Fiat Chrysler faces class-action suits over emissions
Fallout from alleged violations not seen to be as serious as VW scandal
TORONTO Fiat Chrysler Automobiles NV’s alleged pollution violations could “considerably undermine” the company’s business plan, ratings agency DBRS said Monday, as two Canadian law firms launched class-action lawsuits against the automaker.
However, the fallout is unlikely to be as damaging to Fiat Chrysler as Volkswagen AG’s emissions scandal, Moody’s Investors Service said in a credit outlook published Monday.
Fiat Chrysler shares have fallen 12.1 per cent on the New York Stock Exchange since Thursday, when the U.S. Environment Protection Agency (EPA) alleged the automaker violated the Clean Air Act by failing to disclose enginemanagement software that allowed some of its vehicles to exceed pollution limits on the road. U.S. trading was closed Monday for the Martin Luther King Jr. holiday, but shares fell another 4.19 per cent in Milan.
The allegations immediately drew comparisons to Volkswagen’s emissions scandal, which has cost the company more than US$23 billion in fines, compensation and criminal penalties in the U.S. and Canada alone.
FCA chief executive Sergio Marchionne has vehemently denied the allegations. “We may be technically deficient, but not immoral. We never installed any defeat device,” he said last week.
Italy’s transport ministry said in a statement on Monday that tests on Fiat Chrysler vehicles show they are compliant with regulations and contain no emissions defeat devices as alleged by Germany.
DBRS placed FCA’s credit rating under review Monday, questioning what the associated costs could mean for the company’s fiveyear business plan, which aims to boost global sales to seven million vehicles by 2018 from 4.6 million in 2015.
“The company’s ability to absorb any remotely foreseeable costs appears quite considerable, as FCA’s liquidity … is sizable,” DBRS said in a research report in which it placed FCA’s credit rating under review.
“DBRS notes further, however, that any significant costs could considerably undermine the company’s current business plan,” particularly its net industrial cash target of four to five billion euros by the end of 2018, the ratings agency added.
In the U.S., the undisclosed software was found in 104,000 Jeep Grand Cherokee SUVs and Ram 1500 pickup trucks with 3.0-litre diesel engines from the 2014 to 2016 model years. In Canada, 39,000 vehicles are affected.
Two Canadian law firms — Siskinds LLP and Merchant Law Group LLP — have filed proposed class-action lawsuits against FCA and FCA Canada Inc. Those lawsuits have to be certified by the court before they can proceed.
Although no official action has been taken by Ottawa, Environment and Climate Change Canada is “already testing some of these vehicles under its enhanced compliance verification program and will assess the U.S. EPA’s announcement regarding Fiat Chrysler Automobiles to inform next steps in Canada … and if an investigation is warranted into potential violations of the Canadian Environmental Protection Act,” a department spokesman said in an email.
Moody’s said the allegations are “credit negative” for FCA because of the potential fines and legal costs, “but the credit effect would likely be less damaging than that sustained by Volkswagen.”