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Alex Soliman

PR Law & Ethics

Position Paper

Chambers

May 4th, 2017

Chrysler Fiat Scandal

In January 2017, the U.S. government accused Chrysler Fiat of failing to disclose

software in many of its pickups and SUVs with diesel engines. This is a more recent

case of a public relations debacle which is why it struck my interest. The companies

damage control was questionable at best. There were many allegations racking up for

Chrysler Fiat. Even after their was sufficient evidence, the company was still denying

allegations. Many people who purchased the vehicles wanted to go after the company

even after their penalties claiming they were guilty of false advertising and that the lies

to the public caused damages. I believe those suits are a stretch in the world of public

relations because of the penalties that were given to Chrysler Fiat for the illegal act

itself. It almost seems unfair to punish them for lying while trying to cover their tracks

when the original punishment was so outlandish and fits more than one crime.

I believe that the scandal could have been handled in an abundant amount of

ways that would have minimized damage control. The way that the company actually
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handled it would not be on that list, considering their final pay out after all was said and

done they had lost about 75% of their company value. That is not counting the huge loss

they suffered from the stock market. It is safe to say that the punishment for cheating on

the emissions test and for lying about it were combined. The depth of this scandals

financial cut into Chrysler fiat comes from a number of different aspects of the case

The vehicles involved were the 2014 to 2016 model year Dodge Ram 1500

pickup trucks and Jeep Grand Cherokees with 3.0-liter diesel engines. There were

approximately 104,000 vehicles, EPA officials said(Environmental Protection Agency).

The trucks computers were showing different results for the amount of pollutant

emissions that were coming from the exhaust of the trucks. These trucks were equipped

with software that was considered illegal under EPA regulations because they facilitated

cheating on the emissions tests .The software reduced the amount of nitrogen oxide

emitted during emissions tests, obscuring the fact that they spew more harmful

pollutants than is allowed under the Clean Air Act, officials said. At FIRST regulators

were NOT defining the software found in the Chrysler Fiat vehicles as defeat devices

intended to cheat on government emissions tests, which is how they were able to deny

allegations seamlessly. In the long run they were just getting away from the truth which

was finally brought to light and they were exposed.

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It is important to consider that a brand new truck like the 2014-2016 Dodge Ram

1500 pickup trucks or 3.0-liter diesel Jeep Grand Cherokees could range in price from

anywhere around $20,000-$50,000 dollars, adding anywhere from $2-4 billion in

potentially lost money from their trucks that were in jeopardy of needing to be recalled.

The damage was not done from merchandise alone. Chrysler Fiats U.S.-traded shares

dropped 20% after the EPA allegation was reported, wiping out about $3 billion of the

company's market value. The money drain did not stop there. Chrysler Fiat paid more

than $4.5 billion in fines for violations of the Clean Air Act. After the confirmed

allegations and penalties, Chrysler Fiat was slapped with $175 million in penalties by

the National Highway Traffic Safety Administration for mishandling recalls and failing to

report safety data. So not only did they actually do the thing that they were accused of,

they were also guilty of the accusations made against them in terms of handling the

matter. It is safe to say that this was a full on public relations crisis for Chrysler Fiat.

From their very first response to the allegations you could tell that something was

not right. Chrysler Fiat Chief Executive Sergio Marchionne denied any wrongdoing,

saying the EPA was blowing the issue out of proportion. It is uncertain if the Chief

Executive knew at that point that they were guilty but it lead to many other employees

speak on the defense against the accusations. Chrysler Fiat officials denied those same

claims in many statements. Every automaker must use various strategies to reduce
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tailpipe emissions without compromising the durability and performance of its engines,

Chrysler Fiat officials said, adding that its emission control system complies with

necessary requirements. It is more likely than not that not even the boss himself was

made aware of the wrong doings until way to late and that he was telling the truth at the

time.

The question a lot of people asked was how long can Chrysler Fiat CEO Sergio

Marchionne survive with both government regulators and legal sharks circling the

Chrysler Fiat ship. The Chrysler Fiat ship has slowly been taking on water since

Marchionne took the helm. All you have to do is look at the failed Dodge Dart and

Chrysler 200 to see were the water is pouring into the ship. Time will tell how

Marchionne and Chrysler Fiat will sustain itself with heavy damage coming from all

angles. It was easy to for-see that if in the coming months the company sales and stock

value continued to decline, it would just be a matter of time before we see a sequel to

the Volkswagen diesel-gate that has been going on for the last two years.

It was important to the chief executive to speak strongly against allegations in

order to prevent comparison and ties with the most recent scandal at the time which was

a Volkswagen. According to Bloomberg, Chrysler Fiat used technology from German

auto supplier Bosch, which is also under investigation for its role in providing software to

VW. The Chrysler Fiat probe is likely to involve less vehicles than the VW investigation,
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but considering Chrysler Fiats precarious debt situation, it would still hobble the

automaker. When the Environmental Protection Agency first revealed Volkswagens

wrongdoing in September 2015, the company faced punishment of potentially up to $18

billion, a scary number for Chrysler Fiats owners.

The chief executive was attempting to prevent his company from being made an

example of after what many people thought was a slap on the wrist for Volkswagen. He

was also trying to prevent and suppress allegations that the companies were in on the

scandal together. From a public relations standpoint, it was a good idea for the CEO to

be forthright with people and speak out about the allegations as soon as possible. The

longer it takes a company to respond to allegations the longer the bad thoughts boil in

the minds of the public. People want to be informed as much as possible which is why

we are living in an age of instant information updates with social media and the internet

as a whole. When the public receives word of possible criminal actions in a company

they immediately think the worse case scenario. Word can spread very quickly making a

swift denial of allegations even more important.

It seemed that this was exactly what Sergio Marchionne had done, answering the

press the same day of allegations. Marchionne was following the public relations

procedure correctly except for his heavy denial of the allegations. It is okay for the

company to say that they had no intention to do the things they are accused of and that
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they will investigate to make sure it is either fixed or to see if they are guilty. Chrysler

Fiat and Sergio Marchionne decided to completely deny the allegations together. This

may seem like a simple mistake but the company had no room for mistakes and put

their word on the fact that they did not cheat on these emissions tests which came out

as a blatant lie to the viewers face. Unfortunately, all that really did was dig the whole of

embarrassment deeper for the company as they were racking up the lies.

Customer loyalty between a company and its target audience is crucial especially

for major corporations like Fiat Chrysler. One of the primary factors that affect loyalty is

trust. According to a recent survey from Outbrain, two thirds of consumers state that

trust is the most important factor that determines their loyalty to a brand.

The same survey found that 94% of people felt that trustworthiness was a key factor in

determining whether they would visit a website, 87% felt that trust significantly

influenced their satisfaction level with a site and 90% rated trust as the primary reason

that they would recommend a brand. A companies expertise, intentions and ability to

present solutions in a coherent way are all critical to establishing the trust needed to

earn audience loyalty. In the words of Guy Kawasaki: Knowledge is great. Competence

is great, but the combination of both encourages people to trust you and increases your

powers of enchantment. The emphasis on trust on a companies success led me to

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conduct a survey on campus with with the goal of getting an idea of how much this

scandal effected peoples trust in Fiat Chrysler.

The method I used included content analysis of students (with cars) with in the

past few days. I surveyed every 3rd student that walked by me away from the student

commuter parking lot. The major finding was that most people are aware of the scandal

but were not directly effected by it, causing them to be indifferent on the subject. Of the

50 people we surveyed, results for each of our questions varied: When asked, (1) do

you know the Chrysler/Fiat brand? Out of 50 people, 47answered yes (94%). When

asked, (2) do you own/are you looking to purchase a car? All 50 people answered yes

(100%). When asked, (3) are you aware of Chrysler/Fiats scandal involving falsified

emissions tests/emissions equipment? Out of 50 people, 27 answered yes (54%). When

asked, (4) after being aware that Chrysler Fiat cheated on emissions, has your opinion

of their products and company changed for worse? Out of 50 people, 32 answered yes

(64%). And when asked, (5) would you consider purchasing a Chrysler/Fiat vehicle after

hearing of these allegations? Out of 50 people, 12 answered yes (only 24%).

From the survey, especially questions (4) and (5), it is reasonable to conclude

that the loss of trust in Fiat Chrysler caused just by the allegations. This survey can not

be considered a 100% accurate analysis of Chrysler Fiats customer loyalty because the

answers do not represent the whole population nor the all the Chrysler Fiat past,
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present, and future customers. In all truth it is probably impossible to get a completely

accurate depiction of the audiences level of trust. However, I feel that this survey speaks

for a percentage of the common person and gives a good idea of how people reacted to

the crisis and how much they actually knew about it. From the results you can also see

that not necessarily everyone is connected current events enough to even know about

the scandal based off the answer to question (3). About half of the people even knew

that this event had even happened which brings some credibility to the group surveyed

because in life not everyone is up to date on the news.

When people buy cars they are looking for something safe that will get them from

point A to point B and look good while doing so. People will not buy a quality product, no

matter how superior it may be to all of its competitors, if they can not trust the people

who are behind its creation. When teams come together to market a brand they often

start with who they want to sell to and how that target audience can learn to love there

brand. Chrysler Fiat had already established great customer loyalty which is one of the

most important assets they had that allowed them to be such a powerhouse in the

automating industry thus far.

Just as any other major company would, Chrysler Fiat did not bounce back from

this break down. It took $80 billion dollars to put Chrysler back on its feet. The federal

government took over General Motors and Chrysler in March 2009. It fired General
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Motors CEO Rick Wagoner and required Chrysler to merge with Italy's Fiat. The Obama

administration used the take-over to set new auto efficiency standards. Just when you

thought that Chrysler had put this all behind them, they popped up one more time.

Chrysler, which owes its existence to a generous bailout by American taxpayers, is now

demanding weakening changes to antipollution laws, even as it is charged with illegally

polluting, said Dan Becker, director of the Safe Climate Campaign. In fighting the

charges and looking to the new administration for exoneration, perhaps Chrysler hopes

that Donald Trump will tell the company its okay to cheat and lie. Even after the

company was spared they were still looking for more. The public sees greed very clearly

making that a huge blow to their brand reputation. All their actions show to the public is

that not only are their leaders corrupt, the company is corrupt at the very core.

This scandal caused the EPA to improved standards of the auto industries

equipment and the regular checking of that equipment. Chrysler Fiat messed up bad.

The first thing that this company should have done is come up with a message that

addresses what went wrong and how they will handle it. Don't wait to apologize. Even if

it is true that, to the companies knowledge at the time, they had nothing to apologize for.

The public will not scrutinize if you apologize for something that you did not even do in

the end. Yes, the company was right to deny allegations but not to guarantee that they
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had any part so strongly without getting the facts. What they did not do was show their

time and effort that would be going into investigate the allegations.

In my opinion, the company probably knew that their engines were giving out too

much emissions and that they were saving money by doing so. In that case they should

have taken the high road and apologized. It is always easier to cut your losses earlier,

especially when you are fully aware that you are actually guilty. When dealing with a

major corporation as huge as Chrysler Fiat, it seems foolish to think that after serious

allegations like these that the government would not run a full on investigation of the

problem sooner. There was no where to hide yet the company chose to continue to lie.

This situation could have been suppressed had it been handled properly. The

loss could have been cut in half with an early apology and correction of the vehicles.

Then the company could have made a promotional campaign toward a specifically

environmentally friendly car or truck. The face of the company could quickly have been

put in the direction of a cleaner company that still made all the same cars that people

had came to love. They also could have increased their communication with the public

substantially. Social media is a public relations gift. With a small team Chrysler Fiat

could have held message board on sites like Twitter and Facebook in order to address

concerns and reassure people. Hiding in situations when you are accused of hiding is

clearly not the solution. People want up-front communication, very direct clear motives
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for your company and then they will come to trust the company again and even more

than before. They also could have launched a campaign that was pro-environment like I

mentioned earlier.

I would say that the publics opinion of Chrysler Fiat after allegations was that

they are a money hungry company that does not care about the well-being of our planet

or people. In todays educated society, eco-friendly campaigns are not always lucrative

but certainly boost public opinion. There is a lot more easy campaign strategies that the

company could have use to counter-act the debacle. The only down-side to acting

quickly and with a full campaign that specifically goes against allegations is that the

company appears to be admitting guilt making the whole situation seem like an accident

which is the desired scenario for a guilty company. Although this is true, I still believe

that swift movement in the press would have worked out better for Chrysler Fiat because

the publics trust in their cars is more important than whether or not they are actually

guilty.

Overall I think that Chrysler Fiats biggest downfall was their timing. They were not

in a good starting position following Volkswagen and they knew it. That caused a lot of

panic and caused the company administrators to over deny allegations. They missed

the early opportunity to apologize and begin recovering. Instead they continued their lies

which made more investigations and caused the government to dig deeper and deeper.
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As a public relations practitioner at one of the wealthiest companies in America, you

HAVE to realize what is happening around you. After realizing the situation someone in

charge needs to step up and make the call early to apologize. There was not a notable

amount of firings at Chrysler after the scandal which surprised me. I do not see how I

could continue to employee a public relations team that advised the chief executive to

lie.
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Works Cited

1. https://www.entrepreneur.com/article/207530

2. https://www.thebalance.com/auto-industry-bailout-gm-ford-chrysler-3305670

3. https://www.washingtonpost.com/news/innovations/wp/2017/01/12/epa-fiat-chrysler-

used-software-to-cheat-on-emissions-tests/?utm_term=.c23ad0138ee9

4. http://www.cnbc.com/2017/01/12/fiat-emissions-scandal-straight-out-of-cheating-

culture-commentary.html

5. https://www.usatoday.com/story/money/cars/2017/01/13/how-fiat-chryslers-diesel-

woes-differ-vw-scandal/96549918/

6. https://www.nytimes.com/2017/01/12/business/epa-emissions-cheating-diesel-fiat-

chrysler-jeep-dodge.html?_r=0

7. https://www.usnews.com/news/national-news/articles/2017-01-12/over-104-000-fiat-

chrysler-vehicles-cheated-emissions-tests-epa-says

8. https://www.singlegrain.com/blog-posts/complete-guide-audience-loyalty-need-get/