Chrysler’s Emissions Scandal, While Smaller, Could be More Painful Than VW’s

As U.S. automakers struggle with diminishing demand and a glut of vehicles, revenues and profits continue to drop, resulting in casualties such as Ford’s release of CEO Mark Fields this past week. So it makes sense that Fiat Chrysler would look for advantages wherever it can. However, just months after Volkswagen’s emissions scandal wrapped up with a $4 billion fine, Chrysler is following in VW’s footsteps and coming under fire for the exact same thing.

Just How Bad is it Going to Get for Chrysler?

The Environmental Protection Agency issued a notice of violation of the Clean Air Act to Volkswagen in September of 2015. That process lingered for a year and a half, costing VW time, money, and reputation. VW was purposefully using technology to activate emissions controls only during emissions testing, allowing the cars tested to meet U.S standards during testing, but emit more emissions when driven normally. That cheating, which affected 500,000 vehicles, cost the company more than $4 billion in fines, and about $25 billion in lost resources to comply with regulations and fix the problem. Chrysler is accused of using software to bypass emissions control for 100,000 diesel vehicles sold in the last 3 years, and while that number is significantly smaller, this issue could hurt Chrysler more than VW’s scandal harmed the German automaker for one simple reason — Fiat Chrysler is an American subsidy, and publicly traded.

Chrysler could (and most likely will) end up settling the lawsuit out of court. While pricey, that move would save the company from coming under regulatory scrutiny from the EPA and other government agencies. However, while VW admitted to knowingly cheating, Chrysler denies any wrongdoing, and may fight the charges in court. But if that happens and the company loses, Chrysler could end up paying significantly more in damages, along with court costs and legal fees.

Watch the news clip from The Young Turks about Chrysler's Emissions Scandal:

Regardless of Fiat Chrysler’s decision to fight or settle, shares of Fiat Chrysler Automobiles N.V. (FCAU), which slumped on on the news, will continue to drop DOWN.

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