Fiat Chrysler shares drop on U.S. diesel emissions probe

WASHINGTON (Reuters) - Fiat Chrysler Automobiles NV FCHA.MI (FCA) shares fell 1 percent in U.S. trading on Thursday on reports the Justice Department is preparing to file a civil suit against the automaker for selling 104,000 vehicles that emit excess diesel emissions.

A screen displays the ticker 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. REUTERS/Brendan McDermid/Files

Reuters reported on Wednesday the Justice Department may file a suit under the Clean Air Act as early as this week if no agreement is reached with the Italian-American automaker.

The U.S. Environmental Protection Agency and California Air Resources Board in January accused FCA of illegally using undisclosed software to allow excess diesel emissions in 104,000 U.S. 2014-2016 Jeep Grand Cherokees and Dodge Ram 1500 trucks. That was the result of a probe that stemmed from regulators' investigation of rival Volkswagen AG VOWG_p.DE excess emissions.

Shares of the company fell as much as 4 percent on the New York Stock Exchange before closing at $10.48, down 1 percent.

The vehicles engines were manufactured by VM Motori SpA, a subsidiary of FCA, and some component parts for the engines were supplied by Robert Bosch GmbH.

Bosch faces about two dozen lawsuits from owners in connection with the FCA diesel vehicles.

The Justice Department and the EPA have obtained internal emails and other documents written in Italian that look at engine development and emissions issues that raise significant questions, people briefed on the investigation told Reuters. The investigation has scrutinized VM Motori actions.

FCA acquired a 50 percent stake in VM Motori in 2010 and the remainder in October 2013.

A federal judge in California set a May 24 hearing on a series of lawsuits filed by owners of vehicles and some dealers against Fiat FCA and the Justice Department is expected to file its action by then if no agreement is reached.

FCA said on Wednesday it believed any litigation would be “counterproductive” to ongoing discussions with the EPA and California.

The company said it “will defend itself vigorously, particularly against any claims that the company deliberately installed defeat devices to cheat U.S. emissions tests.”

The automaker said in a court filing late on Wednesday it was working closely with the EPA and California in a bid to win approval to sell 2017 diesels.

FCA said testing is ongoing by regulators and it hopes to “install modified emissions software” without requiring any hardware changes to address regulators’ concerns.

The company said it was ensuring potentially relevant documents are preserved, disclosing it has an “investigation hold” covering about 190 current and former employees related to the diesel vehicles under investigation.

The European Commission has launched legal action against Italy for failing to respond to allegations of emission-test cheating by Fiat Chrysler in a procedure that could lead to the country being taken to court.

Reporting by David Shepardson; Editing by Bernadette Baum and Sandra Maler