Shares in Fiat Chrysler Automobiles tumbled in Milan and New York on Thursday after two US dealerships filed a lawsuit accusing the carmaker of inflating US car sales. The suit, filed by dealers under the Illinois-based Napleton Automotive Group, charges that the incentive programs from Italian company's US unit, FCA US, rewarded dealerships that falsely reported higher car sales, inflating the auto giant's results.
The lawsuit cast a cloud over FCA's announcement on January 5 that it had sold a record 2.2 million vehicles last year, a seven percent gain from 2014 on the back of a sharp surge in December. FCA, Fiat Chrysler's strongest arm which has boasted of 69 straight months of year-over-year sales gains in the US, vowed to defend itself "vigorously" in the case.
"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." The news nevertheless hit the company's shares, which fell 7.1 percent in Milan and 5.3 percent in New York.
The suit, filed in US federal court in Illinois, charged FCA with racketeering and fraud and said the company's practices unfairly harmed the two Napleton dealerships based in Illinois and Florida. The suit accuses an FCA official of offering Napleton Automotive president Ed Napleton $20,000 in exchange for falsely reporting the sales of 40 new vehicles. Napleton declined the payment, but later learned that another Napleton employee had agreed to report 16 false car sales.
The suit also cites a case where a rival Fiat Chrysler dealer reported 85 false new vehicle sales after "receiving tens of thousands of dollars as an illicit reward for their complicity in the scheme." In some cases, false sales were reported at the end of the month, so that they could be "backed out" the next day so the warranty time-table on the vehicles would not be triggered.
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