Gas-powered vehicles are terrible for the environment. Even ExxonMobil thinks the emission of pollutants from cars burning fossil fuels (read: gas) are causing climate change. Unfortunately, due to the comparatively expensive cost of electric cars and the widespread usage of fossil fuels, gas-powered vehicles aren’t going away any time soon.
Since gas-powered vehicles are here to stay for now, governing bodies can at least limit the pollutants that cars emit. That’s why automobile manufacturers must follow strict standards on carbon, nitrogen, and other emissions imposed by the United States. If there were no standards, there would be more nastiness in the atmosphere. This would kill those cute penguins and melt the icecaps a lot faster.
Unfortunately, Volkswagen recently decided to deliberately cheat on their emissions test, letting their cars emit more pollutants than they should while selling them to hundreds of thousands of consumers. When the Environmental Protection Agency realized that Volkswagen was cheating on emissions test and letting their cars pollute more than they should, the company faced billions of dollars in fines and some of their executives were arrested.
Now, Fiat Chrysler is under fire for the same thing. The company faces allegations of allowing their cars to pollute way more than they claim, and the U.S. is investigating to see whether or not they used the same methods as Volkswagen.
But why are companies going out of their way to lie to the EPA, and how is it affecting their stock? Let’s take a look.
The EPA found software in Volkswagen diesel cars which purposely misled researchers conducting emissions tests.
In 2015, Volkswagen was found to be using “defeat devices” that produced adequate results during emissions tests but delivered less-than-stellar emissions in real-world cases. EPA researchers would see adequate results during tests, but in reality, the cars were polluting forty times more than what was permitted.
This caused Volkswagen to recall the affected cars and spend $18.32 billion on fixing them.
Volkswagen faces up to $18 billion in fines in the U.S. alone, as other countries continue to investigate shady emissions practices in their own countries. This affected the company’s stock ($VOW) for a while, causing it to drop over several months. Several executives involved in the scandal were also arrested for their deceitful tactics. While it’s since made a bit of a recovery, it’s nowhere near as valuable as it was before this scandal, as consumer trust in Volkswagen is declining.
Fiat Chrysler recently found themselves under fire for similar practices.
The E.P.A. believes the company’s diesel Jeep Grand Cherokee several other models are polluting the atmosphere much more than they say they are. While they didn’t accuse Fiat Chrysler of using “defeat devices” like Volkswagen, but the cars’ software is undoubtedly “contributing to illegal pollution,” according to the bureau.
This news is having a negative effect on Fiat Chrysler’s stock price.
If the company is found to have actually used defeat devices on several cars, then they’ll eventually have to pay billions in fines and to initiate a recall. Thus, Fiat Chrysler shareholders are less enthused about the stock and the company’s future.
Why did these companies cheat in the first place? Complying with EPA standards is expensive, but necessary. Volkswagen and Fiat Chrysler took the easy way out and initially saved money by cheating. Now, Volkswagen has to pay for fixing the affected cars and any fines incurred, which is costing them billions. Fiat Chrysler will likely have to do the same. If they were honest from the get-go, they’d probably save billions.