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Fiat Chrysler Automobiles NV (FCAU) to Invest $1B in U.S., Create 2,000 Jobs

 

https://investorplace.com/2017/01/fiat-chrysler-automobiles-nv-fcau/#.WHUOcsukqf2

 

Fiat Chrysler Automobiles NV says that once the retool of its factories is complete, it will add 2,000 jobs in the United States. President-elect Donald Trump praised the decision with a post on Twitter

 

 

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What are people's game plan? Hold and see how this unfolds, buy more, or sell?

 

I just sold. It was a good run up. Not sure if the shares are now haulted. I don't see any bid/ask on my TWS terminal anymore.

I think having this scandal at the top of a three year high is very dangerous as lots of people would rush to exit while they still have some profits to book.

 

Does anybody have thoughts on the potential fine impact? VW's CEO was forced out after its scandal. While the impact on FCAU might be just a $200 million fine, assuming $2000 per vehicle loss, if Sergio is forced out, then the hockey ride to 2018 may not be feasible anymore. That will be the worst case scenario.

 

What I don't understand is that FCAU's diesel vehicles have the worst MPG amoung its competitors, which might imply that it is not cheating on MPG. And if it does have a diesel problem, then I assume it would have been exposed far earlier than this. I don't know what's going on here. Waiting to see the EPA announcement.

 

 

 

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Accused of diesel emissions cheating:

http://jalopnik.com/the-epa-will-accuse-fiat-chrysler-of-installing-softwar-1791115155

 

This after Germany accused fiat of doing similar in Europe last year.

 

FCAU a low quality auto company hyped by Marchionne's supposed finesse at deal making and manufacturing of "adjusted ebitda".

 

Many catastrophic black swan risks in this company.

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Accused of diesel emissions cheating:

http://jalopnik.com/the-epa-will-accuse-fiat-chrysler-of-installing-softwar-1791115155

 

This after Germany accused fiat of doing similar in Europe last year.

 

FCAU a low quality auto company hyped by Marchionne's supposed finesse at deal making and manufacturing of "adjusted ebitda".

 

Many catastrophic black swan risks in this company.

 

Everyone's entitled to their opinion but if you read the official EPA response it clearly says:

 

https://www.epa.gov/newsreleases/epa-notifies-fiat-chrysler-clean-air-act-violations

 

"FCA may be liable for civil penalties and injunctive relief for the violations alleged in the NOV. EPA is also investigating whether the auxiliary emission control devices constitute “defeat devices,” which are illegal."

 

Let's try to separate facts from fiction.

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Go back to actual data about MPG and emission levels.. you will see the facts and Fiat has lowest MPG and highest emission compared to VW, GM and most of the European car companies.

 

BREAKING: Anyone comparing Volkswagen emissions issues with Fiat Chrysler 'is smoking illegal material': Fiat Chrysler CEO

 

 

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Here's the transcript from the CNBC interview with  Fiat Chrysler CEO Sergio Marchionne.

 

Cheers!

 

-----

 

CNBC Exclusive: CNBC Transcript: Fiat Chrysler CEO Sergio Marchionne Speaks with CNBC's Phil LeBeau Today on CNBC's "Power Lunch"

http://www.cnbc.com/2017/01/12/cnbc-exclusive-cnbc-transcript-fiat-chrysler-ceo-sergio-marchionne-speaks-with-cnbcs-phil-lebeau-today-on-cnbcs-power-lunch.html

 

<snip>....

MARCHIONNE : WELL, I MEAN, WE WERE RELATIVELY CLEAR WITH THE PRESS RELEASE THAT WE ISSUED THIS MORNING. WE HAVE A NUMBER OF CONTROL STRATEGIES THAT RUN OUR ENGINES, AND THERE'S NEVER BEEN ANY INTENT IN PUTTING THE SOFTWARE IN THE VEHICLES TO DEFRAUD ANYBODY. WE THINK THAT THE SOFTWARE IS COMPLIENT WITH CURRENT LEGISLATION. WE MAY HAVE A DIFFERENCE OF OPINION AS TO WHETHER THE EPA AND CARB HAVE DIFFERENT EXPECTATIONS OF DISCLOSURE ON THOSE CALIBRATIONS, BUT THE FUNDAMENTAL DIFFERENCE IN OUR CASE AND RECENT CASES THAT THEY SETTLED HAVE TO DO WITH THE FACT THAT THESE CONTROL STRATEGIES WORK ALL THE TIME IN OUR VEHICLES. THEY DO NOT DISTINGUISH BETWEEN TEST CYCLES AND RUNNING A NORMAL RUNNING OPERATION, SO THE CASE IS FUNDAMENTALLY DIFFERENT, AND IT IS IMPORTANT FOR US TO DISTINGUISH OURSELVES FROM THE CURRENT STATE OF THE ART IN THIS AREA. I THINK WE HAVE BEEN UNNECESSARILY MALIGNED WITH A DESIRE OR A WISH OR INTENT ON OUR PART TO TRY TO DEFRAUD ANYBODY. WE HAVEN'T.

....</snip>

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So it seems the EPA did some fake news,  :o FCAU rises further in early Friday.... 

 

-----

 

Fiat Rises as Investors Question VW Parallels in Cheating Charge

January 13, 2017 - Bloomberg

 

CEO calls the regulator’s allegations ‘unadulterated hogwash’

 

Marchionne said his company did nothing wrong and that his situation is entirely different from VW’s, calling insinuations to the contrary “absolute nonsense.”

 

Marchionne told reporters Thursday. “We don’t belong to a class of criminals.

 

https://www.bloomberg.com/news/articles/2017-01-13/marchionne-faces-cheating-charge-from-weaker-position-than-vw

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Did WSJ remove Google backdoor or is it just me? Going through "Private window" in Firefox that should not have tracking, but still don't get full article.

 

Edit: Tried also Opera through their VPN and private window. Still no access. Hmm.

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Did WSJ remove Google backdoor or is it just me? Going through "Private window" in Firefox that should not have tracking, but still don't get full article.

 

Edit: Tried also Opera through their VPN and private window. Still no access. Hmm.

 

They are experimenting with disabling that "loophole", so I guess I'm now a proud WSJ subscriber. I attached the two articles you mentioned. I also attached this article: http://www.wsj.com/articles/epa-accuses-fiat-chrysler-of-diesel-emissions-violations-1484237791

 

I think the real issue here is answering the "why" question. Why did FCAU not disclose the 8 auxiliary emission-control devices on the 3.0-liter engines the EPA tested on, and if that non-disclosure of the AECDs was really illegal. That issue hasn't been directly addressed from FCAU in anything I've read so far, so it looks like this will play out in the courts. I'm no lawyer, so I can't comment or handicap the actual legality here.

 

However, given the political climate, this charge seems to have been purposely rushed out the door (seriously, how could the EPA go to the public with such accusations without knowing if the software was designed to cheat emissions tests? why wasn't FCAU's PR team on top of this before accusations started flying?!) before the incoming administration takes over. The potential fines here are large, and Mr. Market wiped off almost a third of the max potential fine, so it appears that Mr. Market doesn't believe it will come to the max.

 

I don't think I'll change my position much given my low cost basis and the friendly tone between FCAU and the new administration (https://www.bloomberg.com/news/articles/2017-01-08/fiat-chrysler-commits-1-billion-to-u-s-plants-for-jeeps-rams). Does this call into question the integrity of management? Marchionne's response was pretty standard with his characterized brashness--when you are going up against the U.S. Government I feel that it's better to play nice. Is he just denying to deny? I'm not sure. His leadership and candidness has been fanstastic but if this starts to spiral it might be time for a change.

 

edit: attachments

epa-accuses-fiat-chrysler-of-diesel.pdf

epa-action-highlights-fiats-financi.pdf

epa-emissions-probe-tilts-oddsagain.pdf

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Does this call into question the integrity of management? Marchionne's response was pretty standard with his characterized brashness--when you are going up against the U.S. Government I feel that it's better to play nice. Is he just denying to deny? I'm not sure. His leadership and candidness has been fanstastic but if this starts to spiral it might be time for a change.

 

 

 

My impression of Marchionne is that he has zero tolerance for any illegality, but if there is an area (controversial or not) where he sees a possible advantage then he will get every lawyer he can to look at it every which way and then go ahead if the letter of the law says it's okay.

I think that's likely what happened here and why they didn't lay their cards on the table. If you've found a smart way to make the law work to your advantage, then why tell your competitors or regulators about it?

This is a fight-to-the-death industry where every advantage counts, not some friendly under 8's soccer game for the local church charity.

 

He's constantly spoken about the emissions laws being unclear and open to interpretation. My view is FCA saw an area not covered by the law and so after lengthy discussion and much legal opinion, they built a product that aggressively took advantage of that opening while remaining legal.

If you remember his comments about electric cars, you can see the same thing. Basically, he said he'd manufacture not one more than was legally required because they cost FCA an arm and a leg and if anyone didn't like it they could go play in traffic.

 

My sense is the EPA believes the product violated the spirit of the law, and so even if the evidence wasn't clear-cut they nonetheless got the case out the door before the Trump administration took office.

Whether that'll work remains to be seen. Almost 2 years since the VW scandal broke, it's hard to believe they've got an obvious case after all the testing that's taken place in various cities across multiple countries.

 

I think the shame-and-fine methods of the Obama administration were necessary after the GFC and restored a lot of trust and integrity into various industries. At the same time, there does come a point where business starts to get stigmatized and where it can just become a case of beating mostly reformed people with the biggest stick you can find.

 

Unfortunately, I think this issue falls into that category. Judging from the rushed, unclear nature of the accusations it seems like an attempt to go out in a blaze of glory rather than in a reasonable and considered manner. No big deal, even if it's probably a slight shame for the EPA.

 

As for fines, the Trump nominee is extremely pro-business. There might be some need to fine FCA a $100M or $200M just to show he's no pushover, but I also think it's just as likely the case gets dropped for lack of evidence or that FCA admit they didn't act in the spirit of the law in exchange for a warning. That's just my personal opinion and it's not backed up by any formal legal training.

 

Disclosure: I own FCA stock.

 

 

 

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+1. This is the best reflection on this latest issue I have read. Thanks for sharing your thoughts.

 

 

 

Does this call into question the integrity of management? Marchionne's response was pretty standard with his characterized brashness--when you are going up against the U.S. Government I feel that it's better to play nice. Is he just denying to deny? I'm not sure. His leadership and candidness has been fanstastic but if this starts to spiral it might be time for a change.

 

 

 

My impression of Marchionne is that he has zero tolerance for any illegality, but if there is an area (controversial or not) where he sees a possible advantage then he will get every lawyer he can to look at it every which way and then go ahead if the letter of the law says it's okay.

I think that's likely what happened here and why they didn't lay their cards on the table. If you've found a smart way to make the law work to your advantage, then why tell your competitors or regulators about it?

This is a fight-to-the-death industry where every advantage counts, not some friendly under 8's soccer game for the local church charity.

 

He's constantly spoken about the emissions laws being unclear and open to interpretation. My view is FCA saw an area not covered by the law and so after lengthy discussion and much legal opinion, they built a product that aggressively took advantage of that opening while remaining legal.

If you remember his comments about electric cars, you can see the same thing. Basically, he said he'd manufacture not one more than was legally required because they cost FCA an arm and a leg and if anyone didn't like it they could go play in traffic.

 

My sense is the EPA believes the product violated the spirit of the law, and so even if the evidence wasn't clear-cut they nonetheless got the case out the door before the Trump administration took office.

Whether that'll work remains to be seen. Almost 2 years since the VW scandal broke, it's hard to believe they've got an obvious case after all the testing that's taken place in various cities across multiple countries.

 

I think the shame-and-fine methods of the Obama administration were necessary after the GFC and restored a lot of trust and integrity into various industries. At the same time, there does come a point where business starts to get stigmatized and where it can just become a case of beating mostly reformed people with the biggest stick you can find.

 

Unfortunately, I think this issue falls into that category. Judging from the rushed, unclear nature of the accusations it seems like an attempt to go out in a blaze of glory rather than in a reasonable and considered manner. No big deal, even if it's probably a slight shame for the EPA.

 

As for fines, the Trump nominee is extremely pro-business. There might be some need to fine FCA a $100M or $200M just to show he's no pushover, but I also think it's just as likely the case gets dropped for lack of evidence or that FCA admit they didn't act in the spirit of the law in exchange for a warning. That's just my personal opinion and it's not backed up by any formal legal training.

 

Disclosure: I own FCA stock.

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