FCA Paid $77 Million in Civil Penalties to Sell Cars People Actually Want to Buy

Fiat Chrysler Automobiles paid $77 million in U.S. civil penalties late last year due to its failure to adhere to 2016 model year fuel economy requirements. In December, the National Highway Traffic Safety Administration (NHTSA) issued a report claiming the industry faced millions in fines from 2016 and that one manufacturer was expected to pay significant civil penalties.

You can probably guess which one. But FCA is by no means the only automaker affected by stringent fuel rulings.

The NHTSA said the number of automakers with emission credit shortfalls rose to 26 in 2016. For some perspective, 2011 was a terrible year for automakers, with 18 companies coming up short for a industry penalty of around $40 million. It’s clear the automotive sector is having real trouble meeting the rising emissions rules and less clear what should be done about it.

Despite initially agreeing to the aggressive, Obama-era fuel economy mandates, automakers were quick to meet with Donald Trump and ask that national efficiency rules be rolled back at the start of his term. While several companies eventually changed their position, there’s a growing assumption that the established targets will, for many, remain out of reach.

Shane Karr, head of external affairs for Fiat Chrysler in North America, confirmed the company’s $77-million penance with Reuters. Karr is one of the few automotive spokespeople willing to openly endorse a rollback. He told the outlet that the government’s fuel economy program should be reformed, thus ending the practice of automakers making “large compliance payments because assumptions made in 2011 turned out to be wrong.”

However, Karr also noted FCA remains “committed to improving the fuel efficiency of our fleet and expanding our U.S. manufacturing footprint.”

It’s not difficult to understand why Fiat Chrysler incurred the fines. While Fiat offers fuel-sipping options, the same cannot be said of the firm’s more American nameplates. Most of Dodge’s lineup doesn’t even come with an available four-cylinder, since the brand cut loose many of its smaller and less profitable models several years ago. In fact, Dodge frequently frames its surplus of powerful V8 engines as an important selling point.

Meanwhile, Chrysler’s fleet has been cut down to a full-sized luxury sedan and one minivan that can be optioned as a hybrid. Jeep is more of a mixed bag. But even its smallest and slowest models only manage to deliver average economy for the segment on their better days.

FCA sells the kind of cars people still want, rather than the cars the government thinks they should own; the company knew this would come with a cost. The automaker said the federal fine was expected and incorporated into its fourth-quarter financial results. However, it partially attributed the shortfall to the fact that some front-wheel-drive utility vehicles were, in 2011, reclassified as cars.

While unquestionably true, we would have also accepted the automaker saying “big engines and SUVs lead to big fines,” before asking us to take it up with our elected officials. Boiled down, that’s what’s at the core of the issue — even if FCA still manages to turn a healthy profit.

The Trump administration has until next month to make a move on its fuel economy revisions. It’s facing stiff opposition from Congress, environmentalist groups, and a coalition of states led by California. The president and his supporters believe that a rollback would result in automakers saving more than $300 billion in regulatory costs and help ensure consumers have continued access to the types of vehicles they want. Meanwhile, the opposition claims the environmental impact would be too great and would ultimately disincentivize auto companies from pursuing new technologies, accidentally stifling the industry.

There’s also a sense that global emission rules will eventually force America to follow Europe and China’s lead, placing more EVs in the North American market and accelerating the demise of larger engines.

If the rules don’t change, Fiat Chrysler may still be forced to. But with no EV or mobility talk on the horizon, what kind of solution can the company pull together to upgrade fleet-wide efficiency?

[Images: FCA]