Fiat Chrysler, Cummins spar over costs of diesel emission recall

October 10, 2016 7:17 PM EDT

A Dodge Ram 2014 pickup truck on the assembly line in a file photo. REUTERS/Rebecca Cook


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By David Shepardson

WASHINGTON (Reuters) - Fiat Chrysler Automobiles NV and engine manufacturer Cummins Inc (NYSE: CMI) are fighting over the $200 million estimated cost for a recall of 130,000 Ram pickup trucks equipped with Cummins diesel engines that could exceed U.S. pollution limits.

The U.S. Environmental Protection Agency and California Air Resources Board have demanded a recall of 2013 through 2015 model year Ram 2500 pickup trucks with 6.7L Cummins diesel engines because moisture can lead to the deactivation of the selective catalyst reduction system, causing excess nitrogen oxide emissions, Cummins said in court documents that have not been previously reported.

A lawyer for Fiat Chrysler, John Berg, said at a Sept. 23 court hearing in Detroit the recall could cost $200 million, according to a transcript. The auto maker is willing to cooperate in the recall, Berg said. "What we are not willing to do is bear the cost of it," he said.

Fiat Chrysler has sued Cummins to recover the $60 million it has spent to date repairing 42,000 trucks at its own expense, he said.

The legal dispute between Fiat Chrysler and Cummins began in August when Fiat Chrysler sued the engine maker in U.S. District Court in Detroit for breach of contract, saying the Indiana engine company failed to provide working parts and would not indemnify it.

Cummins countersued, saying Fiat Chrysler would not cooperate in the recall "for one reason – money" and said the automaker was "holding both Cummins and its own customers hostage."

When the emissions system fails, the warning light goes on and if the vehicle isn't fixed soon the vehicles go into "limp mode" that allow them to only be driven very slowly, Berg said.

Cummins spokesman Jon Mills said Monday the two companies have a dispute regarding the financial responsibility for the recall, but "are working collaboratively to resolve an issue with a third party after treatment system purchased by (Fiat Chrysler) as quickly as possible on behalf of our customers."

Fiat Chrysler spokesman Mike Palese said Monday the automaker "remains committed to working with Cummins to ensure that any necessary repairs are carried out effectively and efficiently."

Cummins wants the recall to start next month in California and eight other states, and plans to complete the action early next year, according to court documents.

Cummins said in a court filing the recall will reduce the fuel economy of vehicles by a "negligible" amount - from 14.6 miles per gallon to 14.4 miles per gallon.

(Reporting by David Shepardson; Editing by Andrew Hay)



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