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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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.