Fiat Chrysler shares up as investors play
down EPA impact
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[January 13, 2017]
MILAN (Reuters) - Fiat Chrysler
Automobiles (FCA) <FCHA.MI> shares rose on Friday as investors played
down the potential impact of the U.S. Environmental Protection Agency
(EPA) accusing the company of concealing diesel emissions.
Fiat's Milan-listed rose more than 7 percent in early trade and stood
3.53 percent higher at 9.09 euros at 1101 GMT (6:01 a.m. ET).
The shares tumbled 16 percent on Thursday after the EPA accused the
world's seventh-largest carmaker of illegally using hidden software to
allow excess diesel emissions to go undetected, suggesting a maximum
fine of about $4.6 billion.
Larger rival Volkswagen <VOWG_p.DE> has admitted to cheating diesel
emissions tests and agreed to spend up to $22 billion in the United
States to address claims from owners, environmental regulators, U.S.
states and dealers.
FCA lacks Volkswagen's cash pile but analysts said its case looked much
less severe than that of its German counterpart.
The EPA said FCA failed to disclose engine management software in
104,000 U.S. vehicles leading to an increase in emissions of nitrogen
oxides (NOx). However, the authority has not yet labeled them "defeat
devices" as in Volkswagen's case.
FCA Chief Executive Sergio Marchionne categorically rejected the
allegations on Thursday saying there was no wrongdoing and the company
never attempted to create software to cheat emissions rules. He also
stressed FCA's situation cannot be compared with VW's.
Analysts drew best and worst case scenarios, estimating potential fines
ranging from several hundred million dollars to $4 billion. But they
said the likelihood of hefty fines were very low.
"Our base case is that the current violation notice is settled as a
reporting violation of $140 million, a very manageable figure for FCA,"
said Stuart Pearson, an analyst at Exane BNP Paribas.
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A screen displays the trading 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.
"However, until the issue is settled, emissions uncertainty is
likely to remain a significant overhang to the shares and break the
stock's impressive recovery since Trump's election."
Analysts also noted that FCA's vehicles are equipped with selective
catalytic reduction (SCR) systems, so could likely be fixed at a
relatively immaterial cost.
Before this week's tumble FCA's shares had risen by around 70
percent since Donald Trump's election on expectations of less
stringent emissions policies under the next U.S. administration.
FCA's case will soon be handed over to the new U.S. administration,
which the market expects to be more lenient.
The stock was also supported by Marchionne's promise to deliver on
his ambitious 2018 targets, including wiping out the company's debt.
Italian media quoted Marchionne as saying on Friday that the EPA
enquiry would not affect those goals.
(Reporting by Agnieszka Flak and Valentina Za; editing by Jason
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