The reputation-shredding clouds of dieselgate are spreading

It's been a bad week for Europe's carmakers as the diesel emissions scandal begins to claim further victims.

by Andrew Saunders
Last Updated: 13 Jan 2017

 2017 is not shaping up to be much of a Happy New Year in the boardrooms of many of Europe’s largest carmakers.

On Wednesday VW pleaded guilty in the US to criminal charges relating to cheating emissions test on its diesel cars there and took a $4.3bn fine in return, yesterday the EPA accused Fiat Chrysler of violating the Clean Air Act and today it emerges that French judges have begun an investigation into pollution by Renault cars.

Of course the VW scandal is well known by now, as many a disgruntled owner of an oil burning Tiguan with diminishing residuals will attest. But the news that the EPA, perhaps the most feared and tenacious regulatory body in the world, has now moved its attentions to another large European manufacturer will have sent shivers through executive car parks from Milan to Munich and beyond.

So far the signs are that Fiat Chrysler is not being accused of VW style outright cheating of emissions tests. Rather the EPA claims that software fitted to 104,000 Jeep Grand Cherokees and Dodge Ram pick ups effectively ‘switches off’ emissions control technology temporarily under certain driving conditions, such as when maximum acceleration is required, causing levels of toxic emission to rise above legal limits.

It may be a lesser charge that the one facing VW, but the consequences might not be so very different. Fiat Chrysler shares plummeted 16% on the news yesterday, and the maximum potential fine could amount to $4.6bn.

The firm’s boss Sergio Marchionne reacted angrily, accusing the EPA of ‘grandstanding’ and saying that ‘We have done nothing illegal. They [the EPA] think we all belong to a class of criminals… we’re not trying to break the bloody law.’

His reaction may be understandable, but past experience of the EPA (BP Deepwater Horizon anyone?) suggests that it is unlikely to do the firm much good.

It’s also been pointed out the convenience of the timing of all this, coming as it does just days ahead of Donald Trump taking office – something in the way of a last hurrah for Obama era policies before the climate sceptics get behind the wheel. (Although the fact that all this firepower is ranged at foreign manufacturers rather than good ol’ US ones could work against them in the end).

There may be some truth in that, and the fact that Fiat Chrysler, unlike VW, has not been charged with anything like as gruesome as Conspiracy to Defraud the US suggest that it may yet get away rather more lightly than its German oppo.

But it does all highlight the growing troubles for Europe’s carmakers, not only in the US but also back home where the diesel engines they have invested so heavily in are rapidly becoming public enemy number one.

It also demonstrates eloquently once again the way that reputational scandals have a way of building and spreading so that their impacts are felt far beyond the original perpetrators. In this case the risk is that what started out as a single-firm problem will end up with an entire European industry sweating in the spotlight of public opinion.  

Maybe it’s time to buy a pushbike if you want to be 100% sure of your vehicle’s emissions status.

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