FCA at odds with EPA on emissions

The 3.0-liter EcoDiesel engine available in the Jeep Grand Cherokee and Ram 1500 has been operating under a dark cloud since at least last fall, when the EPA began looking into emissions issues linked to software devices installed in the trucks.

Now Fiat Chrysler Automobiles is facing a potential fine which could equal a third of FCA's total market value -- $4.62 billion.

The EPA and the California Air Resources Board late last week served FCA with notices of violation. Both agencies claim the auto-maker failed to disclose software that changes the way the emissions system operates. The software, which could have been deemed permissible if it had been disclosed, is in the 3.0-liter EcoDiesel engine -- available in 2014-16 model-year Jeep Grand Cherokee SUVs and Ram 1500 pickups.

The emissions control software in both vehicles contains at least eight illegal auxiliary emissions control devices, or AECDs, the EPA and CARB charge.

FCA CEO Sergio Marchionne forcefully denied that the automaker's engineers intentionally installed the AECDs to skirt emissions laws. "Our conscience is completely clear. There is no malfeasance inside of Chrysler," he told CNBC.

The EPA says 103,828 diesel-powered Jeeps and Ram pickups are affected. No 2017 model-year diesel-powered Grand Cherokee or Rams for the U.S. market have been built, according to sources at both plants, as the EPA has not certified the engine.

Marchionne told CNBC that engineers have software that will "cure all of the EPA's concerns."

But even if the devices can be tweaked, it's unclear why FCA did not disclose their existence at the start. AECDs are permitted in limited circumstances, and automakers must disclose them when they apply for each vehicle's certificate of compliance. The EPA and CARB allow AECDs only if they protect the engine from damage such as overheating.

"Failing to disclose software that affects emissions in a vehicle's engine is a serious violation of the law, which can result in harmful pollution in the air we breathe," Cynthia Giles, assistant administrator of the EPA's office of enforcement and compliance assurance, said in a statement.

The news sent FCA's stock tumbling 20 percent Thursday, Jan. 12, before recovering Friday, as reports linked the EPA action to Volkswagen's diesel scandal.

One key difference between the two incidents: FCA has admitted the software is there since the EPA discovered it. VW, until last September, denied the software existed in its vehicles.

The EPA says it discovered Grand Cherokees and Rams were emitting too much NOx during a test known as US06, which measures tailpipe emissions after high-speed highway runs that top out at about 80 mph. The tests also measure emissions during aggressive driving and rapid speed fluctuations.

AutoPacific Analyst Dave Sullivan says any number of factors could be responsible for the excess emissions.

"We don't know the conditions that have to be present for the excess emissions to be triggered. Is it weather? It is winter fuel? Is it summer fuel? Is it towing? Was there some defective hardware from a supplier? We don't know. And it is way too early to say," said Sullivan.

Marchionne had harsh words for the EPA and the media.

He said the EPA and the company could have settled the issue in "a more efficient way" without the EPA announcement, and he said "I'm really pissed off" about reports that equate FCA's issues with VW's.

"The way that it has been described, I think, has been unfair to FCA," Marchionne said. "And that is the thing that disturbs me most. There's not a guy in this [company] who would try something as stupid as" cheating on diesel tests. We don't belong to a class of criminals."