Shares of Fiat Chrysler fell Thursday after the U.S. Environmental Protection Agency accused the automaker of using software that allowed excess diesel emissions in about 104,000 vehicles.
The U.S.-listed shares of Fiat Chrysler plunged as much as 19 percent Thursday after Reuters first reported the news. The automaker's stock was briefly halted after the EPA made the announcement. The stock later recovered some of those losses and ended the day about 10 percent lower.
The agency alleged Fiat Chrysler violated the Clean Air Act by installing and failing to disclose "engine management software in light-duty model year 2014, 2015 and 2016 Jeep Grand Cherokees and Dodge Ram 1500 trucks with 3.0 liter diesel engines sold in the United States."
The undisclosed software results increased nitrogen oxide emissions from the vehicles, the EPA said. The Justice Department is reportedly working with the EPA on this issue.
The company could be liable for civil penalties and injunctive relief for the alleged violations, the EPA said. It said it is also investigating whether the auxiliary emission control devices constitute "defeat devices," which are illegal.
On Thursday, Attorney General Eric Schneiderman said in a statement he was deeply troubled by the evidence the EPA presented.
"My office was proud to take a leading role in the multi-state investigation of Volkswagen that uncovered flagrant abuses of New York's environmental laws and, in the case of VW, a culture of corruption that enabled blatantly illegal conduct to persist over many years," he said.
"My office will not tolerate attempts by any company to evade our environmental laws and pollute the air we breathe," he said. "As such, my office will investigate the claims against Fiat Chrysler and stands ready to work with our state and federal partners to ensure that any violations are pursued to fullest extent of the law."
Fiat Chrysler said Thursday it is "disappointed" the EPA has decided to issue a notice of violation, and said its engines are "equipped with state-of-the-art emission control systems hardware."
"FCA US intends to work with the incoming administration to present its case and resolve this matter fairly and equitably and to assure the EPA and FCA US customers that the company's diesel-powered vehicles meet all applicable regulatory requirements," the automaker said in a statement after the allegations.
"FCA US looks forward to the opportunity to meet with the EPA's enforcement division and representatives of the new administration to demonstrate that FCA US's emissions control strategies are properly justified and thus are not 'defeat devices' under applicable regulations and to resolve this matter expeditiously."
The report comes after German automaker Volkswagen admitted to criminal offences in rigging U.S. emissions tests and agreed to pay $4.3 billion in civil and criminal fines in a settlement with the U.S. Justice Department.
Fiat Chrysler CEO Sergio Marchionne rejected the comparison between Volkswagen and his company, and said anyone comparing it to Volkswagen is "smoking illegal material," according to Reuters.
Marchionne said he "has no doubts" that the EPA issue will cut into sales of affected vehicles in the United States, the news agency said. He reportedly said the EPA could have resolved the issue with the automaker without public announcement, according to the Reuters report.
In September 2015, the EPA instituted an expanded testing program to screen for defeat devices on light-duty vehicles.
"Once again, a major automaker made the business decision to skirt the rules and got caught," California Air Resources Board Chair Mary D. Nichols said in a statement. "CARB and U.S. EPA made a commitment to enhanced testing as the Volkswagen case developed, and this is a result of that collaboration."