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Fiat Chrysler faces $79 million U.S. penalty for fuel economy shortfall

WASHINGTON — Fiat Chrysler Automobiles NV on Wednesday said it faces a $79 million U.S. civil penalty for failing to meet 2017 fuel economy requirements, as regulators reported more automakers were falling short of U.S. greenhouse gas emissions standards. The Italian-American automaker said the payment is not expected to have a material impact on its business. Of 18 major carmakers in the United States, 13 including Fiat Chrysler failed to comply with fuel economy and greenhouse gas emissions standards for the 2017 model year without using credits, according to the National Highway Traffic Safety Administration (NHTSA). The agency said its review of model year 2017 vehicles showed "automakers falling further behind current standards." The 2017 model fleet fell 1 1/2 miles per gallon short of the 33.8 mpg standard based on yearly performance without including credits, NHTSA reported. The shortfall was a half-mile per gallon for the 2016 model year. NHTSA said more automakers were failing to comply with standards for the 2018 and 2019 model years, "and the potential penalties on automakers, which are passed along to consumers, are expected to continue to increase." The Trump administration has used the widening gap between the emissions of automakers' U.S. fleets, which are skewing toward larger vehicles, and national vehicle CO2 emissions standards to bolster its case for freezing vehicle emissions and mileage standards at current levels through 2026. Environmental groups and regulators in California and other states are fighting against any rollback in standards, saying tough rules are needed to address climate change and reduce consumer outlays for fuel. NHTSA and the Environmental Protection Agency are working to finalize as early as next month a rewrite of the Obama administrationÂ’s fuel efficiency requirements, which call for sharp reductions in fleet-wide emissions by 2026. Fiat Chrysler is paying fines for the shortfall in its domestic passenger car fleet, which includes several front-wheel-drive Jeep and rear-drive Dodge SUVs and some sedans and muscle cars. The automaker killed its slow-selling domestic small and midsize sedans. After paying $77.3 million last year for a 2016 model year fuel-economy shortfall, a Fiat Chrysler spokesman confirmed Wednesday the company had received a letter on the 2017 penalty and has 60 days to pay the fine.

For thousands of US auto workers, the downturn is already here

LORDSTOWN, Ohio - Wall Street is fretting that the auto industry is heading for a downturn, but for thousands of workers at General Motors factories in the United States, the hard times are already here. Matt Streb, 36, was one of 1,200 workers laid off on Jan. 20 - inauguration day for President Donald Trump - when GM canceled the third shift at its Lordstown small-car factory here. Sales of the Chevrolet Cruze sedan, the only vehicle the plant makes, have nosedived as consumers switch to SUVs and pickup trucks. Streb is looking for another job, but employers are wary because they assume he will quit whenever GM calls him back. "I get it," said Streb, who has a degree in communications, "but it's frustrating." Layoffs at Lordstown and other auto plants point to a broader challenge for the economy in Midwestern manufacturing states and for the Trump administration. "This is about economics, not what Trump says. Even if Trump went out and bought 10,000 Cruzes a month, he wouldn't get the third shift back here." The auto industry's boom from 2010 through last year was a major driver for manufacturing job creation. The fading of that boom threatens prospects for US industrial output and job creation that were central to Trump's victory in Ohio and other manufacturing states. "This is about economics, not what Trump says," said Robert Morales, president of United Auto Workers (UAW) union Local 1714, which represents workers at GM's stamping plant at Lordstown. "Even if Trump went out and bought 10,000 Cruzes a month, he wouldn't get the third shift back here." Last week the Federal Reserve said factory output fell 0.4 percent in May, the second decline in three months, due partly to a 2 percent drop in motor vehicles and parts production. Mark Muro, a senior fellow at the Brookings Institution, has compiled data from government sources that show the auto industry punching higher than its weight in job creation in recent years - accounting for between 60 percent and 80 percent of all US manufacturing jobs added in 2015 and 2016. In the first quarter of this year, the auto industry accounted for less than 2 percent of the 45,000 manufacturing jobs created. "There's no argument with the idea that auto has been pulling the manufacturing sled up the mountain for the last three or four years," Muro said.

Fiat-Chrysler alliance in jeopardy due to Pentastar's IPO filing?

The four-year relationship between Fiat and Chrysler has thus far been beneficial for both automakers, but it has also proven to be a complicated battle between Sergio Marchionne and the United Auto Workers - the latter controlling the remaining 41.5 percent of Chrysler. With the recent filing for a US IPO, it looks like Marchionne and the UAW appear to be playing a billion-dollar game of chicken, with both sides far apart on how much the union's shares are worth. If it comes down to Chrysler's remaining stake being publicly traded, it could act to drive a wedge between the two companies.
According to Bloomberg, Fiat's chairman John Elkann says "if the IPO will take place, there will be two companies, and that's different than having a single one." Now, we're not great at math, but this sounds like the complete opposite of the full merger that Marchionne has been pushing for since taking the helm at Chrysler. Bloomberg notes that the UAW's shares should be worth around $5.6 billion, but Fiat could end up paying as little as $4.9 billion for Fiat to gain full control of Chrysler. A story by The Detroit News points out that Marchionne's "alleged low-balling" is just the latest hurdle the Auburn Hills-based automaker must overcome as its ownership is being fought over for the fourth time in 15 years.