By on September 3, 2016

2016 Jeep Grand Cherokee Summit, Image: FCA

Federal investigators probing Fiat Chrysler Automobiles for alleged sales tampering have uncovered a strange phrase that they believe is a code word.

According to the Wall Street Journal, company executives would sometimes call up regional managers and dealers and utter a specific phrase. Investigators believe this was a signal for dealers to go ahead and boost end-of-month sales in any way necessary.

The U.S. Justice Department and Securities and Exchange Commission both launched separate investigations into the automaker in July, after hearing reports of inflated sales numbers.

FBI and SEC investigators reportedly visited nine employees in their homes and offices on July 11, while 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.

The WSJ report, drawn from sources familiar with the issue, claims that executives would tell managers and dealers that the “unnatural acts department” was open. The message would be delivered in a conference call or in a one-on-one phone conversation. Once given the green light, dealers could aggressively incentivize vehicles, or perhaps go even further.

Investigators have focused on the practice of moving vehicles from a dealer’s inventory to its test fleet, and reporting that transaction as a sale. The sale would then be rolled back at the beginning of the next month.

When it changed its sales reporting methods in late July, ending a 75-month sales streak, FCA claimed, “It is admittedly also possible that a dealer may register the sale in an effort to meet a volume objective (without a specific customer supporting the transaction).”

Sketchy sales reporting is behind a racketeering lawsuit filed against FCA by an Illinois dealer group. Napleton Automotive Group claims the automaker paid them to inflate sales data at their dealerships. FCA has denied the practice.

[Image: Fiat Chrysler Automobiles]

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45 Comments on “‘Unnatural Acts Department’: Sales Fraud Investigators Uncover Fiat Chrysler Code Word...”


  • avatar
    Kenmore

    Eta Kooram Nah Smech!

  • avatar
    Commando

    I usually hear the term, Unnatural Acts used in terms of human-animal screwing.
    Oh, wait. I just realized that applies here.

    • 0 avatar
      Lou_BC

      @Commando – same thought occurred to me. Some refer to sodomy as an “unnatural act”. Either way, this is turning out to be a huge pain in the azz for FCA. Karma is a bitch. You screw with the truth and eventually it comes back to screw you. The military term Bohica comes to mind. “Bend over, here it comes again.

  • avatar
    Whatnext

    First VW now FCA. Is there no honest automaker? LOL.

    That probably explains the new 2015 300 that showed up on my local dealers lot months after the model year ended.

  • avatar
    multicam

    It is a code word but not for what the investigators think. Unnatural Acts Department… UAD… UrinAlysis Developing.

    It’s a warning that there’s a piss test coming up!

  • avatar
    Paragon

    About that code word: no matter how you say it, you know that you’ll be heard!

    Word up!

  • avatar
    Big Al from Oz

    This is a simple problem to solve.

    The only vehicles counted as sold is when the money is in the bank. Not contracts signed, or vehicles sitting at car dealers.

    Imagine if mining was based on ore dug.

    Numbers should be based purely on retail numbers, not wholesale.

    Also, pickups should be broken down into Classes. This means even the new Titan XD would be measured against other HDs.

    There is way to much bullsh!t in data from industry.

    • 0 avatar
      JustPassinThru

      It’s not a problem begging a solution.

      The PROBLEM, is how to jigger the numbers without BEING CAUGHT.

      They don’t want to report honest sales numbers. Even if they were ahead, a sales-manager’s natural instinct is to cheat and fudge.

      • 0 avatar
        VoGo

        No, the problem is aligning supply with demand. You either build vehicles that consumers actually want (like Honda does) or you stuff the channel and rental car companies with trash they don’t.

        • 0 avatar
          JustPassinThru

          Numbers have always been gamed – since Ford started it after WWII, with their fake numbers to satisfy Robert McNamara. Lynn Townsend turned it into an institutional art with his Sales Bank; and other brands have learned that numbers matter and what does NOT is, whether the numbers are honest.

          You’ll keep on seeing this game. As long as there are car companies.

          • 0 avatar
            VoGo

            If we keep seeing this game, then carmakers will keep seeing SEC lawyers bearing down on them. Public companies that falsify sales data are breaking the law.

          • 0 avatar
            thattruthguy

            Borrowing next month’s sales to make this month’s numbers is a universal business problem, not a car business problem.

          • 0 avatar
            JimZ

            yep, it’s called “stuffing the channel” in other markets (like consumer electronics.)

          • 0 avatar
            Scoutdude

            @JPT Chrysler’s Sales Bank was not about fudging the numbers, it was about keeping the factory running and avoiding a shut down. So when there weren’t orders to keep the lines running Chrysler made some models with “popular options” and put them in a parking lot. Of course this was self defeating because they in turn stopped dealers from ordering cars for stock. Instead when the dealers wanted cars for their lot Chrysler gave them discounts on the stock rotting on their lot. They also offered them to rental car companies at deep discounts to get them off the lot. Thus the first case of dumping cars they couldn’t sell on rental fleets.

            This is different because they are encouraging the dealers to lie about actual sales to customers, to boost their “retail delivery” numbers.

            @JimZ this is not stuffing the channel. Stuffing the channel is when a mfg “incentivizes” the retailers to take more product than they can sell. Usually it is accompanied by the wink and a nod that it is a “Guaranteed Sale”, ie they will buy the product back after a period of time. For what ever reason the auto industry revolves around deliveries to end users while many other business only report shipments to distributors and retailers.

  • avatar
    Von

    Really? You couldn’t just tell them to move heaven and earth to make sales? It’s the same effect without using a stupid code word and you can claim it was just an expression on your part and have plausible deniability as a defense.

    • 0 avatar
      JustPassinThru

      Can’t sell when there are no customers.

      A good salesman can sell more; but the total possible sales in a given timeframe is finite.

      It’s obviously a signal to start cooking the books. Whether it involves selling to the dealership, taking the cars off floorplan and going into an owned-inventory (and reported as a sale) or just reporting sales-not-closed as sales completed…there’s gaming going on. There’s obviously heavy incentive to stage these games. Future allocation or bonuses or other favorable considerations…who knows?

      Why do you find that so hard to accept?

      • 0 avatar
        Lou_BC

        JustPassinThru – Agreed. Everyone right from the dealerships up to the car companies benefit from exaggerated sales numbers. At the end of the day profits are what matter when they issue their quarterly reports.

        • 0 avatar
          Scoutdude

          Since the Dot Com boom stocks are frequently traded on sales numbers. Too many investors don’t pay attention to the quarterly reports to find out that the increase in sales actually resulted in lower profits.

          Even before the Dot Com boom many companies were focused on showing that sales growth over net profits.

          Years ago I worked for a publicly traded company and the normal MO was to offer big discounts to stuff the channel near the end of the year and then come Jan I’d have to go and process returns of “unsaleable product” much of which would be untouched product instead of damaged goods.

          The company was taken private and shortly there after since stock price was not a concern they stopped stuffing the channels to in turn buy back that discounted product at the normal price and usually at the recently increased normal price.

      • 0 avatar
        Von

        PassinThru,
        I was referring to the use of the coded phrase, when they could’ve just used an everyday phrase instead of going through all the trouble of making the order to cook the books even more obvious, specific, and harder to deny that you were just using a common expression.

  • avatar
    JimZ

    well, that explains why there are so many Rams piled up in the north end of the parking lot at Detroit Diesel in Redford.

    • 0 avatar
      Lorenzo

      Not necessarily. Some dealers have much bigger lots than others, and sometimes serve as overflow lots for others’ inventory. My uncle was a Ford dealer who lost nearly half his lot to the state highway maintenance department. He kept a part of his inventory at a huge lot owned by another dealer miles away.

      That was the reason he and his partners sold out to a Lincoln dealer: he didn’t have the space he needed for all the models Ford put out in 1966-68, but the lot and facilities were just right for the Lincoln dealer.

      The other reason was, he couldn’t get enough profitable Mustangs unless he took a bunch of optioned-up Fairlanes he couldn’t sell – people would buy the bigger base Torino for almost the same price. That’s another carmaker trick played on dealers.

    • 0 avatar
      JohnTaurus_3.0_AX4N

      The local Toyota dealer was packed with I bet 100 Tundras, and they are not a large dealer. They rented an abandoned grocery store parking lot to store them after filling a grassy lot next door. I was thinking Toyota must be forcing them to take these trucks, even though they aren’t selling enough to warrant such inventory. Every day for weeks that I drove by it, it was the same trucks. You rarely see a Tundra around here, save for some “urban cowboys” or an old man driving loaded ones that have clearly never seen any harsher duty than what a typical Camry of the same vintage would experience.

      • 0 avatar
        wolfinator

        That seems odd to me. I’ve read elsewhere (can’t remember where) that Toyota dealers are always lobbying Toyota to send them *more* Tundras. Couldn’t that dealer find some way to offload his Tundra inventory to a desperate West Coast dealer?

  • avatar
    thattruthguy

    The Torino was always the same size, and body, as Fairlanes of the same year.

    • 0 avatar
      Drzhivago138

      Methinks he may have meant to say “Galaxie” instead of “Torino,” given the 66-68 timeline. Torino didn’t become a model until 1968, and then it was an upscale sub-series of the Fairlane line, never a “base” model.

      • 0 avatar
        Lou_BC

        Drzhivago138 – correct. Ford had multiple nameplates all based upon the same platform. In some respects it was like Sierra and Silverado.

      • 0 avatar
        Lorenzo

        No, I didn’t mean to say Galaxie, or LTD. The Torinos were about the same price but the V8 and power steering were mostly standard (you could get a six, but dealers wouldn’t carry them), optional on the Fairlane which also had AC, not a big seller between Providence and Boston, where the dealership was, and power windows weren’t favored either.

        I shouldn’t have said ‘bigger’, just a better package, though the Torinos had a nice fastback coupe that *looked* bigger inside and had a different instrument panel with four instrument pods. All my uncle got were conventional Fairlane coupes with the base instrument cluster and that expensive AC. In any event my uncle told me the minimalist Torinos easily outsold the Fairlanes.

  • avatar
    myheadhertz

    The local Fiat dealer has three USED 2015 Fiats listed on Autotrader. All three USED Fiats have less than 40 miles on their odometers. Now I get it.

    • 0 avatar
      IAhawkeye

      Well what was else was FCA going to do? Bite the bullet and admit that FIAT’s just aren’t going to sell in America?

    • 0 avatar
      GeneralMalaise

      Fiats seem to sell better on the east and west coasts and in large metro areas. They are niche cars. Not the same for the Chrysler products. The Feds will shake them down, life goes on.

    • 0 avatar
      IAhawkeye

      I’m actually impressed with how many 500’s we actually have running around. I think I’ve seen 2 or 3 actual plain 500’s and maybe 2 500x’s which in a place with 20,000 people and no near FIAT dealers really isn’t bad. People actually had to go somewhere and seek those out.

      We do have a Chrysler dealer and I think I’ve seen maybe a handful of the new gen 200’s running around, doesn’t speak well for their numbers on those.

      • 0 avatar
        Lorenzo

        The dealers are selling Jeep and Ram, they don’t care about the cars, except for the markup on 300s, Chargers, and Challengers. That’s the downside of a combined dealership setup, the dealers don’t care about car models, don’t push them, so they don’t sell, and then Sergio doesn’t care about the car models, because they don’t sell.

  • avatar
    GeneralMalaise

    Hope the Feds never turn the focus to the BLS and their book cookin’… oh… wait…

  • avatar
    SCE to AUX

    “Carlos Danger”

  • avatar
    turbo_awd

    Wish I could find someone willing to sell me some “unnaturally accounted for” SRT Charger at a steep discount..

  • avatar
    Lorenzo

    Aw, they’ll get off, they’ll just argue the code phrase meant more cash on the hood. A guy as slick as Sergio knows by now that good lawyers are worth their weight in gold. After all, a cryptic code phrase is something a lawyer would come up with.

  • avatar
    Felix Hoenikker

    The winner of this months unnatural automotive acts sales contest is a visit to our local sheep farm.
    The runner up prize is a set of steak knives.

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