Fiat Chrysler Automobiles (FCA) will pay $9.5 million (€8.1 million) to settle charges with the US Securities and Exchange Commission (SEC). The probe concerned misleading disclosures about an internal audit of the carmaker’s emissions control systems.
The announcement comes as FCA and PSA Group reveal the nominations for Stellantis’ board of directors. The new company will be the result of the two manufacturing groups’ 50/50 merger. It will hold the title of the world’s fourth-largest automotive company, with the potential to achieve annual unit sales of around eight million vehicles globally.
The SEC found that in February 2016, FCA said in a press release and an annual report that it conducted an internal audit, which confirmed the carmaker’s vehicles complied with environmental emissions regulations. In its 2016 ‘FCA on Real Driving Emissions’ release, the company said that its vehicles ‘do not have a mechanism to either detect that they are undergoing a bench test in a laboratory or to activate a function to operate emission controls only under laboratory testing.’
But according to the SEC, the carmaker’s statements did not sufficiently disclose the ‘limited scope of the internal audit’. This is because it focused solely on finding ‘VW-style cycle-beating defeat devices,’ or that the audit was not a comprehensive review of FCA’s compliance with US emissions regulations. The Environmental Protection Agency (EPA) and California Air Resources Board (CARB) had raised concerns about the emissions systems in the carmaker’s ‘EcoDiesel’ engines.
The SEC order found that the manufacturer violated reporting provisions of federal securities laws. Without admitting or denying the findings, FCA agreed to discontinue any violations and pay a $9.5 million penalty.
‘This case demonstrates the importance of public companies providing accurate and complete information to investors,’ said Joel R. Levin, regional director of the SEC’s Chicago regional office. ‘At a time of heightened scrutiny of automakers’ regulatory compliance, FCA provided misleading assurances to investors by not disclosing the limitations of its internal audit.’
The carmaker issued a short release, acknowledging the case and the settlement amount. While Autovista Group approached FCA for further comment on the matter, the company did not respond prior to publication.
FCA joins BMW in paying penalties as a result of rulings in the US, as the German carmaker also recently settled charges with the SEC to the tune of $18 million. The probe concerned the carmaker disclosing ‘inaccurate and misleading information’ about its sales while raising approximately $18 billion from investors in a number of corporate bond offerings.
Balancing the board
In more upbeat news for FCA, further progress has been made in setting up the much-discussed FCA/PSA merger company, Stellantis. The board of directors will consist of 11 members, with the majority of the non-executive directors being independent. They will come from diverse professional backgrounds, bringing with them ‘significant relevant perspectives and experience.’
FCA and its reference shareholders nominated five members, including current FCA chairman John Elkann for chairman. Groupe PSA and two of its reference shareholders also nominated five members, including current FFP/PSA chairman Robert Peugeot for vice-chairman. Carlos Tavares, Stellantis’ chief executive officer, will also be a member of the board.
Appointments to the board will be subject to shareholder voting. Completion of the combination is expected by the end of the first quarter of 2021. The two companies recently announced they have restructured the terms of the merger in response to the coronavirus (COVID-19) pandemic. FCA will cut the cash portion of a special €5.5 billion shareholder dividend down to €2.9 billion. Meanwhile, PSA’s 46% stake in Faurecia will be distributed to all Stellantis shareholders after the merger closes, following board and shareholder approval.