Fiat Chrysler hit with U.S. lawsuit

Shares slump as the Justice Department steps up scrutiny of diesel emission testing

Fiat Chrysler Automobiles shares dropped to the lowest in a month after the U.S. Justice Department escalated concerns over the automaker’s diesel-powered pickups and SUVs, claiming they use illegal software to pass laboratory tests.

The complaint filed Tuesday makes Fiat Chrysler the first automaker the U.S. has accused of using defeat devices to pass emissions examinations since Volkswagen in late 2015.

Fiat Chrysler continued efforts to separate itself from Volkswagen, denying in a statement Tuesday that it “engaged

$10.32 Tuesday’s closing price of Fiat Chrysler shares after a 4.1 percent decline

in any deliberate scheme” to use defeat devices.

Fiat Chrysler’s U.S. stock fell 4.1 percent to $10.32, the lowest close since April 21.

Ram 1500 pickups and Jeep Grand Cherokee sport utility vehicles are the first models to be ensnared by stepped-up scrutiny of diesel models following the crisis at Volkswagen, which could cost the German company upward of $24.5 billion.

In the wake of Volkswagen’s admission to equipping cars with software that enabled its vehicles to spew more emissions during normal driving than in the lab, regulatory crackdowns have followed in the U.S. and Europe and some cities have moved to ban diesels from their roads.

“Fiat Chrysler joins the long list of automakers who have put our clean air and health of our families in the backseat by cheating on emissions tests,” Michael Brune, executive director of the Sierra Club, an environmental advocacy group, said in a statement. “Fiat Chrysler’s deceit is as dangerous as the sickening smog these vehicles leave behind.”

The lawsuit, filed on behalf of the Environmental Protection Agency, could pave the way for a showdown between U.S. officials and Fiat Chrysler, which has fought back against safety regulators in recent years.

The government is seeking civil penalties for alleged violations of the Clean Air Act, according to the complaint submitted to a federal court in Detroit.

Months of negotiations over the nearly 104,000 vehicles failed to bridge a divide between Fiat Chrysler and regulators over the nature of emissions calibrations used in diesel engines installed in 2014-2016 Jeep and Ram models.

The vehicles also are the subject of a U.S. criminal probe.

Fiat Chrysler last week proposed a fix in a bid to resolve the EPA’s concerns with the vehicles. If the agency approves the proposed settings for the automaker’s 2017 diesels, the company said, the carmaker would then make the same modifications to the older vehicles under scrutiny.

The company said in its statement that it was reviewing the Justice Department’s complaint and that it was “disappointed” the suit had been filed.

The suit comes the same day as President Donald Trump’s budget proposed an 18 percent cut to the EPA’s vehicle and fuel standards and certification program.

The EPA operation that detected Fiat Chrysler’s alleged diesel violations and did the work underpinning the U.S. government’s prosecution of Volkswagen would have a budget of $76 million, according to a summary of the president’s budget request posted on the EPA’s website.

The budget request also seeks to cut funding for EPA’s enforcement office by 24 percent.

Volkswagen touched off the biggest scandal in modern automotive history when it admitted in 2015 that about 11 million diesel cars worldwide were outfitted with so-called defeat devices — embedded algorithms used to game emissions tests. The German automaker has committed to buying back or repairing some 560,000 vehicles.

Unlike VW, Fiat Chrysler has steadfastly denied that it knowingly set out to cheat on emissions tests.

In January, the EPA identified eight emissions controls in the Jeep and Ram diesels that weren’t disclosed as required in applications for clean-air certifications filed with the agency.

The EPA also said it believed that one or more of those controls were defeat devices, and challenged the carmaker to prove otherwise.

An initial hearing of separate lawsuits, brought by owners of the diesel SUVs and pickups, is set for Wednesday in San Francisco federal court where VW emissions lawsuits were consolidated.

The EPA said in a statement Tuesday it will try to move its case to the same court.