Any prospective fines Fiat Chrysler Automobiles (FCA) might need to pay to settle a U.S. civil lawsuit over diesel emissions will unlikely top $1 billion, experts stated, including the case appeared less severe than at bigger competing Volkswagen.
The United States government submitted a civil lawsuit on Tuesday accusing FCA of unlawfully utilizing software to bypass emission controls in 104,000 vehicles offered since 2014, which it said caused higher than permitted levels of nitrogen oxide (NOx) that are blamed for breathing health problems.
FCA’s shares decreased 16 percent in January when the U.S. Environmental Protection Agency (EPA) first raised the allegations, adding the automaker might deal with an optimum fine of about $4.6 billion. The stock has been under pressure since.
Volkswagen consented to spend up to $25 billion in the United States to resolve claims from owners, ecological regulators, U.S. states and dealerships. FCA, which rests on net debt of 5.1 billion euros ($5.70 billion), does not have Volkswagen’s money pile however experts said its case looked much less extreme.
While Volkswagen confessed to deliberately cheating, Fiat Chrysler rejects any misbehavior. Officials will have to show that FCA’s software makes up a so-called “defeat device” and that it was fitted in the automobiles actively to bypass emission controls.
Though we cannot be very sure but even if convicted, the range of FCA automobiles targeted by the lawsuit is below a fifth of those in the Volkswagen case.
Applying estimations used in the German settlement, experts estimate potential civil and criminal charges for Fiat Chrysler of around $800 million at best. Barclays has currently cut its target cost on the stock to take such a estimation into account.
Experts also kept in mind that FCA’s automobiles are geared up with selective catalytic reduction (SCR) systems for slashing NOx emissions, so it is most likely that any issue could be fixed through a software upgrade.
“Should this be the case, we estimate an overall expense per vehicle of not more than around $100, i.e. around $10 million in aggregate,” Evercore ISI expert George Galliers stated in a note.
The estimates omit any extra investments FCA might be asked to make in zero emissions vehicles facilities and awareness as held true with Volkswagen.
FCA stated recently it would update the software in the vehicles in question, hoping it would reduce the regulators’ concern, however experts stated it might have been too little too late.
The automaker is likewise dealing with allegations concerning its diesel emissions in Europe.
Investors stay cautious over what any prospective charges will suggest for FCA’s 2018 targets, including its guarantee to eliminate debt.
If necessary, the automaker might consider selling a few of its properties, including parts maker Magneti Marelli or luxury brand Maserati. FCA has up until now left out the need for any disposals to reach the 2018 objectives.
“If FCA is needed to make a significant payment, we believe all options will be checked out,” Galliers added.