Sources: FCA found sales were inflated
Skip to main content
Sister Publication Links
  • Automotive News Canada
  • Automotive News Europe
  • Automotive News Mexico
  • Automotive News China
AN-LOGO-BLUE
Subscribe
  • Subscribe
  • Account
  • login
  • HOME
  • NEWS
    • Dealers
    • Automakers & Suppliers
    • News by Brand
    • Cars & Concepts
    • Shift
    • Mobility Report
    • Special Reports
    • Digital Edition Archive
    • This Week's Issue
    • Turn self-driving cars into offices? That'll take 30 years
      The bus stops here
      Last mile
      Self-driving cars might make people sick to their stomachs
    • Daimler, BMW will invest $1.13 billion in mobility JV to rival Uber
      Lyft plans to file for IPO next week, reports say
      Apple sheds light on safety of its AV program
      GM launches 'Vehicle Locate' app
    • Dealerships owned by ex-NFL stars face collapse, litigation
      Want a luxury car? Try a Kia
      Costly lesson of tortuous legal battle: Get it in writing
      Denny Hecker: A changed man?
    • Access F&I
    • Fixed Ops Journal
    • Marketing
    • Used Cars
    • Sales
    • Best Practices
    • Dealership Buy/Sell
    • NADA
    • NADA Show
    • Automakers
    • Manufacturing
    • Suppliers
    • Regulations & Safety
    • Executives
    • Leading Woman Network
    • PACE Awards
    • CES
    • Management Briefing Seminars
    • World Congress
    • Aston Martin
    • BMW
      • Mini
      • Rolls Royce
    • Daimler
      • Mercedes Benz
      • Smart
    • Fiat Chrysler
      • Alfa Romeo
      • Chrysler
      • Dodge
      • Ferrari
      • Fiat
      • Jeep
      • Maserati
      • Ram
    • Ford
      • Lincoln
    • General Motors
      • Buick
      • Cadillac
      • Chevrolet
      • GMC
      • Holden
    • Honda
      • Acura
    • Hyundai
      • Genesis
      • Kia
    • Mazda
    • Mitsubishi
    • Nissan
      • Infiniti
    • PSA
      • Citroen
      • Opel
      • Peugeot
      • Vauxhall
    • Renault
    • Subaru
    • Suzuki
    • Tata
      • Jaguar
      • Land Rover
    • Tesla
    • Toyota
      • Lexus
    • Volkswagen
      • Audi
      • Bentley
      • Bugatti
      • Lamborghini
      • Porsche
      • Seat
      • Skoda
    • Volvo
    • (Discontinued Brands)
    • Auto Shows
      • Detroit Auto Show
      • New York Auto Show
      • Los Angeles Auto Show
      • Chicago Auto Show
      • Geneva Auto Show
      • Paris Auto Show
      • Frankfurt Auto Show
      • Toronto Auto Show
      • Tokyo Auto Show
      • Shanghai Auto Show
      • Beijing Auto Show
    • Future Product Pipeline
    • Photo Galleries
    • Car Cutaways
    • Design
  • OPINION
    • Blogs
    • Cartoons
    • Keith Crain
    • Automotive Views with Jason Stein
    • Columnists
    • Editorials
    • Letters to the Editor
    • Send us a Letter
    • Is Honda's U.K. plant closure the beginning of a Japanese Brexit?
      Tesla introduces 'Dog Mode' to keep pets cool inside the car
      A GM investment in Rivian would send the wrong messages
      Bad policy, worse political strategy on auto tariffs
    • Dealers need to be ready for anything
      EVs will come with economic cost
      Spend money on sales, not stores
      Put it on your bucket list
    • Feb. 22, 2019: Tesla goes from disruptor to disrupted
      Feb. 15, 2019: EV startup gets Amazon, GM interest
      Jan. 4, 2019 | Bumpy road ahead for Detroit’s automakers and suppliers?
    • Bad policy, worse political strategy on auto tariffs
      Elaine Chao: A speedier path for innovation
      Industry initiatives seek to ease tech shortage, but challenges remain
      Drivers for ride-hailing services can be a prime source of fixed ops profits
    • NADA can help fight stair step incentives
      Let dealers invest in innovation, not renovations
      Hackett's vision for Ford is still a blur
      The last temptation of Elon Musk
    • Thank you, Sting, for Oshawa efforts
      Customer-centric approach set Tesla apart
      Cadillac falls short on marketing, luxury
      Deeper issues in tech shortage
  • DATA CENTER
  • VIDEO
    • AutoNews Now
    • First Shift
    • Special Video Reports
    • Weekend Drive
  • EVENTS & AWARDS
    • Events
    • Awards
    • World Congress
    • Retail Forum: NADA
    • Canada Congress
    • Marketing 360: L.A.
    • Europe Congress
    • Fixed Ops Journal Forum
    • Retail Forum: Chicago
    • Leading Women Conference Detroit
    • 100 Leading Woman
    • 40 Under 40 Retail
    • All-Stars
    • Best Dealership To Work For
    • PACE Awards
    • Rising Stars
    • Europe Rising Stars
  • JOBS
  • +MORE
    • Webinars
    • Leading Women Network
    • Custom Features
    • Classifieds
    • People on the Move
    • Newsletters
    • Contact Us
    • Media Kit
    • Ally: Do It Right
    • Guide To Economic Development
MENU
Breadcrumb
  1. Home
  2. Automakers & Suppliers
July 25, 2016 01:00 AM

Sources: FCA found sales were inflated

Pressure to keep streak alive cited

Larry P. Vellequette
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    DAVID PHILLIPS
    Fiat Chrysler topped No. 2 Ford by 278 retail deliveries in June, helped in part by the Jeep brand's popularity.

    DETROIT -- An internal review ordered in mid-2015 by top Fiat Chrysler executives uncovered thousands of vehicle sales reported by FCA brands for which there were no actual buyers, according to two company sources.

    The insiders told Automotive News that following the inquiry, U.S. sales head Reid Bigland put a stop to the practice, which had resulted in FCA US reporting more sales than it actually made.

    The sources did not specify the precise time period covered by the review but said it revealed that 5,000 to 6,000 vehicles had been reported as sold by dealers and then "unwound."

    Photo

    Bigland: Tried to stop it, insiders say.

    They said the sales numbers were inflated in part under pressure to preserve FCA's streak of U.S. monthly year-over-year sales increases, which now stands at 75 months. One source cited dealer complaints about the practice that reached CEO Sergio Marchionne before Bigland sought to end it. But he added that overstating of sales has crept back into play this year as competitive pressures on FCA's field staff have increased. 

    Meanwhile, the other company insider said the employee turnover rate among sales staff in the company's nine business centers around the country is four times higher than in the rest of the company because of pressure applied from above to meet aggressive sales targets. 

    FCA has declined to comment. 

    The revelations come as investigators from the Securities and Exchange Commission and the Department of Justice look into FCA's sales practices. One of the company sources said investigators visited all nine regional business centers beginning July 11 and spoke with current and former employees. Investigators also visited FCA field employees and past employees at their homes, the source said. 

    In January, FCA was accused by dealerships owned by Napleton Automotive Group, a Chicago-area dealership group, of civil racketeering in a lawsuit that alleged the automaker paid dealers to improperly inflate sales. FCA called the allegations "baseless" and sought dismissal of the suit. The lawsuit appeared to spur the federal investigation. 

    Bloomberg reported Monday, July 18, that the federal probe into FCA is in an early stage. The agencies would not comment on the scope or subject of their investigation. 

    FCA said it was "cooperating with an SEC investigation into the reporting of vehicle unit sales to end customers in the U.S." The company said that "inquiries into similar issues were recently made by the U.S. Department of Justice." 

    Both agencies and FCA declined to comment on whether warrants had been issued as part of the investigation.

    The streak

    The FCA insiders say the company's streak has driven sales reporting abuses. The current run of 75 consecutive months of year-over-year sales increases in the U.S. is the longest such active streak of any automaker and has been a source of pride as the company rebounded after its 2009 exit from bankruptcy.

    Earlier this year, Marchionne said FCA's sales streak "has happened not because of the fact that I've discounted vehicles because the margins in our operations have improved, but it's happened because of the fact that, you know, there's brand equity and there's value in what we're selling to the customer base."

    The streak also has become harder to extend the longer it has gone on.

    Indeed, after the streak reached six full years in March, the automaker stopped mentioning it in its monthly press releases reporting U.S. sales. It was last cited by the company in its March sales release on April 1, when FCA began to include a lengthy disclaimer as to how it reported its monthly sales.

    The disclaimer describing FCA US' "method for determining monthly sales" said, in part: "FCA US reported vehicle sales represent sales of its vehicles to retail and fleet customers, as well as limited deliveries of vehicles to its officers, directors, employees and retirees. Sales from dealers to customers are reported to FCA US by dealers as sales are made on an ongoing basis through a new vehicle delivery reporting system that then compiles the reported data as of the end of each month.

    "Sales through dealers do not necessarily correspond to reported revenues, which are based on the sale and delivery of vehicles to the dealers. In certain limited circumstances where sales are made directly by FCA US, such sales are reported through its management reporting system."

    A possible defense

    In its statement acknowledging the federal investigation, FCA differentiated between quarterly corporate financial reporting and its monthly reports of sales to retail and fleet buyers. The company noted that in its "annual and quarterly financial statements, it records revenues based on shipments to dealers and customers and not on reported vehicle unit sales to end customers."

    Peter Henning, a former SEC lawyer and a professor at Wayne State University Law School in Detroit, speculated that FCA is distinguishing the two methods of reporting sales as a possible defense.

    But Henning said the SEC's investigation appears to be a "bread and butter" accounting investigation and that attempting to differentiate the two was unlikely to be effective. He said he believes the feds are looking into monthly sales numbers, not revenue figures.

    "What the SEC focuses on is disclosure to investors and to the market, so they're not going to buy a claim that "We don't technically engage in sales. The dealers do.' This is all of a piece, which is: How do you measure how any auto company is doing? Sales. That's the bottom line, and that's what the SEC is going to be looking at," Henning said.

    Henning said the involvement of the Justice Department is another clue about the investigation.

    "Typically, the Justice Department will steer clear of a case until it gets indications of wrongdoing," he said. "Normally, it will defer to the SEC. Just the disclosure that they're on the scene means that there's at least smoke, and maybe a fire."

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    Digital Edition
    THIS WEEK'S EDITION
    See our archive
    Fixed Ops Journal
    Thumbnail
    Read the issue
    See our archive
    Sign up for free newsletters
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please select at least one newsletter to subscribe.

    You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.

    Get Free Newsletters

    Sign up and get the best of Automotive News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Now

    Get access to in-depth, authoritative coverage of the auto industry from a global team of reporters and editors covering the news that's vital to your business.

    Subscribe
    Connect With Us
    • Facebook
    • Instagram
    • LinkedIn
    • Twitter

    Our Mission

    The Automotive News mission is to be the primary source of industry news, data and understanding for the industry's decision-makers interested in North America.

    AN-LOGO-BLUE
    Contact Us

    1155 Gratiot Avenue
    Detroit, Michigan
    48207-2997

    (877) 812-1584

    Email us

    Resources
    • About us
    • Contact Us
    • Media Kit
    • Subscribe
    • Manage your account
    • Reprints
    • Ad Choices Ad Choices
    • Sitemap
    Legal
    • Terms and Conditions
    • Privacy Policy
    Copyright © 1996-2019. Crain Communications, Inc. All Rights Reserved.
    • HOME
    • NEWS
      • Dealers
        • Access F&I
        • Fixed Ops Journal
        • Marketing
        • Used Cars
        • Sales
        • Best Practices
        • Dealership Buy/Sell
        • NADA
        • NADA Show
      • Automakers & Suppliers
        • Automakers
        • Manufacturing
        • Suppliers
        • Regulations & Safety
        • Executives
        • Leading Woman Network
        • PACE Awards
        • CES
        • Management Briefing Seminars
        • World Congress
      • News by Brand
        • Aston Martin
        • BMW
          • Mini
          • Rolls Royce
        • Daimler
          • Mercedes Benz
          • Smart
        • Fiat Chrysler
          • Alfa Romeo
          • Chrysler
          • Dodge
          • Ferrari
          • Fiat
          • Jeep
          • Maserati
          • Ram
        • Ford
          • Lincoln
        • General Motors
          • Buick
          • Cadillac
          • Chevrolet
          • GMC
          • Holden
        • Honda
          • Acura
        • Hyundai
          • Genesis
          • Kia
        • Mazda
        • Mitsubishi
        • Nissan
          • Infiniti
        • PSA
          • Citroen
          • Opel
          • Peugeot
          • Vauxhall
        • Renault
        • Subaru
        • Suzuki
        • Tata
          • Jaguar
          • Land Rover
        • Tesla
        • Toyota
          • Lexus
        • Volkswagen
          • Audi
          • Bentley
          • Bugatti
          • Lamborghini
          • Porsche
          • Seat
          • Skoda
        • Volvo
        • (Discontinued Brands)
      • Cars & Concepts
        • Auto Shows
          • Detroit Auto Show
          • New York Auto Show
          • Los Angeles Auto Show
          • Chicago Auto Show
          • Geneva Auto Show
          • Paris Auto Show
          • Frankfurt Auto Show
          • Toronto Auto Show
          • Tokyo Auto Show
          • Shanghai Auto Show
          • Beijing Auto Show
        • Future Product Pipeline
        • Photo Galleries
        • Car Cutaways
        • Design
      • Shift
      • Mobility Report
      • Special Reports
      • Digital Edition Archive
      • This Week's Issue
    • OPINION
      • Blogs
      • Cartoons
      • Keith Crain
      • Automotive Views with Jason Stein
      • Columnists
      • Editorials
      • Letters to the Editor
      • Send us a Letter
    • DATA CENTER
    • VIDEO
      • AutoNews Now
      • First Shift
      • Special Video Reports
      • Weekend Drive
    • EVENTS & AWARDS
      • Events
        • World Congress
        • Retail Forum: NADA
        • Canada Congress
        • Marketing 360: L.A.
        • Europe Congress
        • Fixed Ops Journal Forum
        • Retail Forum: Chicago
        • Leading Women Conference Detroit
      • Awards
        • 100 Leading Woman
        • 40 Under 40 Retail
        • All-Stars
        • Best Dealership To Work For
        • PACE Awards
        • Rising Stars
        • Europe Rising Stars
    • JOBS
    • +MORE
      • Webinars
      • Leading Women Network
      • Custom Features
        • Ally: Do It Right
        • Guide To Economic Development
      • Classifieds
      • People on the Move
      • Newsletters
      • Contact Us
      • Media Kit