Fiat Chrysler Puts a Price on Its EcoDiesel Punishment
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]
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- Funky D I despise Google for a whole host of reasons. So why on earth would I willing spend a large amount of $ on a car that will force Google spyware on me.The only connectivity to the world I will put up with is through my phone, which at least gives me the option of turning it off or disconnecting it from the car should I choose to.No CarPlay, no sale.
- William I think it's important to understand the factors that made GM as big as it once was and would like to be today. Let's roll back to 1965, or even before that. GM was the biggest of the Big Three. It's main competition was Ford and Chrysler, as well as it's own 5 brands competing with themselves. The import competition was all but non existent. Volkswagen was the most popular imported cars at the time. So GM had its successful 5 brands, and very little competition compared to today's market. GM was big, huge in fact. It was diversified into many other lines of business, from trains to information data processing (EDS). Again GM was huge. But being huge didn't make it better. There are many examples of GM not building the best cars they could, it's no surprise that they were building cars to maximize their profits, not to be the best built cars on the road, the closest brand to achieve that status was Cadillac. Anyone who owned a Cadillac knew it could have been a much higher level of quality than it was. It had a higher level of engineering and design features compared to it's competition. But as my Godfather used to say "how good is good?" Being as good as your competitors, isn't being as good as you could be. So, today GM does not hold 50% of the automotive market as it once did, and because of a multitude of reasons it never will again. No matter how much it improves it's quality, market value and dealer network, based on competition alone it can't have a 50% market share again. It has only 3 of its original 5 brands, and there are too many strong competitors taking pieces of the market share. So that says it's playing in a different game, therfore there's a whole new normal to use as a baseline than before. GM has to continue downsizing to fit into today's market. It can still be big, but in a different game and scale. The new normal will never be the same scale it once was as compared to the now "worlds" automotive industry. Just like how the US railroad industry had to reinvent its self to meet the changing transportation industry, and IBM has had to reinvent its self to play in the ever changing Information Technology industry it finds it's self in. IBM was once the industry leader, now it has to scale it's self down to remain in the industry it created. GM is in the same place that the railroads, IBM and other big companies like AT&T and Standard Oil have found themselves in. It seems like being the industry leader is always followed by having to reinvent it's self to just remain viable. It's part of the business cycle. GM, it's time you accept your fate, not dead, but not huge either.
- Tassos The Euro spec Taurus is the US spec Ford FUSION.Very few buyers care to see it here. FOrd has stopped making the Fusion long agoWake us when you have some interesting news to report.
- Marvin Im a current owner of a 2012 Golf R 2 Door with 5 grand on the odometer . Fun car to drive ! It's my summer cruiser. 2006 GLI with 33,000 . The R can be money pit if service by the dealership. For both cars I deal with Foreign car specialist , non union shop but they know their stuff !!! From what I gather the newer R's 22,23' too many electronic controls on the screen, plus the 12 is the last of the of the trouble free ones and fun to drive no on screen electronics Maze !
- VoGhost It's very odd to me to see so many commenters reflexively attack an American company like this. Maybe they will be able to find a job with BYD or Vinfast.
Did the Feds ever establish whether this was "malice" or "stupidity" on FCAs part?
"[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.