January 15, 2016 — Fiat Chrysler Automobiles came out fighting late yesterday in a strongly worded release rejecting the allegations of falsifying sales made in a civil lawsuit filed this week by dealer Ed Napleton. In the statement, FCA called the lawsuit “nothing more than the product of two disgruntled dealers who have failed to perform their obligations in the dealer agreements they signed with FCA.”
The release also panned the media (such as ourselves) who were so “willing to be used in questionable litigation practices without a full understanding of the facts.” FCA says they investigated the facts before the lawsuit was filed and determined the charges are baseless. (FCA’s full statement is below).
The column I wrote yesterday was harsh. I questioned certain aspects of the culture at FCA. The lawsuit was the third time in just over four months that I have heard similar allegations from other dealers so the lawsuit was not much of a surprise.
The truth is, it’s a dynamic that’s characteristic of the entire industry. Most automotive brands — at the sales and marketing level — find themselves under significant pressure to keep moving vehicles off the lots. The sales and marketing teams are given sales objectives — often aggressive — which then result in them exerting strong pressure on their dealers. All sorts of schemes are hatched to drive sales. And sometimes, those strategies, such as punching sales to use an industry term, come dangerously close to artificially padding the sales numbers. To hit the numbers, manufacturers will start pressuring dealers toward the end of the month to begin classifying a certain number of vehicles as demos, which enables the automaker to count them as sold. The dealer later will sell them to real customers. Dealers often complain about the strategies, even though they can make good money doing it.
Napleton, however, is alleging that certain individuals at FCA’s Business Center level went beyond the normal practice of punching sales. Rather, he claims they engaged in fraud and attempted to bribe him by offering to funnel extra money through the coop advertising programs.
He owns eight dealerships selling the Chrysler Dodge Jeep Ram brands — two of which are involved in the lawsuit. However this lawsuit turns out, one probable result will be those eight stores likely will be owned by someone else in the near future.
Napleton retained the law firm Bellavia, Blatt and Crossett to handle the case. It’s the same firm that Maserati dealer Stuart Hayim hired in August to handle a somewhat similar lawsuit alleging Maserati of also falsifying sales.
Fiat Chrysler Automobiles N.V. (“FCA”) (NYSE: FCAU / MTA: FCA) learned late yesterday of the filing of a lawsuit in an Illinois Federal Court by two U.S. dealers located in Illinois and Florida. The named defendants are FCA US LLC (“FCA US”) and FCA Realty LLC. The dealer plaintiffs are two dealerships of the larger Ed Napleton Automotive Group.
The lawsuit makes allegations of false sales reporting by FCA US. Notwithstanding numerous requests to provide evidence of this alleged activity, the plaintiffs have refused to substantiate their claims. FCA US carried out an investigation of the facts, and has determined that these allegations are baseless and plaintiffs were notified of this fact before they filed suit.
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. 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.
FCA US will continue to resist these pressures, safeguarding the relationship of trust and openness which governs its relationship with its dealers. FCA finds it unfortunate and disappointing that reputable media would be willing to be used in questionable litigation practices without a full understanding of the facts.