(Adds details on timing of possible settlement, closing stock price)
By David Shepardson
WASHINGTON, Feb 2 (Reuters) - The U.S. Justice Department is seeking "substantial" civil fines from Fiat Chrysler Automobiles NV after the government filed suit accusing the company of illegally using software that led to excess emissions in 104,000 U.S. diesel vehicles sold since 2014, a person briefed on the matter said on Friday.
Bloomberg News reported Friday that the Justice Department sent Fiat Chrysler lawyers a Jan. 27 settlement offer that included requiring the company to offset excess pollution and take steps to prevent future excess emissions.
A person briefed on the matter confirmed the letter included language that a settlement "must include very substantial civil penalties."
Fiat Chrysler shares ended down 7.2 percent at $22.30 on Friday in New York after earlier falling over 10 percent on news of the potential fines.
In a discussion in Washington this week between the Justice Department and Fiat Chrysler overseen by court-appointed settlement adviser Ken Feinberg, no specific figures were discussed, two people briefed on the talks said. Another round of settlement talks is set for late this month.
Feinberg and Fiat Chrysler declined to comment.
In July, Fiat Chrysler won approval from federal and California regulators to sell 2017 model year diesel vehicles after it came under scrutiny for alleged excess emissions in older diesel models.
To resolve the excess pollution issue, Fiat Chrysler lawyer Robert Giuffra said in December at a court hearing the company remains confident it can use updated emissions software in the 2017 vehicles as the basis of a fix to address agencies' concerns over 2014-2016 diesel vehicles.
The Justice Department said in December that company testing on the proposed fix began on Dec. 17 and would take about three months. The government will then have 30 days to review the results and expects to make a determination by the end of April.
No settlement is expected before testing is completed, people briefed on the talks said.
Separately, the company is still trying to settle lawsuits filed by owners of the diesel vehicles. A separate settlement session is set with lawyers for the owners and Fiat Chrysler in the coming weeks.
Regulators have said Fiat Chrysler diesel vehicles had undisclosed emissions controls that allowed vehicles to emit excess pollution during normal driving. The company has denied wrongdoing, saying there was never an attempt to create software to cheat emissions rules.
Fiat Chrysler's emissions case comes after Volkswagen AG's diesel emissions scandal prompted increased industry scrutiny. (Reporting by David Shepardson; editing by Cynthia Osterman and G Crosse)