By on July 19, 2016

FCA - Auburn Hills

Fiat Chrysler Automobiles is in hot water with federal authorities over the way it reports its sales.

Late yesterday, it was revealed that the U.S. Department of Justice and the Securities and Exchange Commission both launched investigations into the automaker, following months of accusations of inflated sales figures.

In a brief statement, FCA said it was “cooperating” with the SEC and Justice Department investigations “into the reporting of vehicle unit sales to end customers in the U.S.”

“In its annual and quarterly financial statements, FCA records revenues based on shipments to dealers and customers and not on reported vehicle unit sales to end customers,” the automaker stated.

Prior to this, FCA faced several accusations of skewed sales numbers and a dealer lawsuit that alleged a program exists that rewards dealers who falsely report the highest monthly tallies.

According to Bloomberg, lawyers from the firm Hagens Berman Sobol Shapiro, which represents the dealer group behind the lawsuit, claimed FBI agents visited the homes of nine FCA employees on July 11. The employees were all managers who work at the automaker’s business centers and interact directly with dealers, the lawyers said.

A source told Automotive News that FBI and SEC investigators visited nine employees in their homes and offices on July 11. The same source said federal staff attorneys visited FCA’s U.S. headquarters in Auburn Hills, Michigan on the same day, and “raided or visited” locations in Orlando, Dallas and California.

Earlier this year, FCA called the racketeering lawsuit filed by Napleton Automotive Group a “smear job.” The scheme described by Napleton allegedly saw dealers file false new vehicle delivery reports in exchange for cash, with the money listed as advertising support. After the exchange, dealers would allegedly cancel the sale at the beginning of the next month.

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19 Comments on “Federal Investigations Launched Into Fiat Chrysler’s Sales Practices...”

  • avatar

    If they would only stop selling all other models and just make Hellcats, they would have sold millions, MILLIONS I tell you. Heck, I wouldn’t be surprised if they sell 10 millions Hellcats. I know that all of us Americans love Hellcats, and we would have made sure the rest of the world buy our beloved Hellcats too.

    • 0 avatar

      Morning brain-teaser…how many times does the word “Hellcat” appear in this comment? LOL.

      Seriously, I guess Jeep is what keeps FCA going (and Ram, to an extent). Just switch to an “all Jeep” lineup and ol’ Sergio will be seen as the second coming as sales take off. FCA don’t need no stinkin’ cars!

      • 0 avatar

        Henry Kaiser said that…when he bought W-O and discontinued cars in favor of an all-Jeep lineup.

        Gerald Meyers, head of AMC, tried for years to NOT say that, but slowly the company shifted from being a car company with the Jeep subsidy, to the Jeep company building two cars under license from Renault.

        Chrysler didn’t live long enough to say anything other than “urghh…” as Daimler held it under water.

        Seriously. Given the high cost of mandated equipment and the engineering behind it, a small-volume lineup like Jeep simply cannot survive as a stand-alone company. Even before Federal mandates, Henry Kaiser’s people found it increasingly hard and not cost-effective to engineer powertrains. After the failure of the OHC Tornado six, which was a parts-bin job, Jeep opted to get engines from Buick and Rambler.

        And Jeep is a FASHION statement, much more than a work vehicle. We tend to forget the two gas shortages in the 1970s, and how close they came to taking AMC under – as Jeep sales slowed to a halt.

        Fashion can change fast. A utility product that fills actual needs will be around a long time, but fashion can change immediately with expediencies.

        No, if Sergio Sweaterman is depending on Jeep…he’d best part out his wreck of an empire and find a job with Tesla.

        • 0 avatar

          I wouldn’t say the Tornado Six was a failure. It came out in 1962, and in 1970 Kaiser sold Jeep to AMC, which had a nearly identical displacement six, the 232. AMC dropped the Tornado in favor of its own engine due to economics.

  • avatar

    Sergio is even having trouble with Ferrari F1
    Not sure Hellcats would fix that either.

  • avatar

    It’s scary that FCA resorts to cheating its numbers in one of the highest years for sales in US market history. What will the do in a down year?

    • 0 avatar

      I’m not sure it is “cheating.” FCA’s “customers” are dealerships, it’s proper to report sales to those parties. Individuals are customers of dealerships. Yeah, that might provide some numbers that don’t exactly reflect the reality of customer purchases, but you can thank our franchise laws for creating that situation (probably intentionally, at least originally).

      • 0 avatar

        It’s called “channel stuffing.” If FCA is engaging in it, then it is definitely illegal.

        • 0 avatar

          Oh I know. And from an honesty standpoint it’s far from kosher. But from a legal standpoint, because of said franchise laws, it may be fine.

          Then again, said franchise laws are preventing me from direct-ordering my custom car from FCA or any other manufacturer and forcing me to go through a sleazy dealer. So they reap what they sow, this is what they get for protecting them.

          • 0 avatar

            The issue is whether FCA is over-reporting sales, which violates their responsibility to report honestly to share holders. If the allegations are true, this is a major problem for for FCA, which will be opened up to severe fines, shareholder lawsuits and even jail time for the CFO. This is exactly the kind of thing that keeps CFOs awake at night.

          • 0 avatar

            Franchise laws have nothing to do with it.

            If a producer books revenues based upon units that it know can’t be retailed, then it is channel stuffing and that is illegal.

            In that scenario, the revenues are a sham. In most industries, that would require the producer to eventually take back or buy back the unwanted units. In the auto business, the unwanted inventory usually isn’t taken back but it does increase the incentive spend. But either way, it is illegal and it cannot be done; revenues have to be booked with the reasonable expectation that they will eventually be converted into cash received.

    • 0 avatar

      Interesting that the FBI is interested in your sales figures not your accountants. When did the US change it’s name too the United Soviet States of Ameriski

      • 0 avatar

        If your accountants are cooking the books then it’s fraud on a national level and yes the FBI along with the SEC is interested in what you are doing.

  • avatar

    I knew a golf pro who ran a pro shop like that. To make his monthly quota, he’d “sell” clubs or merchandise near the end of the month, and list them as returns after the month rolled over. He had to do it every month, and the end of the month sales (and next month’s returns) got bigger and bigger, until the pro shop’s parent company audited the books.

    The pro was demoted to running a driving range, until the books didn’t add up again, and he was forced to make a career switch to real estate. If FCA is doing the same thing, and not correcting the previous month’s sales figure to address the returns, I don’t know what Sergio will do – sell insurance?

  • avatar

    Maybe Jeeps aren’t selling as well as we thought.

  • avatar

    Sales Bank! Sales Bank! Sales Bank!

    Make my Dart pastel blue with wheel covers and a stick!

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