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FCA is facing a showdown with U.S. regulators.

The United States Justice Department could sue Fiat Chrysler as soon as this week over allegations that the automaker used a cheating device in its diesel-powered trucks and SUVs, a new report finds.The possible litigation stems from accusations made in January of this year by the Environmental Protection Agency that FCA equipped its EcoDiesel-equipped Ram 1500 and Jeep Grand Cherokee models with a defeat device that allowed the vehicles to pass emissions test but then spew unlawful levels of CO2 emissions during normal driving. FCA denies any wrongdoing.

"In the case of any litigation, FCA US will defend itself vigorously, particularly against any claims that the company deliberately installed defeat devices to cheat U.S. emissions tests," Fiat Chrysler said in a statement. "The company believes that any litigation would be counterproductive to ongoing discussions with the U.S. Environmental Protection Agency and the California Air Resources Board."

The EPA has already served FCA with a notice of violation related to the alleged cheating device. The agency says some of FCA's controls "appear to cause the vehicle to perform differently when the vehicle is being tested than in normal operation and use." FCA could be facing fines as high as $4.6 billion if found in the wrong.

Inside sources revealed to Bloomberg that negotiations are still ongoing between FCA and the U.S. government, so it's possible the situation could be resolved outside of a courtroom. However, if FCA fails to properly explain the existence of the supposed cheat device, the automaker will likely windup as the target of a lawsuit.

FCA is also facing heat over emissions in Europe. Just this week the European Commission stepped up pressure on Italian regulators to explain a cheating divide found on some European-spec FCA vehicles.

FCA's possible emissions violations follow an admission by Volkswagen in 2015 that it used cheating devices it its diesel-powered vehicles. That scandal ended up costing VW $24.5 billion.