Sergio Marchionne, CEO of Fiat Chrysler Automobiles, believes diesels will allow the company to meet future, tougher fuel-economy standards.

But that faith is being sorely tested at the moment.

The U.S. Environmental Protection Agency (EPA) now says the company failed to disclose software for its EcoDiesel 3.0-liter V-6 engine that could affect emissions.

DON'T MISS: EPA says Ram, Jeep diesel emission software violates Clean Air Act (updated)

Even before the EPA publicly made that accusation, Marchionne said that rising costs could eventually make diesel irrelevant in passenger cars.

Transitioning 80 percent of current diesel engines to new Euro 6 emissions standards will cost 500 million euros ($531 million), Marchionne told Wards Auto and other media outlets during a press conference at the 2017 Detroit Auto Show.

The press conference was held January 9, two days before the EPA announcement that FCA may have used illegal software in its diesel engines.

2017 Fiat 500X

2017 Fiat 500X

While diesel has "acquired an incredibly bad reputation," Marchionne said it is still useful.

However, the cost of compliance with Euro 6 emissions standards may push diesel beyond the limit of economic viability, he said.

Equipment such as the selective catalytic reduction (SCR) exhaust aftertreatment systems already used on many diesels could "push the price of diesel solutions beyond the combination of gas and electrical," Marchionne declared.

ALSO SEE: Diesel Has An Endpoint, Says Fiat Chrysler's Marchionne (Feb 2016)

Marchionne has been hesitant to incorporate any form of electrification into FCA products, although the company appears to have moderated that position recently.

The only electrified vehicle sold by FCA in significant numbers in the U.S. is the recently-introduced Chrysler Pacifica Hybrid plug-in hybrid minivan.

FCA sells the Fiat 500e electric car in California and Oregon, but that model remains a "compliance car" to meet California's zero-emission vehicle standard.

2016 Ram 1500 EcoDiesel HFE

2016 Ram 1500 EcoDiesel HFE

When the 500e launched and in the years that followed, Marchionne complained that FCA lost $10,000 or more on every one.

But more recently, he has discussed mild-hybrid powertrains for upcoming SUVs and pickup trucks.

In Detroit, the FCA CEO also acknowledged that diesel's future may be bleak.

MORE: Justice Department launches criminal probe of FCA diesels: report

In 10 years, diesel will have "limited use" in passenger cars, Marchionne said, owing to the cost of the technology needed to meet emissions standards.

The EPA now says that FCA failed to disclose eight separate software routines that affect engine emissions.

Failure to disclose auxiliary emission-control devices, or AECDs, is itself a violation of the Clean Air Act, although the EPA has specifically not said that any of the software constitutes a "defeat device" meant to cheat emissions tests.

2015 Ram 1500 EcoDiesel HFE

2015 Ram 1500 EcoDiesel HFE

The EPA investigation encompasses roughly 100,000 Ram 1500 EcoDiesel pickup trucks and Jeep Grand Cherokee EcoDiesel SUVs, which use the same 3.0-liter V-6 engine.

Marchionne has called the EPA's action "strange and unfortunate."

An FCA statement released in response to the EPA announcement said the company's diesel models "meet all applicable regulatory requirements."


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