Emissions Scandals Hit Fiat and Renault

Fiat and Renault are the latest auto manufacturers to face charges of cheating on auto emissions testing. While spokesmen from both companies have stated that the devices installed on their vehicles are simply to protect engines from damage, environmentalists complain that pollution coming from the targeted cars is consistently higher in real world situations than in testing. In an attempt to discover if this discrepancy is deliberate, Renault is being investigated by a French panel and Fiat is being questioned by both the U.S. Environmental Protection Agency (EPA) and Germany.

Emissions Scandal hit Fiat and Renault


Why the EPA Singled Out Fiat

Last Thursday, the EPA announced that more than 100,000 of Fiat Chrysler’s diesel trucks and SUVs actually failed to meet the standards set out in the Clean Air Act. The affected models were Jeep Grand Cherokees and Dodge Rams. As Jeep Cherokees are also sold in the U.K., the British Department of Transport contacted the EPA to request results of the emissions data for this vehicle. The EPA has asked Fiat to explain the methods used in calibrating the software that activates and shuts off the emissions control systems in the two cars to determine if the program should be classified a “defeat device” or as an “auxiliary emissions control” (AEC) device.

Defeat Devices Vs. Auxiliary Emissions Control Devices

The differences between the two systems are vague, and often boil down to the manufacturer’s intent upon installation. A defeat device works only during testing. It switches off during normal driving conditions. An AEC functions during regular operations and works to prevent damage in short term conditions such as upon startup. The AEC should not cause a major difference between the car’s test results while at the plant and while on the road. A spokesman for the International Council on Clean Transportation said, “It could have been just more ignorance on the part of the Fiat Chrysler people who were calibrating this engine.”

Will Trump’s EPA Pick Back Fiat?

The EPA began the investigation 18 months ago. Insiders have hinted that the company’s participation with the investigation slowed as the possibility became stronger that Donald Trump would win the Presidency. Given Trump’s choice of Scott Pruitt as EPA head, this may turn out to have been a wise decision. As Oklahoma’s Attorney General, Pruitt sued the EPA several times, alleging that the agency’s regulations adversely affected local businesses. Chances are good that the Trump administration will back Fiat more than the Obama administration has up until now.

Germany Also Doubts Fiat’s Emissions Results

Germany is also asking the EU to investigate Fiat. The car company uses Italian regulation to gain EU approval to sell cars in its 28 member states. Following the fallout in Germany over Volkswagen’s emissions scandal, the German Transport Ministry requested a meeting with Fiat executives to confirm that the company was not using defeat devices in cars intended for the European market. Thus far, Fiat has refused to speak with German officials, and the Italian government unilaterally cancelled a meeting set up by the European Commission intended to smooth over the conflict.

France Investigates Renault

France is handling the investigation of its beleaguered auto manufacturer, Renault. This country is one of the most dedicated to better air quality. In December, Paris legislated driving restrictions on days where smog is above a safe level. France’s Environmental Ministry discovered that many French automakers were exceeding test tolerances by a factor of 500 percent. However, some Renault vehicles were causing 1000 percent more nitrogen oxide pollution than permitted. Renault blamed an improperly adjusted anti-pollution part.

Emissions Scandals in the Post-VW Era

These investigations come in the wake of VW pleading guilty in yet another court system to cheating on emissions tests. This time the automaker promised to pay the U.S. government almost $3 billion in criminal fines. There have also been a series of arrests and indictments spanning the U.S. and Germany. This has left other companies scrambling to defend themselves from charges of deliberate malfeasance, to limit liability. IT has not kept the companies from seeing steep drops in share prices, however.

How the Fiat and Renault Investigations Affect Trading

Fiat Chrysler and Renault stocks are dropping as traders await possible fines from the ongoing investigations. The London FTSE will drop due to the issues with European car manufacturers. Additionally, the fines are likely to affect available funds for VW, Renault, and Fiat to expand. This could possibly lead to higher unemployment and a weaker euro. The U.S. government is collecting billions in fines, and also promoting sales of cars by American companies, which will aid in the raise of the dollar, and stock prices for several American car companies. The Dow Index and  S&P 500 can be expected to improve as well.