EU Emission Fines Could Spell Trouble for Automakers in 2021, Especially VW and FCA

Matt Posky
by Matt Posky
eu emission fines could spell trouble for automakers in 2021 especially vw and fca

A recent study from consulting firm AlixPartners has suggested that automakers could be in for a financial ass kicking of epic proportions. As it turns out, reaching emission quotas is a difficult business and the European Union wants 95 grams of carbon dioxide per kilometer by 2021. The study suggests few automakers are on track to reach that goal and, as a result, will be forced to pay out sizable fines. We’re talking billions.

Can you guess which manufacturers are supposed to get hit the hardest?

Here’s a hint: we’ve discussed one of them having similar issues in the United States earlier this year and both of their names are in the title of this article.

In February, we reported that FCA paid $77 million in U.S. civil penalties due to its failure to adhere to 2016 model year fuel economy requirements and would likely be on the hook for steeper penalties in the years to come. Volkswagen’s storied history with air pollution has been covered to death. After being caught cheating on emissions tests in 2015, and being on the receiving end of huge fines, the German company has shifted aggressively toward electrification.

According to Reuters, AlixPartners is forecasting that Europe’s stiffer penalties could result in VW facing fines of up to 1.83 billion euros ($2.08 billion) by 2021, with FCA being slapped with a projected 746 million euros (about $848 million) — massive, considering its size in relation to Volkswagen Group.

While Fiat Chrysler hasn’t entirely ignored present-day trends in environmentalism, it’s often seen as lagging its competitors in terms of supplying the public with greener, cleaner vehicles. However, if you ask me, the automaker is simply declining to pay lip service. Unless you’re illiterate, deaf, and have been living beneath a rock for the majority of your adult life, you’ve probably noticed that a lot of companies talk about progress and the environment while remaining totally fixated on their bottom line.

Practically every business does this but car companies are repeat offenders — frequently playing the PR game while trying to circumvent regulation and maximize profit. As they’re in the business of making money, that’s largely understandable. But it doesn’t change the fact that it often feels like a well-orchestrated con job, done to avoid scrutiny. The gas war in the U.S. is a pristine example of this. Most automakers lobbied for the fueling rollback but when California cried foul, they publicly reneged and urged for compromise while publicizing their most-green initiatives.

Meanwhile, FCA has been telling it like it is. Remember when the late, great Sergio Marchionne urged everyone not to buy the Fiat 500e? He did that because it wasn’t making FCA any money and we know that because he said so, in no uncertain terms. The car only existed to appease emission mandates and there are countless EVs that have been built for identical purposes — their manufacturers just failed to tell everyone.

“I hope you don’t buy it because every time I sell one it costs me $14,000,” Marchionne, the legend, told a crowd at the Brookings Institution in 2014. “I’m honest enough to tell you that.”

Even though Fiat Chrysler has been doing a bang-up job in terms of corporate frankness, comparatively speaking, that doesn’t change the fact that it’s doing a rather lousy job of improving emissions. However, FCA seems to feel that repositioning itself as a forward-thinking mobility company is fiscally nonsensical, risks compromising some of its most-important brands, and would do little to help it achieve its longstanding merger goals. Just paying the fines is an acceptable solution if it doesn’t cost more than the alternative and FCA’s stated plan is to endure environmental bills in whatever manner is cheapest.

By contrast, Volkswagen has said it intends to to comply with the European rules by building as many electric vehicles as possible. A better strategy in the eyes of EU regulators, but we remain concerned that the EV market hasn’t yet caught up to regulations. VW could be getting ready to build a whole lotta cars most folks aren’t prepared to buy. But it has already spent billions developing EVs and can’t afford to back out now.

That’s not a criticism of either brand, just an observation of how odd it is that each solution seems equally viable to their respective automakers and would technically satisfy the regulatory framework that’s currently in place. VW is keeping its head down; FCA is shrugging its shoulders. Both still have to pay out, in one form or another.

AlixPartners reported that Volvo and Toyota are the only major manufacturers which would be able to sell their emission credits to other outfits and won’t have to face penalties in 2021. That will also be true of Tesla but the firm didn’t see it as a large enough to qualify as a “major manufacturer.” Alix also said that it expects European car sales to stagnate or decline over next three years ( something we’re already seeing), negatively impacting the margins of suppliers and automakers — especially those attempting to balance sale of electric and combustion-engined cars, which will be most of them in a few years.

[Image: Rasulov/Shutterstock]

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  • Loopy55 Loopy55 on Jun 30, 2019

    The joke is that the #1 way to reduce C02 from combustion engined cars is with diesel engines as they burn less fuel=less C02. The latest generation are incredibly efficient and clean.

  • JD-Shifty JD-Shifty on Jul 01, 2019 Who Wants to Kill the Electric Car This Time? The Koch brothers hope it will be them FacebookTwitterEmail BY BEN JERVEY | JUN 28 2019 Illustration shows the Koch brothers bashing in an electric car with a crowbar and a baseball bat that says Wichita Slugger. ILLUSTRATION BY STEVE BRODNER IN FEBRUARY, Senator John Barrasso, a Wyoming Republican who chairs the Senate Committee on Environment and Public Works, introduced a bill to end the federal tax credit for plug-in electric vehicles and establish a new annual "highway user fee" for all "alternative fuel vehicles." If the bill becomes law, these provisions of the Fairness for Every Driver Act would check off two high-priority boxes on the policy wish list of Charles and David Koch, the billionaire petrochemical barons who have built a fortune on the transport and refining of fossil fuels. And this is no coincidence. Barrasso is the third-highest recipient of campaign donations from Koch Industries, and in remarks on the Senate floor as well as in an op-ed published on the Fox News website, he cited figures from reports funded by the Koch brothers and their donor network. Speaking in the Senate, Barrasso said that the EV program "disproportionately subsidizes wealthy buyers" and that "hard-working Wyoming taxpayers shouldn't have to subsidize wealthy California luxury-car buyers." In effect, Barrasso justified the bill almost entirely with arguments—many misleading, some demonstrably false—tested and refined for years by Koch-affiliated think tanks, advocacy groups, and astroturfing operations. Senator Barrasso's bill is just one example of how the Koch brothers and their Big Oil allies are working to decelerate the country's transition to electric cars. "The Koch network is opposing pro-EV policies at all levels of government, in public utility commissions, state legislatures, and the US Congress," says David Arkush, managing director of Public Citizen's climate program. "The campaign is classic Koch—a mix of front groups, campaign cash, corporate cronyism, and deception." Several years ago, oil companies began to see EVs as a real threat to their businesses. Electric-car sales, virtually nonexistent when President Barack Obama took office, were rising consistently (though more than 1 million Americans have bought or leased an electric vehicle, EVs still represent only about 2 percent of new car sales). By the beginning of 2016, a new generation of plug-in cars targeting the mass market had been announced—including the Chevy Bolt, the updated Nissan Leaf, and Tesla's Model 3—all of which were promising 100-plus miles of range and a price tag around $30,000 after the federal tax credit. About the same time, the Koch network began preparing a calculated campaign to keep gas-guzzlers on the road. In late 2015, a couple of key Koch agents started meeting with oil-refining and marketing companies to pitch a new "multimillion-dollar assault on electric vehicles," according to a HuffPost investigation. James Mahoney, a Koch Industries board member, and Charles Drevna, a former president of the American Fuel and Petrochemical Manufacturers, were raising funds to defend the oil and gas industry from stronger fuel-efficiency standards and transportation electrification. In December 2015, an organization called Frontiers of Freedom, a front group that has received millions from ExxonMobil and Koch Family Foundations, created the Energy Equality Coalition with the express purpose of fighting the EV tax credit. The group's slogan for EVs is "Built by billionaires, bought by millionaires . . . and subsidized by the rest of us." Then, in 2016, Drevna launched an outfit named Fueling US Forward, which balanced oil and gas cheerleading with aggressive EV bashing. The group produced a YouTube video, "The Hidden Costs of Electric Cars," that described the EV tax credits as a "massive wealth transfer from poor to rich."

  • Keith Maybe my market's different. but 4.5k whack. Plus mods like his are just donations for the next owner. I'd consider driving it as a fun but practical yet disposable work/airport car if it was priced right. Some VAG's (yep, even Audis) are capable, long lasting reliable cars despite what the haters preach. I can't lie I've done the same as this guy: I had a decently clean 4 Runner V8 with about the same miles- I put it up for sale around the same price as the lower mile examples. I heard crickets chirp until I dropped the price. Folks just don't want NYC cab miles.
  • Max So GM will be making TESLAS in the future. YEA They really shouldn’t be taking cues from Elon musk. Tesla is just about to be over.
  • Malcolm It's not that commenters attack Tesla, musk has brought it on the company. The delivery of the first semi was half loaded in 70 degree weather hauling potato chips for frito lay. No company underutilizes their loads like this. Musk shouted at the world "look at us". Freightliners e-cascads has been delivering loads for 6-8 months before Tesla delivered one semi. What commenters are asking "What's the actual usable range when in say Leadville when its blowing snow and -20F outside with a full trailer?
  • 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.