STLA Stellantis NV

By Eric Sylvers and Giovanni Legorano 

MILAN-- Fiat Chrysler Automobiles NV on Tuesday said it would reduce the emissions of its vehicles as the Italian-American car maker moves to get ahead of the debate on European regulations following the Volkswagen AG cheating scandal .

Fiat Chrysler, which reiterated that its engines meet European regulatory requirements, is updating the method it uses to measure emissions from diesel engines so its vehicles perform the same way whether they are being tested under real driving conditions or in a laboratory.

The announcement comes on the eve of a vote by the European Parliament that will decide whether to reject a plan to start measuring auto emissions in part by using road tests rather than exclusively with laboratory results. Environmental groups have criticized the proposed changes and in December the commission's environment committee said they leave too much leeway for manufacturers to surpass existing caps on some types of emissions.

The European Automobile Manufacturers' Association on Tuesday called on the European Parliament to pass the new testing method, saying a defeat would lead to increased uncertainty. Fiat Chrysler also said it supports the new testing procedures.

It is common, and legal, for cars to emit more carbon dioxide and nitrogen oxide under real driving conditions than while being tested in a laboratory, something European regulators have long known and are seeking to address with the new regulations. The European Commission is also attempting to add a provision that would allow it to fine auto makers as much as EUR30,000 ($32,750) a vehicle if they are found to have cheated on emissions tests.

"The industry is likely to come under greater scrutiny and regulation is forcing manufacturers to be more transparent," said Anil Valsan, the lead automotive analyst at EY. "The actions [that] companies have taken so far are certainly in the right direction."

Fiat Chrysler's move is in line with actions taken by other European car makers and comes as they brace for a tightening of testing and supervision of auto emissions after the disclosure by U.S. regulators that Volkswagen cheated on emissions tests for years

In November, France's PSA Peugeot Citroën said it would develop new testing procedures with an environmental advocacy group to evaluate performance on the road. The results of the new procedures could be released as soon as early this year.

With many European cities struggling to keep pollution under control, there is public support for more rigorous testing, but meeting the new standards will be costly for the car industry, which already invests upward of $1 billion to develop a new model.

"The cost of meeting more demanding emission norms and possible recalls or fines could limit some car makers' free cash flow and, in turn, credit quality improvements over the next few years," Standard & Poor's said Tuesday.

Fiat Chrysler's decision to act proactively on its diesel emissions comes as jittery investors try to gauge whether the problems that engulfed Volkswagen could spread throughout the industry. Last month, France's Renault SA had to reassure investors after its shares lost a fifth of their value on news its facilities had been raided by authorities carrying out an emissions investigation.

Last week, the European Commission proposed overhauling the way the EU authorizes the sale of new cars in a bid to get better control of emissions testing. Currently, national authorities approve the sale of new cars, which can then be sold across the EU. Under the proposed changes, the commission and national regulators could test cars already approved. Those found not to meet minimum requirements could be banned from sale or recalled without the agreement of the authority that initially approved them.

While it waits for a single EU rule, Fiat Chrysler is voluntarily updating the way it measures emissions from its diesel vehicles, those with the so-called Euro 6 engine. New vehicles sold from April onward will be equipped with the new means for measuring and current owners of Fiat Chrysler vehicles with Euro 6 engines can have their car updated.

The company said the changes to how it measures emissions will allow it to adapt more quickly to new testing standards once they are introduced.

Fiat Chrysler, which recalled more than 11 million vehicles in the U.S. last year, more than any other car maker, pointed out that the moves announced Tuesday weren't part of a recall campaign. The company also said it would speed up the implementation in its vehicles of Active Selective Catalytic Reduction technology, which converts some noxious emissions from diesel engines into water and nitrogen.

Write to Eric Sylvers at eric.sylvers@wsj.com and Giovanni Legorano at giovanni.legorano@wsj.com

(END) Dow Jones Newswires

February 02, 2016 14:12 ET (19:12 GMT)

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