A U.S. auto dealer group is suing Fiat Chrysler Automobiles NV, accusing the auto maker of offering payments to dealerships to report false monthly vehicle sales numbers.
The lawsuit centres on the company's bonus payments to dealers – so-called stair step incentives that reward dealers as they meet sales targets, with bonus payments rising as levels are met or exceeded. FCA has employed stair step incentives at its U.S. and Canadian sales units and other auto makers have similar programs.
One U.S. Fiat Chrysler dealership was offered $20,000 (U.S.) to report the sale of 40 vehicles, Napleton's Arlington Heights Motors Inc. and Napleton's North Palm Auto Park Inc. said in documents filed this week in U.S. District Court in Illinois in a lawsuit against FCA US LLC.
"FCA directly benefits from this practice as it results in the inflation of the number of year over year sales which, in turn, create the appearance that FCA's performance is better than, in reality, it actually is," said the two dealerships, which are part of Napleton Automotive Group. Chicago-based Napleton owns dealerships in Illinois, Florida, Missouri and Pennsylvania.
Fiat Chrysler responded to the lawsuit against FCA US LLC and an FCA real estate company in a statement on Thursday saying that it believes the claim is without merit.
"The company is confident in the integrity of its business processes and dealer arrangements and intends to defend this action vigorously," FCA said in the statement.
"The company believes the claim is without merit and was filed by internal counsel to the dealer group as FCA US has concurrently been discussing with the dealer group the need to meet its obligations under some of its dealer agreements."
Questions were raised last year about the bonus system in place at FCA Canada Inc. dealerships after searches of dealers' used-car websites revealed many of them holding dozens of "used" 2014 and 2015 vehicles with less than 200 kilometres on their odometers. Some "used" vehicles were listed as having just a single kilometre on their odometers.
FCA Canada grabbed first place in the Canadian sales race in 2015 after reporting deliveries of 293,061 new vehicles, up 1.1 per cent from 2014.
Reid Bigland, FCA Canada's president, said in June that many of the vehicles with just a handful of kilometres on them were loaners or demonstrator vehicles and that the auto maker tries to make a loaner vehicle available to all service customers.
Dealers said the Canadian bonus system, called volume performance allocation, leads to Canadian dealers buying new vehicles themselves, registering them as sold, then putting them on their used-car lots in order to meet bonus targets.
Such a practice is legal.
FCA US said last week that its U.S. new vehicle deliveries rose in December for the 69th consecutive month.
The court documents filed by the dealers said the U.S. bonus plan, known as the "volume growth program," funnels bonus money to dealers who agree to falsely report sales and penalizes those who do not report false sales.
Dealers who fail to meet the program targets are "ineligible to get into the 'bonus round' where the incentives to the dealers significantly increase," the court filing said.
Sales would be reported during one month, then cancelled on the first day of the subsequent month before the factory warranty on the vehicles began to run, the documents said.