U.S. alleges Fiat Chrysler diesel engines have software enabling them to pollute too much

Reporting from washington —  The U.S. government accused Fiat Chrysler on Thursday of failing to disclose software in some of its pickups and SUVs with diesel engines that enables them to emit more pollution than allowed under the Clean Air Act.

The Environmental Protection Agency issued a “notice of violation” to the company that covers about 104,000 vehicles, including the 2014 through 2016 Jeep Grand Cherokee and Ram pickups, all with 3-liter diesel engines. The California Air Resources Board took similar action.

“Failing to disclose software that affects emissions in a vehicle’s engine is a serious violation of the law, which can result in harmful pollution in the air we breathe,” said Cynthia Giles, EPA assistant administrator for enforcement and compliance.

Fiat Chrysler Chief Executive Sergio Marchionne denied any wrongdoing, saying the EPA was blowing the issue out of proportion. “We have done, in our view, nothing that is illegal,” he said Thursday on a conference call. “We will defend our behavior in the right environment.”

Marchionne said company lawyers told him the Justice Department is investigating the company in concert with the EPA, raising the likelihood of an ongoing criminal investigation. He said the company halted production of Grand Cherokees and Rams with diesel engines in September but will continue to sell models that are still on dealers’ lots.

The company said it intends to present its case to the incoming Trump administration. “We will work with the new leadership to get this issue through,” Marchionne said.

A spokesman for President-elect Donald Trump did not immediately respond to a request for comment. The White House said Thursday that the EPA makes enforcement decisions independently and that President Obama was not involved in the decision to cite the company.

If found liable, Fiat Chrysler could face more than $4.5 billion in fines for violations of the Clean Air Act.

The EPA said it will continue to investigate the “nature and impact” of the eight software functions identified through an intensive testing program launched after Volkswagen was caught in a 2015 cheating scandal involving its “Clean Diesel” line of vehicles.

Read more: Six high-level Volkswagen employees indicted in emissions scandal »

Regulators were not defining the software found in the Fiat Chrysler vehicles as “defeat devices” intended to cheat on government emissions tests.

However, the EPA said numerous discussions with Fiat Chrysler over the past year had not produced any suitable explanation for why the company had failed to disclose the software, which regulators said caused the vehicles to emit less pollution during testing than during regular driving.

“This is a clear and serious violation of the Clean Air Act,” Giles said. “When companies break the law, Americans depend on EPA to step in and enforce.”

California regulators announced Thursday that they were citing Fiat Chrysler for 11 violations under that state’s strict air quality standards.

Fiat Chrysler said in a statement that its emissions control systems “meet the applicable requirements” and that it spent months giving information to the EPA to explain its emissions technology and proposed a number of actions including software changes to address the agency’s concerns.

Regulators said that owners of the affected models do not yet need to take any action and should continue driving their vehicles.

Fiat Chrysler’s U.S.-traded shares tumbled 20% on Thursday morning as the EPA action was reported, wiping out about $3 billion of the company’s market value. The shares then recovered somewhat, closing down 10.3% at $9.95.

Shares of Cummins Inc. fell 1.5% to $138.56. Although the company manufactures some diesel engines for Fiat Chrysler, it said Thursday that it did not make the engines in the Jeep and Ram models cited by the EPA.

The announcement comes one day after Fiat rival Volkswagen pleaded guilty in federal court to criminal charges related to widespread cheating involving emissions tests, agreeing to pay a record $4.3-billion penalty. Six high-ranking VW executives were indicted. That scandal prompted a nationwide recall of more than half a million affected cars and SUVs.

In the Volkswagen case, prosecutors alleged that top officials at the company approved of the cheating scheme, repeatedly lied to U.S. regulators and then orchestrated a mass attempted cover-up that included deleting computer files and emails.

EPA regulators made no such allegations against Fiat Chrysler on Thursday, though they said their investigation is in the early stages.

This isn’t the first time the company has run afoul of a federal agency. In 2015, Fiat Chrysler was slapped with $175 million in penalties by the National Highway Traffic Safety Administration for mishandling recalls and failing to report safety data.

Marchionne, who clearly was agitated on a conference call with reporters, expressed confidence that the EPA will find no evidence of an illegal “defeat device” in the Jeeps and Rams. He said some of the computer software on the engines was not disclosed because it’s standard among automakers and that disclosure wasn’t previously required. He said the EPA changed the rules after the Volkswagen case.

Marchionne said there is no comparison between his company and VW because there was no intent by Fiat Chrysler to deceive the EPA or cheat on emissions tests.

“There’s not a guy in this house that would even remotely attempt to try something as stupid as that,” he said. “And if I found a guy like that I would have hung him on a door.”

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UPDATES:

2:30 p.m.: This article was updated with Fiat Chrysler and Cummins shares’ closing prices.

12:25 p.m.: This article was updated with comments from Fiat Chrysler’s chief executive, background information and additional details.

8:50 a.m. This article was updated with the announcement from the EPA, response from Fiat-Chrysler and additional details.

This article was originally published at 7:55 a.m.