Fiat Chrysler Accused Of Faking Sales By Angry Dealer

An explosive racketeering lawsuit by a car-dealer chain accuses Fiat Chrysler of paying dealers to fake new-vehicle sales—accusations which roiled stock markets overseas and brought a rapid rebuttal from the automaker.

The federal lawsuit was filed earlier this month in Chicago by Edward Napleton, president of his family’s Napleton Automotive Group, a chain of more than 50 dealerships in five states. While it lists a variety of grievances and bad acts by Fiat Chrysler, the main claim is that on two occasions Fiat Chrysler employees offered Napleton or his workers payments to falsify end-of-month sales results.

Napleton’s lawsuit, first reported by Automotive News, says FCA wanted the vehicles to count as new sales at the end of the month, but then had dealers undo the transactions the next day, before the new-vehicle warranties would kick in. According to the lawsuit, a FCA sales executive got a Napleton employee to falsely report 16 new vehicles as sold at the end of a month. Later, another sales exec made a pitch directly to Napleton, offering the store $20,000 disguised as advertising credits if he would fake 40 sales.

Napleton says he rejected the offer and told FCA it was illegal, but later learned a competing Chrysler dealer had taken a similar pitch for 85 sales.

The fake deals “create the appearance that FCA’s performance is better than, in reality, it actually is,” the lawsuit says. “These results are reported to the public at large and investment community. FCA has every reason to continue to be opaque about this issue as it would not be helpful for the truth to come to light at the same time as FCA may be pursuing mergers and other business opportunities.”

“While the lawsuit has not yet been served on FCA US, the company believes that the claim is without merit,” Fiat Chrysler said in a statement. “The company is confident in the integrity of its business processes and dealer arrangements and intends to defend this action vigorously.”

Late Thursday, Fiat Chrysler sent a revised, far stronger rebuttal, saying it had probed the allegation and found no wrongdoing, and accusing Napleton of using the threat of the lawsuit to shake down the automaker while ignoring its own failures.

“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 company said. “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 puts much pride in its sales results, notching 69 straight months of year-over-year increases, mainly in its Jeep and Ram brands. (The streak is a staple of Fiat Chrysler chief executive Sergio Marchionne’s speeches.) Yet the auto industry has a long history of monkeying with its monthly sales figures, which are closely watched by investors, economists and executives. Automakers can report vehicles as “sold” when bought by dealers as demonstrators, like BMW has been known to do, and has been caught before outright faking, as Cadillac did in 1999 to show it had beat Lincoln.

One main reason the trickery can appeal to many is that automakers are the master of the sales data; there are few checks on the accuracy of their self-reporting. A few firms track data on how many new vehicles are registered, but those totals run a few months behind sales reports.

The faked sales account for only a small section of Napleton’s grievances with Fiat Chrysler, which he accuses of deception and strong-arming in a variety of ways that equal violations of federal and state laws. Fiat Chrysler has not yet filed an official reply with the court.