modern diesel technology, and the trade-off between emissions controls and engine performance, had motivated automakers like Fiat Chrysler to cut corners, he said.

“It’s very enticing to take shortcuts,” he said. “But it’s absolutely possible for a diesel car to fully comply with U.S. emissions standards, and have good drivability and performance,” he said. “It just costs money.”

If Fiat Chrysler is found to have violated the Clean Act Act, as the E.P.A. says, it faces potential penalties of up to $44,500 for each affected car, or more than $4.5 billion in total.

The discovery of cheating in Volkswagen vehicles, 600,000 of which were sold in the United States, set off numerous investigations.

On Wednesday, federal prosecutors announced criminal charges against six Volkswagen executives for their roles in the emissions manipulation. Volkswagen also formally pleaded guilty to conspiracy to commit wire fraud and to violate the Clean Air Act, and to customs violations and obstruction of justice.

For Volkswagen, the financial cost of the emissions cheating has been hefty. The German automaker is set to pay $4.3 billion in criminal and civil penalties in connection with the federal investigation, bringing the total cost of the deception to the company in the United States, including settlements of suits by car owners, to $20 billion — among the costliest corporate scandals in history.

Ms. Giles declined to comment on whether other automakers were being scrutinized, but said investigations into diesel emissions levels were continuing.

Stock in Fiat Chrysler tumbled after the E.P.A.’s announcement, falling more than 15 percent before heavy volume forced the New York Stock Exchange to suspend trading. The stock eventually recovered some of its losses, but ended the day down 10 percent.

The accusations come at a difficult time for Fiat Chrysler. Until recently, the company was experiencing rapidly rising sales in the United States market, outpacing rivals like Ford and General Motors. An increasing interest among Americans in trucks and sport utility vehicles helped fuel brisk sales of the automaker’s Jeep and Ram pickup models, even as sales of its cars languished.

But a lawsuit last year accused the company of inflating sales figures, and Fiat Chrysler subsequently became the subject of a Securities and Exchange Commission investigation, which is not complete. Sales slowed after news of the inquiry. The company sold 2.24 million cars and light trucks last year, a decline of 0.4 percent from 2015.

European manufacturers have been trying for years to build a following for diesel-powered cars in the United States. In addition to Volkswagen and Audi, BMW, Jaguar, Land Rover and Mercedes-Benz all offer luxury models with diesel engines, although those vehicles make up a small fraction of the companies’ total sales.

Diesel models account for a modest portion of Fiat Chrysler’s Ram pickup trucks. In 2016, the company sold 489,418 Ram trucks, and 11 percent were equipped with diesel engines, according to data compiled by Hybridcars.com. That was still enough to make it the top-selling diesel light vehicle in the country, just ahead of Ford’s diesel Transit vans.

All other diesel vehicles had much lower sales. The third-best-selling model was the diesel version of Chevrolet’s Colorado pickup, which General Motors sold 8,596 of last year. Fiat Chrysler also sold 4,253 diesel-powered Jeep Grand Cherokees and 397 diesel ProMaster vans.

Environmental advocates used the accusations against Fiat Chrysler to highlight the role of the E.P.A. and to issue warnings about President-elect Donald J. Trump’s expected plans to reduce the agency’s scope and authority.

Mr. Trump has vowed to “take a tremendous amount out” of the E.P.A. His nominee to lead the agency, Scott Pruitt, Oklahoma’s attorney general, has led a legal charge against many of the agency’s clean air regulations. Mr. Pruitt has also pushed to diminish federal oversight of the environment, sending authority from Washington to the states.

Mr. Trump’s transition team did not respond to a request for comment.

“It’s very important that they’re doing this now,” said Frank O’Donnell, the president of Clean Air Watch, a Washington advocacy group. “They’ve got polluter lobbyists massing at the gate of both Congress and the White House. This case underscores the importance of keeping a federal environmental cop on the beat at E.P.A.”