An attendee touches the logo of Fiat Chrysler Automobiles NV (FCA) displayed at the 16th Shanghai International Automobile Industry Exhibition (Auto Shanghai 2015) in Shanghai, China. (Photographer: Tomohiro Ohsumi/Bloomberg)

Fiat Chrysler to Settle U.S. Civil Suit on Diesel Emissions, Source Says

(Bloomberg) -- Fiat Chrysler Automobiles NV will pay hundreds of millions of dollars to settle a lawsuit brought by the U.S. Justice Department, which alleged some of its diesel-powered vehicles violated clean-air rules, a person familiar with the matter said.

Fiat Chrysler won’t have to admit wrongdoing and will agree to pay owners of roughly 104,000 diesel-powered SUVs and pickups to update the emissions software on the vehicles via a recall, said the person, who spoke on the condition of anonymity to discuss the agreement before it was announced.

The Associated Press reported Wednesday that a multi-part agreement would include civil penalties of roughly $311 million paid to federal and California regulators, in addition to $280 million to compensate drivers and $72 million to settle claims brought by other U.S. states. The AP’s report cited a source who was not named.

The settlement is scheduled to be announced Thursday by the Justice Department in Washington, the person said. It will mark a milestone in the second major case brought by American officials against an automaker for Clean Air Act violations stemming from diesel vehicles equipped with pollution controls prohibited by U.S. law.

Volkswagen AG in January 2017 pleaded guilty to criminal charges and agreed to pay some $4.3 billion in U.S. penalties for its scheme to deliberately rig hundreds of thousands of U.S. diesel vehicles to cheat on emissions tests. The VW scandal extended to some 11 million other vehicles the company sold worldwide and led to U.S. criminal charges against eight people. 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.

The pact will resolve civil claims by the Justice Department on behalf of the U.S. Environmental Protection Agency that some Jeep Grand Cherokee and Ram 1500 models contain pollution-control software that improperly limits pollution during lab tests while allowing the vehicles to spew excess emissions on the road.

Fiat Chrysler will agree to corporate governance reforms intended to prevent future emissions violations under the agreement, the person said. 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.

Representatives for Fiat Chrysler and the Justice Department declined to comment. The company has denied intentional wrongdoing. It has already set aside about $810 million to cover settlements and other costs stemming from the diesel matter.

The Fiat Chrysler settlement won’t include a determination that the company committed wrongdoing, a second person familiar with the matter said. The diesel vehicles also won’t suffer any degradation in performance or fuel economy following the software update, the person said.

The Justice Department filed a civil lawsuit against Fiat Chrysler in May 2017, accusing the company of using so-called defeat devices to mask pollution levels of its vehicles so they would pass government tests.

The Justice Department and company are also said to be nearing a settlement to resolve a two-year criminal investigation into whether it knowingly sold diesel vehicles that violated clean-air rules, according to two other people familiar with the matter. Asked about the criminal case on Tuesday, Fiat Chrysler said it wouldn’t comment on speculation.

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