Signs point to this issue becoming the next big scandal

Following Volkswagen’s debilitating and outright embarrassing diesel emissions scandal, Fiat Chrysler Automobiles may now find itself with its own scandal after a 2015 internal review ordered by FCA executives on allegations of sales padding unearthed documents saying some dealerships had reported thousands of vehicle sales in the U.S. with no actual buyers.

Citing multiple sources, Automotive News is reporting that 5,000 to 6,000 vehicles had been reported as sold by dealerships and subsequently unwound, a term used to let customers out of a deal. The sources added that the sales numbers were intentionally inflated, reflecting earlier allegations made by two dealers in a civil lawsuit filed against FCA back in January 2016. Apparently, the alleged sales padding was done to help FCA continue its current run of 75 consecutive months of year-over-year sales increases.

FCA’s U.S. sales head, Reid Bigland, reportedly put a stop to the practice following the review, but those calls only lasted temporarily as the practice continued in the wake of “competitive pressures” brought about by the increase of FCA’s field staff.

Multiple government agencies, including the Federal Bureau of Investigation, the Securities and Exchange Commission, and the Department of Justice are already investigating these allegations, which if proven true, could turn into the next automotive scandal and perhaps leading to plummeting stocks for FCA.

For its part, the automaker has acknowledged that a federal investigation is ongoing. The automaker hasn’t elaborated on the finer details of the investigation, presumably opting to keep its mouth shut in preparation for a court defense.

Continue after the jump to read the full story.

Why it matters

I don’t want to pass judgment on something so sensitive, as that would be rather irresponsible. But, this report by Automotive News is a damning revelation, especially if the report of an internal review unearthing thousands of make-believe sales is proven accurate. That kind of shady practice could have catastrophic effects on FCA’s reputation as an automaker and its overall business foundation.

The issue is completely different from the diesel emissions scandal that plagued Volkswagen, but don’t bet against some of the possible consequences being similar. The obvious short-term ramification is the company’s stock plummeting if it’s determined that the company was found guilty of padding its sales volume. FCA’s stock is volatile enough as it is, but when you take into account these allegations, and the possible ramifications of being found guilty, that could make a huge hit on the company’s stock, which in turn could lead to an exodus of investors and shareholders.

Then there’s the criminal aspect of this issue. If the company is found guilty, heads will roll as the FBI and SEC possibly files charges to those involved. At the end of the day, it’s a terrible blow to FCA. Even the mere fact that it’s already being investigated should be considered a sign of unease for the company.

Source: Automotive News Europe

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