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FCA Hit By U.S. Emissions Law Suit

FCA Hit By U.S. Emissions Law Suit.

But Even The Worst Case Scenario Wouldn’t Cause Serious Damage

Fiat Chrysler Automobiles (FCA) shareholders must have been shaking in their shoes when news broke U.S. authorities had sued, alleging Volkswagen-like cheating on diesel engines.

But it seems the potential damage to FCA will not be of the existence threatening level of “dieselgate”, which will cost VW at least $25 billion, not to mention the damage to its reputation.

The suit, filed by the U.S. Justice Department, concerns 104,000 Jeep Grand Cherokees and Ram 1500 pickup trucks. It alleges the vehicles used “defeat devices”, but FCA denies this. After the action was taken against VW, the company admitted its guilt. But FCA denied it had taken any wilful action to thwart the law.

The maximum potential fine is about $4.6 billion, according to the U.S. Environmental Protection Agency (EPA). 

Barclays Equity Research reckons the maximum liability for FCA is about $800 million, while the cost of recalling and fixing the vehicles would be “a few tens of millions of euros”.

Not on VW scale
According to investor researcher Evercore ISI, the number of vehicles involved is less than a fifth of VW’s.

“Simply applying a pro-rata to VW’s fines would infer a total penalty of $760 million. Whether FCA would be liable to pay less, given the scale of the alleged deception is much lower, or more as a result of not admitting guilt is open to debate,” Evercore ISI said in a report.

Evercore ISI said given FCA diesels are already fitted with more sophisticated SCR (Selective Catalytic Reduction) devices the cost of fixing the problem would be not more than $100, or about $10 million in total.


 

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