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Fiat Chrysler Called `Bad Actor' as U.S. Settles Emissions Suit

Fiat Chrysler Agrees to Pay Fine, Recall Vehicles in Diesel Case

(Bloomberg) -- Fiat Chrysler Automobiles NV will pay about $800 million in fines and costs to settle lawsuits brought by states, car owners and the U.S. Justice Department, which said the company’s diesel-powered pickups and SUVs violated clean-air rules.

“A multinational corporate bad actor seriously violated American emissions laws to the detriment of the health and welfare of the people of the United States,” said Jeffrey Bossert Clark, assistant attorney general for the Justice Department’s Environment and Natural Resources Division. “That is a very serious offense.”

The Italian-American carmaker’s penalties include a $305 million U.S. fine, more than $200 million for recall repairs and environmental mitigation as well as its $280 million portion of a $307.5 million consumer settlement. That estimate is based on 100 percent participation by consumers, which may not be achieved.

German parts components-maker Robert Bosch GmbH, which supplied the engine control devices found to be rigged to pass emission tests, will pay $27.5 million as part of the settlement with consumers. In addition, it agreed to pay a total of $103.7 million to 50 jurisdictions, according to Maryland Attorney General Brian Frosh.

Jeeps, Rams

Fiat Chrysler will pay owners of roughly 101,000 diesel-powered Jeep Grand Cherokee and Ram 1500 models to update the emissions software for free via a recall, according to a consumer consent decree filed Thursday in federal court in California. Consumers will get an average of $2,800 per vehicle from Fiat Chrysler, according to the automaker.

The pact does not resolve any potential criminal liability associated with the emissions violations, the Justice Department said in a statement. Prosecutors have an ongoing criminal probe of Fiat Chrysler that was opened in 2017, Bloomberg has reported.

The case is the second major action brought by U.S. officials against an automaker for Clean Air Act violations stemming from the discovery that diesel vehicles were rigged to pass emissions tests in labs even though they spewed nitrogen oxide in excess of permitted levels while on the road.

Volkswagen Case

In January 2017, Volkswagen AG pleaded guilty to criminal charges and agreed to pay some $4.3 billion in U.S. penalties after admitting it deliberately rigged hundreds of thousands of U.S. diesel vehicles. The company has set aside more than $30 billion to cover costs and settlements, including $15 billion to buy back or fix vehicles in the U.S.

Fiat Chrysler reassured regulators for three years that the vehicles adhered to emissions rules even though they didn’t, said Jesse Panuccio, a senior Justice Department official, telling reporters the company’s conduct was “serious and egregious.”

The settlement doesn’t require Fiat Chrysler to admit wrongdoing.

“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,” the automaker said in a statement. “The consent decree and settlement agreements contain no finding or admission with regard to any alleged violations of vehicle emissions rules.”

Justice Department and U.S. Environmental Protection Agency officials said the company’s actions represented serious violations of U.S. environmental laws. Andrew Wheeler, acting EPA administrator, noted that Fiat Chrysler was assessed a higher per-vehicle penalty for Clean Air Act violations than Volkswagen: about $3,000 per vehicle for Fiat Chrysler compared to roughly $2,500 per vehicle for Volkswagen.

“Part of the problem with FCA was they kept reassuring us that they were not cheating,” Wheeler told reporters Thursday. “Volkswagen came forward much earlier and admitted to their wrongdoing.”

Fiat Chrysler has also agreed to corporate governance reforms intended to prevent future emissions violations under the agreement. To mitigate the vehicles’ excess emissions, Fiat Chrysler will also provide funds and work with a catalytic converter manufacturer to offer drivers better emissions reductions when they replace that part.

“We strongly believe these settlements hold FCA and Bosch accountable,” said Elizabeth Cabraser of Lieff Cabraser Heimann & Bernstein LLP, the lead counsel for plaintiffs in the class action lawsuit.

Additional Penalties

Fiat Chrysler will be on the hook for additional penalties if it fails to update the software on at least 85 percent of the affected vehicles within two years, according to the EPA. VW received a similar deadline, and has now managed to buy back or fix 90 percent of the cars included in its class, “so we know it can be done,” said Cabraser.

Bosch said in a statement that its “robust compliance systems as well as its full cooperation during the investigations” were taken into account in the settlements.

“We want to devote our attention and resources to developing our businesses and to intensifying our efforts to shape the future in our areas of activity,” Stefan Hartung, chairman of Bosch’s Business Sector Mobility Solutions, said in the statement.

Fiat Chrysler has set aside about $810 million to cover settlements and other costs stemming from the diesel matter.

California’s Settlement

California will receive $78.4 million as part of the settlement.

“California’s emission standards exist to protect our residents and the environment from harmful pollution,” California Attorney General Xavier Becerra said in a conference call. “Fiat Chrysler tried to evade these standards by installing software to cheat emissions testing. The company not only violated the law and our trust, but did so at the expense of our environment.”

California conducted its own testing of FCA vehicles following their investigation of Volkswagen to discover comparable defeat devices, said Mary Nichols, chairman of the California Air Resources Board. She’s hopeful the cars will be fixed and won’t need to be scrapped, like many Volkswagens.

“While the company admitted they used the defeat device, they had maintained it was something that was inadvertent,” she said of Fiat Chrysler. “We don’t agree with that and with this settlement, it appears they’re admitting that. You can’t just shoot and get away with it.”

The case is In re Chrysler-Dodge-Jeep EcoDiesel Marketing, Sales Practices and Products Liability Litigation, 17md2777, U.S. District Court for the Northern District of California (San Francisco).

--With assistance from Susan Decker.

To contact the reporters on this story: Ryan Beene in Washington at rbeene@bloomberg.net;Kartikay Mehrotra in San Francisco at kmehrotra2@bloomberg.net;Gabrielle Coppola in New York at gcoppola@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman

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