Federal regulators are investigating claims by two dealers that FCA may have rigged sales numbers.

With its numbers up 7% in June, Fiat Chrysler Automobiles said it had its best June sales in 11 years, the figures stretching to 75 consecutive months FCA’s streak of year-over-year sales gains. Or did they?

The trans-Atlantic automaker has confirmed it is “cooperating with an SEC investigation” looking at whether it has inflated those sales figures – an allegation first raised by two FCA dealers who filed a civil racketeering lawsuit against the automaker early this year.

The maker denied the initial charges, and on Monday issued a statement saying it intends to “cooperate fully with these investigations (which focus on) “the reporting of vehicle unit sales to end customers in the U.S.”

This is by no means the first time questions have been raised about industry sales numbers over the years. Both Cadillac and Lincoln were caught manipulating numbers when they were trying to retain their leadership of the luxury market. More recently, allegations have been levied against the current high-line leaders, including BMW and Mercedes-Benz.

Some makers have bent – if not broken – the rules by having dealers move new vehicles into their service fleets and declaring them as retail sales. In fact, the vehicles must later be sold as used.

“Volume sales is like crack cocaine, completely addictive,” said Max Zanan, president of Total Dealer Compliance, a consulting firm that helps retailers meet regulatory guidelines. “It’s not Chrysler that does this. I think every other manufacturer uses the same tactic. The industry, as a whole, is guilty of this.”

According to Zanan, distorting sales is more than just a minor infraction, however. He said it impacts dealers who come under intense pressure to boost the numbers, even if it means they break the rules. How they perform can have a significant impact on their compensation. Dealers who don’t deliver may find themselves struggling to get the products they need from the factory.

(FCA denies pressuring dealers to inflate sales results. For more, Click Here.)

In turn, consumers often come under intense pressure to close a deal so that dealers can make their quotas.

And stockholders, said Zanan, also are impacted by flawed sales reporting because the numbers they need to judge the value of their investments isn’t necessarily accurate.

The SEC investigation comes about six months after two FCA dealers took the maker to court, in a civil racketeering complaint argument that, the maker’s doctored numbers, “create the appearance that FCA’s performance is better than, in reality, it actually is.”

(Click Here for details about the possibility that regulators may roll back CAFE mandates.)

FCA’s health has come under question in recent months, despite its steady stream of sales gains, because its performance has been strong almost exclusively on the truck side of the ledger. Demand for the maker’s passenger cars has slipped so badly FCA plans to drop two once-important models, the Chrysler 200 and the Dodge Dart.

The civil lawsuit was filed by two dealerships owned by the Napleton Automotive Group. According to trade publication Automotive News, Napleton was the country’s 31st largest dealership chain as of 2014.

In January, FCA denied the allegations made by the dealerships – one in Arlington Heights, Illinois, the other in Lake Park, Florida. “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,” the company said.

(To see more about Ford firing a new salvo in pickup wars, Click Here.)

FCA’s relationship with many of its dealers was strained following the maker’s 2010 bankruptcy. It originally moved to slash hundreds of dealers using Chapter 11 protection but was eventually forced by Congress to bring many of those retailers back into its franchise system.

Don't miss out!
Get Email Alerts
Receive the latest Automotive News in your Inbox!
Invalid email address
Send me emails
Give it a try. You can unsubscribe at any time.