Federal authorities are investigating whether Fiat Chrysler Automobiles NV inflated sales reports, adding to mounting pressure on the Italian-U.S. auto maker and sharpening scrutiny of the way that car companies report their monthly volumes.
The U.S. Justice Department and Securities and Exchange Commission are investigating allegations raised earlier this year by an Illinois car dealer who claimed the company manipulated monthly sales data, said people familiar with the matter. The dealer sued Fiat Chrysler in January, alleging the auto maker financially rewarded retailers for falsifying sales. Fiat Chrysler in March called the dealer suit “baseless.”
Federal Bureau of Investigation agents visited the homes of nine Fiat Chrysler regional managers on July 11, a lawyer for several of the auto maker’s dealerships said. Some of those managers also were mentioned in the Illinois dealer’s lawsuit.
Fiat Chrysler said on Monday it is cooperating with the investigations, adding that its annual and quarterly financial results are tied to shipments to dealers, not on sales to end customers. Bloomberg News earlier reported on the Justice Department probe.
In the suit, Illinois dealer Edward Napleton alleges Fiat Chrysler’s recent sales growth was achieved by “strong arm” tactics to get dealers to falsify month reports, creating “the appearance that [Fiat Chrysler’s] performance is better than, in reality, it actually is.”
Mr. Napleton alleged his company was offered $20,000 to falsely report sales of 40 Fiat Chrysler vehicles. His suit said he rejected the offer and told Fiat Chrysler’s business center workers to refrain from such practice. He claimed Fiat Chrysler moved on to other dealers who would participate in the arrangement.
Some auto makers say dealers are allowed to purchase cars for their own use to meet month-end sales goals. Auto executives have defended the practice as commonplace in the industry and a way to supply dealers with extra cars for driver-testing and service-department loans.
That practice, which dealers say is allowed by auto makers, doesn’t lead to inflated sales results. But reporting large numbers of sales kept for a dealer’s use can paint an overly rosy portrait of the health of a company’s U.S. operations, potentially affecting investor sentiment, say critics.
The Fiat Chrysler investigations cast a shadow over the company’s 75-month-long streak of year-over-year sales increases aided in part by sales incentives and strong demand for its Jeep sport-utility vehicles.
A New York dealer operating a Maserati dealership last year filed a similar suit, claiming he was pressured to pad sales. Fiat Chrysler, which owns the Maserati brand, called has called the suit baseless and without merit.
Fiat Chrysler’s U.S. sales have outpaced those of other auto makers that are struggling to replicate a clip that led to a record 17.5 million cars, pickup trucks and SUVs sold in 2015.
The investigations mark the latest legal headache for Fiat Chrysler, which last year faced financial penalties for safety problems that included lapses with recalls covering millions of vehicles and regulatory reporting failures.