2 dealers accuse Fiat Chrysler of inflating sales – USA TODAY
Two Fiat Chrysler Automobiles dealerships accused the company of conspiring to inflate sales, sparking a sell-off in the Italian automaker’s stock.
The dealers, one located in Illinois and one in Florida, filed a civil racketeering lawsuit against the automaker, saying the company had paid certain dealers to report false sales to “create the appearance that FCA’s performance is better than, in reality, it actually is.”
Fiat Chrysler, in a statement, dismissed the claims as “without merit” and said the suit comes amid discussions with the dealer group over “the need to meet its obligations under some of its dealer agreements.”
The feud raises the specter of yet another embarrassing episode for the auto industry, which has faced a series of scandals involving defects, emissions and regulatory failures that have undermined the public trust.
The lawsuit comes after Fiat Chrysler recently posted its 69th consecutive month of U.S. monthly sales gains, which have been hailed as the pillar of the company’s global operations. Fiat Chrysler’s U.S. brands are Ram, Jeep, Chrysler, Dodge and Alfa, and its U.S. headquarters are located in Auburn Hills, Mich.
The dealers that filed the lawsuit — Napleton’s Arlington Heights Chrysler Dodge Jeep Ram in Arlington Heights, Ill., and Napleton’s Northlake Chrysler Dodge Jeep Ram in Lake Park, Fla. — are part of the Napleton Automotive Group, which Automotive News said was the 31st largest dealership group in the U.S. in 2014.
The suit alleges that dealership principal Edward Napleton was asked but refused to falsely report sales of 40 vehicles in exchange for $20,000 that would have been distributed by Fiat Chrysler to the dealership’s advertising budget.
That came after a lower-level employee agreed to falsely report the sale of 16 vehicles without permission of upper management, according to the suit.
A lawyer for the dealers, who are seeking unspecified damages including attorney’s fees, did not respond to requests seeking comment.
Fiat Chrysler said: “The company is confident in the integrity of its business processes and dealer arrangements and intends to defend this action vigorously.”
The lawsuit proved unsettling for investors. Trading in Italy was halted temporarily several times after losses exceeding 10%, according to MarketWatch.
Shares traded on the New York Stock Exchange (FCAU) fell 5.5% to $7.42 at 11:36 a.m.
Tension between dealers and manufacturers over aggressive sales techniques is hardly new, as automakers press their franchises to move inventory or discount vehicles to boost volume.
But any proof of nefarious activity could prove disruptive to Fiat Chrysler’s effort to find a merger partner as CEO Sergio Marchionne pushes industry consolidation.
“If there is anything to allegations … against FCA, that story will be huge. FCA won’t be merging with anyone,” University of Michigan business professor Erik Gordon said in an email. “They will be defending themselves against investors around the globe.”
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.