Report: FCA Knew About Inflated Sales Before Investigation

A report from Automotive News says Fiat Chrysler executives knew about the automaker’s practice of inflating sales figures prior to the FBI and SEC investigation that began recently. Sources inside FCA told AN that an internal review was ordered in mid-2015. The report suggests sales numbers were inflated in part due to pressure to continue FCA’s streak of more than six years of year-over-year monthly sales increases.

According to the sources, U.S. sales chief Reid Bigland ended the padding of sales numbers after the inquiry. No time period for the review was given, but sources say between 5,000 and 6,000 vehicles had been reported as sold by dealers but then “unwound.”

Pressure to keep the company’s U.S. sales streak going was cited as the main reason for inflating numbers. By FCA’s count, the company has had 75 months of straight sales increases. Though Bigland reportedly ended the sales padding practice, one source said the overstating of numbers eventually resumed as pressure on field staff got more intense. Pressure from above to meet aggressive sales targets is one reason why the turnover rate is so high among sales staff at FCA’s nine U.S. regional business centers, one source said. Investigators from the SEC began interviewing current and former employees from those business centers on July 11.

Lawsuits from several dealerships alleging FCA paid dealers to create false New Vehicle Delivery Reports spurred the investigation, which is ongoing. When news of the investigation broke, FCA said in a statement that it is “cooperating with an SEC investigation into the reporting of vehicle unit sales to end customers in the U.S.”

The company also stated that it records revenues in its annual and quarterly financial statements based on shipments to dealers and customers, not on reported sales to end customers. Automotive News points out that the differentiation between how FCA tallies sales for its monthly reports and its quarterly financial reports could be used as a defense, though perhaps not an effective one.

“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,'” Peter Hennings, former SEC lawyer and Wayne State University law professor, told AN. “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.”

Source: Automotive News (Subscription required)

 

The post Report: FCA Knew About Inflated Sales Before Investigation appeared first on Motor Trend.

from Motor Trend http://ift.tt/29Vlk7A