Jan 12, 2017

Chrysler Fiat Has the VW problem

Just one day after Volkswagen was forced to cough up $4.3 billion in fines for installing software on its vehicles that helped it cheat on emissions tests, the EPA has accused Chrysler Fiat of similar violations.

The EPA says that Chrysler installed software on roughly 104,000 vehicles between 2014 and 2016 aimed at evading EPA testing. Chrysler denies the allegations.

What are the stakes: The magnitude of this alleged crime is smaller than the Volkswagen scandal. VW installed software of 500,000 cars in the United States, five times more than Chrysler-Fiat. At the same time, Chrysler's revenue is half that of VW, while its market capitalization is one-fifth of Volkswagen's so Chrysler would be much less well positioned to withstand the effects of a billion-dollar fine.

It's still not clear whether the EPA sees what Chrysler has done as egregious as the Volkswagen case, but traders aren't taking any chances — the stock has fallen 12% since the EPA's announcement.

Go deeper