Renault SA became the latest victim of the fallout of Volkswagen AG's diesel scandal after Paris prosecutors opened a preliminary investigation into the French company's vehicle emissions, wiping as much as $1.6 billion from its market value.
French investigative judges will oversee the case opened Thursday, the same day American authorities announced an investigation into accusations that Fiat Chrysler Automobiles NV used computer software to cheat emissions tests of its diesel models. Renault -- which doesn't sell vehicles in the U.S. -- faces allegations that its cars are a pollution hazard, a spokesman for the prosecutors office said by telephone.
The auto industry has been under increased scrutiny since American regulators found in September 2015 that Volkswagen had installed software to activate pollution controls during government tests and turn them off during regular driving. On Thursday, Fiat Chrysler was accused of violating pollution laws with 104,000 diesel vehicles, sending the shares plunging.
"We are in line with what happened to Volkswagen in September 2015 ... these are topics that are scary because they potentially mean extra costs for penalties," Natixis analyst Georges Dieng said by phone.
Shares of Europe's third-largest automaker fell as much as 6 percent in Paris trading.
Renault, whose biggest shareholder is the French government with a 20 percent stake, said it hasn't received any official notification about the latest developments in the investigation, which French prosecutors announced in a brief statement Friday. The company insists that its vehicles comply with French and European Union legislation and aren't equipped with software to cheat on emissions.
"What is important from Renault's point of view is that things can go fast, whatever the final decision is," Dieng said. "This topic largely weighted on the performance of Renault in 2016, although its economic performances were very good."
Renault shares crashed in January last year after a report that government investigators had searched the Boulogne-Billancourt, France-based company. PSA Group premises were also raided by government fraud investigators in April.
In November, French Ministry of Economy fraud watchdogs said their research found enough material to require further investigation into nitrogen oxides emitted by the company's vehicles, and recommended that prosecutors open a case.
Volkswagen's bill for its cheating rose this week after the company settled criminal and civil complaints with the U.S. Department of Justice, including pleading guilty to conspiracy to defraud the government and obstruction of justice. While there's no evidence that other manufacturers have also deliberately cheated on emissions tests, it's typical for cars to pollute more on the road than during tests -- which opens the door to a lot of massaging performance.
"There will be many more probes," said Matthias Holweg, a management professor at Oxford University's Said Business School. "The scope for manipulation is very present for every car company."
Business on 01/14/2017