Fiat Chrysler Puts a Price on Its EcoDiesel Punishment

Steph Willems
by Steph Willems

With Fiat Chrysler’s third-quarter earnings report, released Tuesday, the automaker showed it could improve on the boosted North American profitability seen under late CEO Sergio Marchionne.

The automaker posted an EBIT (earnings before taxes and interest) profit margin of 10.2 percent in the region, helped by heady Jeep and Ram sales and the 2016 decision to cull its unpopular small cars. That’s up from the record 8.4 percent margins seen in the second quarter of last year, and a 51 percent increase from Q3 2018.

Good times? Overall, yes, but net profit took a hit from last year’s 3.0-liter EcoDiesel saga. FCA expects to pay the federal piper for its undeclared auxiliary emissions control devices, with a dollar figure now attached to its penance.

The Q3 earnings report shows an $812 million charge related “to U.S. diesel emissions matters.” Because of this, FCA’s net profit — $642 million — was less than it could have been. Pre-tax earnings stood at $2.28 billion, a 13 percent increase over the same quarter in 2017.

“This charge does not represent an agreed settlement amount nor an admission of liability, but represents an estimate of the provisions under applicable accounting guidelines based on progress of settlement discussions with counterparties,” the automaker wrote.

FCA never admitted fault for failing to declare its EcoDiesel devices to the Environmental Protection Agency, which came down on its head like a ton of bricks. After issuing a stop-sale order, the EPA forced the automaker to revamp its emissions control system and offer a fix for the 100,000-plus existing owners of 2014-2014 Ram 1500 and Jeep Grand Cherokee models. A new version of the 3.0-liter V6 is expected to appear in 2019.

In April, a lawyer for FCA said a settlement between the automaker and the Department of Justice would likely arrive during the summer. If $812 million is indeed the extent of it, it’s far less than the potential $4.6 billion fine the feds could have handed down.

Elsewhere in the world, FCA’s Asia-Pacific earnings took a hit, mainly because of China’s current economic doldrums. Its not alone in this. Headwinds in Europe, the Middle East, and Africa also dragged the company lower, but pre-tax earnings in Latin America rose 41 percent compared to Q3 2017.

[Source: Automotive News] [Image: Fiat Chrysler Automobiles]

Steph Willems
Steph Willems

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  • PrincipalDan PrincipalDan on Oct 30, 2018

    Did the Feds ever establish whether this was "malice" or "stupidity" on FCAs part?

    • See 7 previous
    • Highdesertcat Highdesertcat on Oct 31, 2018

      @highdesertcat "hosed him on trade-in " I don't know if he got hosed or not, but to some people money is a tool, a means to an end, where getting what you want is more important than having to settle for something. For people who don't finance, they can buy anything they want, as long as they pay for it. And to people who have money, often the cost is less important than the value received. (Here's an example of this eccentric behavior: Why do people plunk down $300K to join a Resort Membership, even if they already own a perfectly good home?)

  • JohnTaurus JohnTaurus on Oct 30, 2018

    "[profits] helped by...the 2016 decision to cull its unpopular small cars." This is a recipe for disaster! I will personally stalk every congressional member who even dares to consider giving them billions of my dollars again the very next time they go bankrupt AGAIN! Wait. This is FCA, not Ford. My bad. Carry on.

    • Forward_look Forward_look on Oct 31, 2018

      Well, other states have defense industries to soak up taxpayer dollars to get congressmen reelected. Michigan has the UAW, reliably Democratic ... oh wait.

  • Redapple2 Another bad idea from the EVIL gm Vampire.
  • Daniel J Alabama is a right to work state so I'd be interested in how this plays out. If a plant in Alabama unionized, there are many workers who's still oppose joining and can work.
  • ToolGuy This guest was pretty interesting.
  • NJRide So this is an average age of car to be junked now and of course this is a lower end (and now semi-orphaned) product. But street examples seem to still be worth 2500? So are cars getting junked only coming in because of a traumatic repair? If not it seems a lot of cars being junked that would still possibly worth more than scrap.Also Murilee I remember your Taurus article way back what is the king of the junkyard in 2024?
  • AMcA I applaud Toyota for getting away from the TRD performance name. TuRD. This is another great example of "if they'd just thought to preview the name with a 13 year old boy."