Fiat Chrysler Automobiles NV (NYSE:FCAU) has conducted an investigation and rejected allegations of inflated automotive sales, describing the statements as totally baseless.
Two dealers belonging to the Illinois-based Napleton Automotive Group accused Fiat Chrysler’s U.S. unit, FCA US, of rewarding dealerships that inflated their automotive sales reports to deliver more optimistic sales results, presumably in hopes of boosting the value of FCAU stock.
The lawsuit raised doubts about the FCA Group’s announcement of a record 2.2 million vehicles sold in 2015, which represents a seven-percent increase over the previous year, thanks to a December surge. (Source: “Fiat Chrysler accused of inflating sales,” The News Today, January 15, 2016.) FCAU stock plunged to $7.37, a little more than five percent, on January 14, starting a recovery amid overall bearish market sentiment on January 15.
Mike Palese, FCAU stock spokesman, waited a day before addressing the accusations from the Napleton dealership network, which sells a number of automotive brands, many of which are Fiat competitors, in order to give Fiat Chrysler’s legal department a chance to peruse the lawsuit papers.
Now, in a clear and decisive tone, Fiat Chrysler argues that despite its numerous requests to Napleton to provide evidence of such alleged activities, the actors have not presented any evidence to this effect.
Fiat Concludes Allegations Are Baseless
The plaintiffs were notified of that conclusion before they filed their lawsuit, which, says Fiat Chrysler, is nothing more than the product of two disgruntled dealers who have not fulfilled their commitments under the contract signed with Chrysler Group LLC:
“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 [the dealers] 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,” reads the FCA Group’s statement. (Source: “FCA Strongly Rejects Allegations by Two U.S. Dealers,” Fiat Chrysler Automobiles NV web site, January 15, 2016.)
The statement speaks plainly and for good reason, even if it is taking on what is, after all, one of its main dealers. But as noted by the automotive specialist web site Jalopnik, Fiat Chrysler had no option but to be forceful in order to protect itself and FCAU stock, especially if the company, as the statement implies, is innocent. (Source: “Fiat Chrysler Smacks Down Dealerships That Claimed Corporate Racketeering,” Jalopnik, January 14, 2016.)
The Bottom Line on These Latest FCAU Stock Allegations
As the Jalopnik article notes, “Falsification of sales records is an accusation of the highest degree, and even just putting the idea in the minds of shareholders and stock traders could do damage.” (Source: Ibid.)
“And if the dealership does rescind,” the article continues, “they’re going to have a hard time holding a business relationship with any automaker after pulling a stunt like that.” (Source: Ibid.)
The ball is back in Napleton’s court. Either the company proves the charges or it backs down. FCA Group will likely stop the dealer from selling its cars.
The company’s case against the dealers sustains the tremendous 2015 sales success, even as 2016 could be an even better year with a number of new models from all of the FCAU stock brands, including the “Alfa Romeo Giulia,” the “Fiat 124 Spider,” the “Chrysler Pacifica,” the “Maserati SUV,” and several other new models.