With a baby (and attendant baggage) in tow for the first time, I'd asked the rental company for a bigger car and driven away in a Fiat 500x crossover. So there was some personal interest this week when German and U.S. university researchers appeared to back claims that the 500x's diesel engine may contain code that reduces emission controls after about 25 minutes. That’s just a little longer than it takes to do a laboratory emissions test.
Asked to comment on the research, Fiat referred me to a previous statement. This says its cars don't use devices to detect whether they're undergoing a laboratory test, but promises to voluntarily re-calibrate some vehicles to make them less dirty in real driving conditions.
It appears the U.S. government has some concerns too, albeit related to other vehicles and emission control techniques.
On Tuesday, the Justice Department sued Fiat, accusing it of failing to disclose software that makes the emission control systems of Jeep and Dodge Ram vehicles less effective sometimes, meaning 100,000 vehicles allegedly emitted much higher levels of NOx when driven by customers. Fiat plans to defend itself vigorously against any suggestion it deliberately cheated U.S. tests.
Back in Europe, the European Commission has launched legal action against Italy for failing to police Fiat's emissions. Meanwhile, hundreds of police raided Daimler AG offices this week to search for evidence of alleged emissions fraud and false advertising. Daimler says it's cooperating and has denied cheating before.
With even Daimler and Porsche's hometown of Stuttgart threatening to ban diesels, demand for these vehicles is plummeting. In Germany, diesel sales fell 19 percent in April. That could depress residual values, which in turn may require both lease assets and engine investments to be written down. About half of western European car sales are diesels.
So it’s not just Volkswagen AG with a diesel problem. Small wonder that car stocks are out of favor. No mass-market European carmaker trades on more than eight times estimated earnings, about half the average for European stocks.
What’s troubling is that almost two years after VW's dieselgate scandal, the wider industry is failing to get a grip. Carmakers and governments have pursued a mix of denial, obfuscation, foot-dragging and finger-pointing. Fiat boss Sergio Marchionne said this about the company’s diesel emissions on his earnings call last month.
“Whatever has been done, has been done, there is not much that can be done to rectify past practices, which at least by our calculations were fully compliant with the existing regulations.”
There's plenty the industry can do now, though.
First, where tests show a diesel vehicle grossly exceeds the allowed level of NOx emissions when driven on the street, it should be recalled and re-calibrated. Carmakers who fall back on the letter of the law or bluster about protecting engines should be ashamed. This isn’t a technical point, it’s about public health. Diesel emissions kill thousands every year.
Second, as Ferdinand Dudenhöffer at the University of Duisburg-Essen argues, the industry urgently needs a new diesel labeling system that consumers can trust. Some so-called Euro VI vehicles (the latest ones) have very low NOx emissions. Others don’t.
While VW concealed its cheating for years, it has since apologized and paid compensation (at least in the U.S). So far, other European carmakers haven't had to follow suit, but the legal scrutiny is intensifying. As for me, I'd like to apologize to Italy for possibly polluting its air. Next time I'll ask for a hybrid.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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