Just when you start to think that the Fiat Chrysler Group with all of its Jeep and Hellcat support was able to wrap up 2015 with some solid sales numbers, along comes a few disgruntled dealerships claiming that these numbers have been falsified. FCA was quite curt in its rebuttal statement late Thursday night from London, stating that this whole mess stems from a couple of underperforming locations which think that a federal racketeering lawsuit is the best way to bail themselves out of some sizable financial woes.
Firing back with both barrels, FCA says the two dealers “have refused to substantiate their claims,” and that it “carried out an investigation of the facts, and has determined that these allegations are baseless and plaintiffs were notified of this fact before they filed suit.” Nevertheless, the Napleton Automotive Group of Westmont, Illinois continues to stand by its allegations that FCA conspired with a select few dealerships in order to over-inflate the automaker’s monthly sales figures last year. The federal lawsuit claims that FCA went as far as offering dealers money to falsify sales reports, an accusation that the automaker calls “a wrongful attempt to compel FCA U.S. to reserve special treatment for them.”
Filed this past Tuesday at a U.S. District Court in Chicago, the lawsuit pertains to both the aforementioned Napleton Automotive Group and a Northlake Chrysler/Jeep/Dodge/Ram dealership in Lake Park, Florida. According to a report by Automotive News, an assistant general counsel to the two dealerships says that “dealers were paid to report false sales on the last day of the sales reporting month and then ‘back out.'” This move would supposedly “unwind the sales the following business day before the factory warranty on the vehicles could be processed and start to run.”
Regardless of validity, these allegations are an unexpected blow to the automaker that saw strong sales numbers in the 2015 year. So the only question now is: Who’s telling fibs here: the under-performing dealerships or the out-perfoming automaker?
Continuing its rebuttal to the claims, FCA says it plans to focus on “safeguarding the relationship of trust and openness which governs its relationship with its dealers.” It also seemed a bit nonplussed by the media’s initial coverage of the issue, claiming that it “finds it unfortunate and disappointing that reputable media would be willing to be used in questionable litigation practices without a full understanding of the facts.”
In a separate investigation by The Wall Street Journal, Mr. Napleton allegedly claims that “his company was offered $20,000 to falsely report the sales of 40 vehicles,” and that he rejected the offer, telling Fiat Chrysler workers at the company’s business center that it “should refrain from such practice.” According to the complaint, FCA then approached competing dealers in the hopes that they would be more likely to participate in the fudging of sales numbers. Napleton Automotive went as far as accusing a competing dealership of falsely reporting that it had sold 85 vehicles and received tens of thousands of dollars in compensation. The dealership also claims that FCA disguised payments to dealers as “factory-based incentives” in order to protect them from a sales audit.
Automotive News’s investigation revealed that the Napleton family currently operates more than 50 dealerships which make up 32 franchises, and that attorney Len Bellavia (who specializes in dealer litigation) has been brought in to prosecute the case. For those of you who are unfamiliar with the name, Bellavia filed a similar suit against FCA on behalf of a Maserati dealer who claimed he was pressured to pad his sales last year.
“This lawsuit is nothing more than the product of two disgruntled dealers who have failed to perform their obligations under the dealer agreements they signed with FCA US,” the FCA Group said in its statement. “They have consistently failed to perform since at least 2012, and have also used the threats of litigation over the last several months in a wrongful attempt to compel FCA US to reserve special treatment for them, including the allocation of additional open points in the US FCA network.”
Fiat Chrysler reported selling around 2.24 million cars in the U.S. alone last year, crowning the company’s sixth consecutive year of sales growth. U.S. sales reportedly climbed 7.7% in 2015, the fastest-growth out of all automakers with more than one million U.S. vehicle sales, as monthly sales continued to climb after 69 consecutive months. Most of this growth has been attributed to a tidal wave of new products, Hollywood-backed advertising campaigns, and heavy-handed sales incentives. FCA shares closed 4% lower at $7.53 a share Thursday on the New York Stock Exchange, with analysts expressing concern about fallout from the suit even though time will only tell who is in the wrong here.