Business & Real Estate

New air pollution scandal: Fiat Chrysler settles with California and U.S. for $800 million

Dodge Ram pickup trucks sit on a lot at a dealership in Georgia. Federal and California officials have accused Fiat Chrysler of using rogue software to conceal air pollution emissions from 104,000 diesel vehicles.
Dodge Ram pickup trucks sit on a lot at a dealership in Georgia. Federal and California officials have accused Fiat Chrysler of using rogue software to conceal air pollution emissions from 104,000 diesel vehicles. Associated Press file

Call it Dieselgate II.

In a settlement announced Thursday by state and federal officials, Fiat Chrysler Automobiles agreed to pay $800 million over charges that the global carmaker used “defeat device software” in thousands of diesel vehicles to cheat on air pollution tests.

The case is similar to the multibillion-dollar settlement made by Volkswagen over the use of the rogue software — and was discovered through enhanced testing procedures state and federal officials developed after the Volkswagen scandal was unearthed by California and federal officials in 2015.

“Although the company admitted they had used the defeat device, they maintained this was something that was inadvertent,” said Mary Nichols, chairwoman of the California Air Resources Board, in a conference call with reporters. “We disagree with that and the settlement shows they are acknowledging they are responsible.”

The case involves diesel Jeep Grand Cherokees and Dodge Ram 1500s made from 2014 to 2016. The state said Fiat Chrysler sold 100,000 of those vehicles nationwide and 13,325 in California.

“The company not only violated the law and our trust, but did so at the expense of our environment,” said California Attorney General Xavier Becerra. “These vehicles were marketed to consumers as environmentally friendly.” California officials first accused Fiat Chrysler of cheating on diesel tests in 2017.

Fiat Chrysler announced that it plans to spend a total of about $800 million to settle the charges, including about $400 million in fines to the federal government and all 50 states. California, which worked with the federal Environmental Protection Agency on chasing down the illegal software, will get $78.4 million.

The company also settled a class-action private lawsuit to give car owners an average of $2,800 each, for a total of around $280 million. In addition, Fiat Chrysler must establish a recall program and fix the emissions systems on the affected vehicles, and must provide those customers with extended warranties. The warranties are expected to cost about $100 million, for a total payout of approximately $800 million from Fiat Chrysler.

Robert Bosch, a German manufacturer of components for Fiat Chrysler diesel engines, has agreed to pay $27 million to consumers as well, according to Lieff Cabraser Heimann & Bernstein, the law firm leading the class-action case.

Fiat Chrysler said 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.” Nevertheless, the company said it needed to regain consumers’ confidence.

“We acknowledge that this has created uncertainty for our customers, and we believe this resolution will maintain their trust in us,” Mark Chernoby, the company’s head of North American safety and regulatory compliance, said in a prepared statement.

The Trump administration, which has been accused by environmentalists of being soft on polluters, hailed the Fiat Chrysler case as evidence to the contrary. “Today’s 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,” said Andrew Wheeler, acting administrator of the EPA.

The Volkswagen settlements included an agreement by the company to spend hundreds of millions of dollars in California on electric-vehicle charging stations and other clean-car projects in Sacramento and other cities, as a means of offsetting the excess nitrogen oxide emissions that fouled the air. NOx is a key ingredient in the formation of smog.

Fiat Chrysler won’t be required to undertake a similar program, state officials said. The big difference: Volkswagen’s software was so thoroughly embedded into the vehicles that most of the cars couldn’t be totally fixed. The Fiat Chrysler vehicles are completely fixable.

The “defeat device” was used to cheat on the air-pollution certification tests required by regulators before vehicles can be sold. Essentially, the software switches off the emissions-control systems when vehicles are on the open road but remain fully engaged when they’re in the test lab. Emissions controls can hinder fuel mileage and a vehicle’s durability and handling.

Nichols said defeat software is permissible in limited circumstances — such as when a vehicle is climbing a steep hill — but has to be disclosed to regulators.

“The basic cheat here was the company failed to disclose exactly what they were doing with this software,” Nichols said. “That’s illegal and all of these companies know that it’s illegal.”