May 18, 2018 / 5:31 PM / 5 months ago

Fiat Chrysler shares fall on latest diesel emissions allegations

WASHINGTON (Reuters) - Fiat Chrysler Automobiles NV (FCHA.MI) (FCAU.N) shares fell more than 3 percent in New York trading on Friday amid investor concern about allegations mounted in court filings over alleged excess diesel emissions.

FILE PHOTO: A screen displays the ticker information for Fiat Chrysler Automobiles NV at the post where it's traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 12, 2016. REUTERS/Brendan McDermid

The U.S. Justice Department filed a civil lawsuit against Fiat Chrysler and its VM Motori SpA unit in May 2017, accusing the Italian-American automaker of illegally using software to bypass emission controls in 104,000 diesel vehicles sold since 2014.

Court documents filed by lawyers suing Fiat Chrysler on behalf of owners this week in an amended complaint cited emails that VM Motori knew as early as 2010 that an auxiliary emissions control device (AECD) would be illegal if concealed from regulators.

Fiat Chrysler shares fell as much as 3.2 percent after Bloomberg News reported on the documents earlier on Friday. The shares were down 1.7 percent at $21.81 (16.2 pounds) in early afternoon.

The lawsuit disclosed emails from 2010 between a Fiat Chrysler (FCA) powertrain division employee and VM Motori about whether the AECD used “cycle detection” - a mechanism allowing vehicles to detect when they were being tested to see if they meet regulatory requirements, and modify emissions. VM Motori regularly admitted that an AECD employed cycle detection, the suit said.

The company denies wrongdoing, saying it never engaged in any deliberate scheme to cheat emissions rules. “It is inappropriate to draw conclusions from isolated communications and internal deliberations, without the more detailed context that is part of the reviews FCA is conducting,” the company said in a statement.

Reuters reported in 2017 the existence of emails from VM Motori that raised questions.

Regulators have said Fiat Chrysler diesel vehicles had undisclosed AECDs that allowed vehicles to emit excess pollution during normal driving.

Fiat Chrysler held two days of settlement talks last week with the Justice Department, but two people briefed on the talks said the sides remain far apart on the amount of a civil penalty. Another session is set for next week. The company faces a separate criminal probe into the matter.

The Justice Department sent Fiat Chrysler a January settlement offer letter requiring it to offset excess pollution and the offer included language that a settlement must include substantial civil penalties.

On Monday, Reuters reported Fiat Chrysler Chief Executive Sergio Marchionne reprimanded the company’s top U.S. spokesman for issuing press releases about Fiat’s vehicle emissions practices days after Volkswagen’s (VOWG_p.DE) disclosure in September 2015 that the German automaker had used illegal software to evade emissions tests, citing court documents.

Lawyers filed excerpts of an email from Marchionne to Gualberto Ranieri, then the company’s U.S. spokesman, criticising him for saying the company does not use defeat devices.

“Are you out of your goddam mind?” Marchionne wrote in an email on Sept. 22, 2015, adding that Ranieri should be fired and calling his actions “utterly stupid and unconscionable.”

The company said it was “understandable that our CEO would have a forceful response to any employee who would opine on such a significant and complex matter, without the matter having been fully reviewed.”

Reporting by David Shepardson in Washington; Editing by Matthew Lewis

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