Fiat Chrysler To Recall 965k Vehicles Over Emission Issue

Per Reuters, Fiat Chrysler Automobiles N.V. (NYSE:FCAU) will recall approximately 965,000 gasoline vehicles that don’t comply with U.S. emission standards. The flawed vehicles are from the United States and Canada that will require catalytic converter replacements.

In-use emissions investigation conducted by Environmental Protection Agency (“EPA”) and in-use testing led by Fiat Chrysler, per the U.S. regulations, have impelled the company to issue the recall. The faulty vehicles include 2011-2016 Dodge Journeys, 2011-2014 Chrysler 200s and Dodge Avengers, 2011-2012 Dodge Calibers, and 2011-2016 Jeep Compass/Patriots. Out of the total, 863,000 cars are from the United States, while the rest are from Canada.

The issue has been observed by the EPA during a routine in-use emissions testing, which showed deteriorating performance of catalytic converters in vehicles. The faulty catalytic converters produce nitrogen oxide pollution that is above regulatory limits. Fiat Chrysler has commenced the recall procedure that will be undertaken in phases this year.

Fiat Chrysler Automobiles N.V. Price and Consensus

Fiat Chrysler Automobiles N.V. Price and Consensus | Fiat Chrysler Automobiles N.V. Quote

EPA announced that the flawed vehicles have no safety concerns and the company will not be charged any associated fines for not complying with the emission standards. Additionally, the agency announced that it will conduct the testing of other Fiat Chrysler models that are possibly noncompliant, which may lead to future recalls.

The automaker did not mention the cost involved with the recall. That said, it reported that related costs had been accounted in fourth-quarter 2018.

Prior to this, EPA sued Fiat Chrysler for using illegal engine-control software in diesel vehicles to pass emissions tests in 2017. Later in January 2019, the parties agreed on a settlement that costed the company roughly $800 million.

In fourth-quarter 2018, the automaker recorded robust earnings growth in North America, which is its largest and most profitable market. However, high costs in the region, and stiff competition in the SUV and truck market acted as major headwinds for the company.

Lowering demand in China, projection of higher costs and other concerns across the industry impelled Fiat Chrysler to project 2019 earnings per share at 2.70 euros. In 2018, the company’s earnings were 3 euros per share.

Over the past three months, shares of Fiat Chrysler have underperformed the industry it belongs to. During the said period, shares of the company have lost 7.2% compared with its industry’s decline of 0.6%.

Zacks Rank & Stocks to Consider

Fiat Chrysler currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are Ferrari N.V. (NYSE:RACE) , Geely Automobile Holdings Ltd. (OTC:GELYY) and PACCAR Inc. (NASDAQ:PCAR) . While Ferrari and Geely Automobile currently sport a Zacks Rank #1 (Strong Buy), PACCAR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ferrari has an expected long-term growth rate of 18.5%. Year to date, shares of the company have gained 30.8%.

Geely Automobile has an expected long-term growth rate of 7%. Shares of the company have gained 2.7% on a year-to-date basis.

PACCAR has an expected long-term growth rate of 10.8%. Shares of the company have gained 22.5% over the past three months.

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