• Carmaker say all its vehicles comply with EU emission rules
  • Stock drop makes FTSE MIB Index the day’s worst in Europe

Fiat Chrysler Automobiles NV slumped to a three-month low as its fight with Germany over vehicle emissions escalated after the country’s most-read newspaper reported that the authorities found that the company cheated.

The Italian-American automaker said all its autos meet European rules after Bild am Sonntag newspaper reported that Germany’s Federal Motor Transport Authority determined the carmaker allegedly used illegal software to manipulate emissions controls.

Fiat Chrysler dropped as much as 5.9 percent to 5.94 euros, the lowest intraday price since Feb. 26, and was trading down 3.6 percent at 11:27 a.m. in Milan, making Italy’s FTSE MIB Index the day’s worst performer in Europe.

A dispute between German regulators and the Italian-American carmaker came to a head on May 19, when Fiat refused to meet with German Transport Minister Alexander Dobrindt to discuss findings of an emissions probe and his Italian counterpart told Dobrindt to effectively leave Fiat alone. Under European Union rules, Italy is responsible for testing Fiat cars because the automaker’s regional operations are centered in the country, a regulation that the manufacturer reiterated through a spokesman on Monday.

“If the Italian authorities are content with Fiat’s vehicles then, unless the German authorities can demonstrate to the Italians that they are missing something in their interpretation, we don’t expect any repercussions for the carmaker,” Arndt Ellinghorst, an analyst at Evercore ISI in London, wrote in a report to clients.

Volkswagen AG’s revelation in September following a U.S. probe that it rigged diesel-engine software to pass official tests has put the car industry’s credibility under tighter scrutiny. The scandal prompted Germany to set up a commission to look into emissions readings across all manufacturers. In recent weeks, Mitsubishi Motors Corp. has acknowledged separately that it manipulated fuel-economy tests on vehicles in Japan, and Daimler AG is checking for possible irregularities in its model certifications at the behest of the U.S. Department of Justice.

The German Transport Ministry said Sunday in response to the Bild report that after Fiat Chrysler “refused to give an opinion before the inquiry commission,” the motor transport authority, or KBA, relayed measurement data to its counterpart in Italy and the European Union’s executive arm. “The Italian model-approval authorities are called upon to assess the results and to take action,” the German ministry said.

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