Fiat Chrysler revises new vehicle sales figures – USA TODAY
Fiat Chrysler Automobiles on Tuesday said it has revised the way it counts monthly sales figures of new cars and trucks and now says its impressive sales streak of 75 months of consecutive sales gains actually ended in September, 2013.
The automaker issued a lengthy explanation of its sales reporting practices and revised its monthly and annual sales figures in the wake of media reports and a federal investigation that questions the way it reports sales.
As a result of the changes Fiat Chrysler’s annual sales totals increased in three of the past six years by as much as 14,996 cars and trucks and decreased for the other three years by as many as 8,991 vehicles, according to chart the company released.
Ironically, Fiat Chrysler now says its internal review discovered that it has actually under-reported its sales by nearly 19,000 cars and trucks since 2011.
Fiat Chrysler acknowledged last week that it is facing scrutiny from the U..S. Securities and Exchange Commission and the U.S. Department of Justice for its sales reporting practices. On Monday, Automotive News reported that the automaker conducted an internal review last year that revealed its sales figures had been overstated by several thousand vehicles.
“The sales increase streak is meaningless, but it makes a headline and it’s nice for the company to tout itself,” said Peter Henning, a Wayne State University law professor and a former Securities and Exchange Commission investigator.
The good news, if any, for Fiat Chrysler is that it likely will not have to restate earnings for all quarters since 2013 because earnings are based on revenue from sales to dealers, which the company reported accurately. What they report every month is the number of sales by dealers to consumers and fleet sales to rental agencies, corporations and governments.
“These reports have mistakenly suggested that potential inaccuracies in the monthly data somehow impact the integrity of Fiat Chrysler’s reported revenues in its financial statements,” the automaker said.
Although the automaker restated results for every month since January, 2011, it did not admit to any intentional wrongdoing.
“Our review of industry practice has not revealed a standard reporting practice among OEMs in the U.S., although we believe that Fiat Chrysler’s competitors have used broadly similar approaches in compiling monthly sales data,” the automaker said.
After reviewing its sales reporting practices Fiat Chrysler said it realized that it was possible for dealers to report sales one month and then “unwind” some transactions recorded in its system and return vehicles to the dealer’s unsold inventory.
Last year, the Globe & Mail, a Canadian newspaper, reported that some dealers in Canada were essentially buying cars from themselves by selling vehicles to their own leasing or rental car subsidiaries so they could meet monthly sales quotas and earn bonuses from Fiat Chrysler.
“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),” Fiat Chrysler said. “There is, however, no obvious economic incentive for a dealer to do so, since FCA US’s policy is to reverse all incentives due or paid to a dealer that resulted from the unwound retail sales transaction.”
In the future, Fiat Chrysler said those “unwound” sales would be culled from its system.
In January, two Fiat Chrysler dealers filed a civil racketeering lawsuit against the automaker, saying the company had paid certain dealers to report false sales to “create the appearance that Fiat Chrysler’s performance is better than, in reality, it actually is.”
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.
Henning said Fiat Chrysler’s practice is known in the industry as “channel stuffing,” or pressuring dealers to take more vehicles than they could sell. It is not unique to Fiat Chrysler.