The FCA diesel crisis, which erupted a little over a year ago and resulted in a lawsuit against Jeep and Ram parent company Fiat Chrysler Automobiles in May 2017, is heating up again. At the center of it all is the alleged use of undisclosed software that constitutes a “defeat device.”
Days after prosecutors in Germany launched an investigation into two Bosch employees in connection with the U.S. probe, the U.S. Department of Justice extended an offer to FCA to settle a lawsuit over alleged emissions violations that could see the automaker recall 104,000 vehicles and pay a substantial monetary penalty, Bloomberg reports. As part of the settlement offer, FCA will also have to mitigate past pollution and institute internal changes to guard against violations, according to documents obtained by Bloomberg.
In January 2017, the EPA issued a notice of violation to the automaker, claiming that 2014-16 Jeep Grand Cherokee and Ram 1500 diesel models possess auxiliary emissions control devices that permit the vehicles to emit higher-than-certified nitrogen oxide (NOx) emissions. At the time, the EPA noted that FCA could face potential fines amounting to $4.6 billion, based on the 104,000 affected vehicles, in addition to conducting a costly recall. The DOJ filing in May 2017 alleged that the automaker used the software to pass laboratory emissions tests while allowing the affected vehicles to exceed pollution standards in on-road use.
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The proposed settlement would resolve civil but not criminal penalties against the automaker; it would still face criminal liability for developing and using the software in violation of U.S. law.
Bloomberg also reports that the settlement offer letter to FCA cites “compelling evidence” that the automaker misled regulators while knowing or having reason to believe that the vehicles did not comply with emissions regulations.
FCA was working on a software patch since early 2017 for the affected models, and the automaker announced in March 2017 that it was in discussions with the EPA and California Air Resources Board to obtain approval for the software fixes.
It remains to be seen whether the civil monetary penalty offered to FCA will be close to the $4.6 billion figure threatened by the EPA Notice of Violation, though industry observers do not expect the automaker to be on the hook for the entire cited sum. Bloomberg cites several financial advisory firms estimating the potential fine to be between $460 million and $1 billion. Given the $31 billion total cost of the VW diesel crisis, this may be considered to be a substantial bargain.
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It is likely that the automaker will have to conduct a recall campaign for the 104,000 vehicles — itself an expensive matter, even if it only involves software — and will likely have to create a civil settlement program for all owners of these vehicles, similar to Volkswagen’s.
The upside for FCA and for Jeep and Ram owners, if any, is that a buyback is not in the works; Bloomberg reports that the settlement offer to the automaker does not include a requirement to purchase back the affected vehicles.