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FCA Paid $77 Million in Fines in 2016 to Sell Profitable Trucks, SUVs

It’s no secret, and we’ve said it often, that for automakers, selling pickups and SUVs is a very profitable enterprise. The case of FCA (Fiat Chrysler Automobiles) and certain fines it paid in 2016 illustrate the point.

A Reuters report reveals that FCA paid $77 million in civil penalties that year. The reason? The company was unable to meet federal fuel emissions standards in place at that time. The obvious culprits for the company falling short of those targets are its Jeep and RAM divisions. The products made by these divisions are very popular with consumers despite their relative fuel inefficiency.

But there’s a context these fines needs to be understood in, as we imply in our title above. While surely the company didn’t just blithely decide to break the rules in order to make profits with sales of Jeeps and RAMs, the late FCA boss Sergio Marchionne did say last June that the company could expect to be tagged with fines from time to time if it hoped to continue selling vehicles that consumers were clamouring for.
Boil it down to its essence, and the calculation is straightforward: if the bottom line shows its profitable…

Photo: V.Aubé

Another bit of nuance is in order. Like other auto manufacturers, the FCA Group makes the case that the standards implements in 2012 no longer reflect the reality of the automotive sector today. In this, the company has a point. At the turn of the 2010s, gasoline prices were climbing alarmingly and consumers are forsaking their SUVs for more fuel-stingy cars. Today, prices have come back down, and like clockwork motorists returned to their preferred methods of transportation.

For its part, the NHTSA reported that in 2016, a total of $77 million in penalties were assessed across the industry. Which means that FCA was the only company to get dinged.

FCA also claims it was the victim of a 2011 change in the classification of vehicles. That year some FWD SUVs were classed as cars instead of trucks, which penalized them in relation to the standards in effect at the time.

As it happens, 2016, the year of the fines, was also the year that the Chrysler 200 and Dodge Dart were abandoned – a move that didn’t help FCA to meet the standards.

All of this leaves us with a pertinent reminder that for automakers, profitability dictates a lot of decisions. Brand image is important, yes, but no more so than the generating of profits.

In the midst of all this, electrification is coming, even to FCA, and as soon as 2022 if the company’s own projections are to be believed.

Stay tuned.

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