DETROIT _ Fiat Chrysler Automobiles on Tuesday said it has revised the way it counts monthly sales figures of new cars and trucks and dropped its claim that it had seen 75 consecutive months of sales gains, saying the streak actually ended in September 2013.
The automaker issued a lengthy explanation of its sales reporting practices and revised its monthly and annual sales figures in the wake of media reports and a federal investigation that questions the way it reports sales.
As a result of the changes FCA's annual sales totals increased in three of the past six years by as much as 14,996 cars and trucks and decreased for the other three years by as many as 8,991 vehicles, according to a chart the company released.
Ironically, FCA said its internal review discovered that the automaker has actually under-reported its sales by nearly 19,000 cars and trucks since 2011.
FCA acknowledged last week that it is facing scrutiny from the U.S. Securities and Exchange Commission and the U.S. Department of Justice for its sales reporting practices. On Monday, Automotive News reported that the automaker conducted an internal review last year that revealed its sales figures had been overstated by several thousand vehicles.
"The sales increase streak is meaningless, but it makes a headline and it's nice for the company to tout itself," said Peter Henning, a Wayne State University law professor and a former Securities and Exchange Commission investigator.
The good news, if any, for FCA is that it likely will not have to restate earnings for all quarters since 2013 because earnings are based on revenue from sales to dealers, which the company reported accurately.
FCA said it issued its statement Tuesday in response to media reports.
"These reports have mistakenly suggested that potential inaccuracies in the monthly data somehow impact the integrity of FCA's reported revenues in its financial statements," the automaker said.
Although the automaker restated results for every month since January 2011 it did not admit to any intentional wrongdoing.
After reviewing its sales reporting practices FCA said it realized that it was possible for dealers to report sales one month and then "unwind" some transactions recorded in its system and return vehicles to the dealer's unsold inventory.
Last year, the Globe & Mail, a Canadian newspaper, reported that some dealers in Canada were essentially buying cars from themselves by selling vehicles to their own leasing or rental car subsidiaries so they could meet monthly sales quotas and earn bonuses from FCA.
"It is admittedly also possible that a dealer may register the sale in an effort to meet a volume objective (without a specific customer supporting the transaction)," FCA said. "There is, however, no obvious economic incentive for a dealer to do so, since FCA US's policy is to reverse all incentives due or paid to a dealer that resulted from the unwound retail sales transaction."
In the future, FCA said those "unwound" sales would be culled from its system. Under the new reporting process, FCA's sales will be comprised of:
_Dealer reported sales in the U.S.
_Fleet sales delivered directly by FCA US
_Other retail sales including sales by dealers in Puerto Rico
Reid Bigland, FCA's head of U.S. sales and the head of the Alfa Romeo Brand, last commented on the automaker's monthly sales streak in March.
In January, two FCA dealers filed a civil racketeering lawsuit against the automaker, saying the company had paid certain dealers to report false sales to "create the appearance that FCA's performance is better than, in reality, it actually is."
The dealers that filed the lawsuit _ Napleton's Arlington Heights Chrysler Dodge Jeep Ram in Arlington Heights, Ill., and Napleton's Northlake Chrysler Dodge Jeep Ram in Lake Park, Fla., _ are part of the Napleton Automotive Group, which Automotive News said was the 31st largest dealership group in the U.S. in 2014.
Henning said FCA's practice is known in the industry as "channel stuffing," or pressuring dealers to take more vehicles than they could sell. It is not unique to FCA.
A year ago BMW of North America settled a class-action lawsuit filed on behalf of buyers of more than 104,000 demo vehicles that customers thought were new even though the vehicles' four-year warranty periods had already begun.
"There certainly have been games played where dealers would get extra inventories of hot models that other dealers wouldn't get," said Carl Galeana, owner of Van Dyke Dodge and other Chrysler related stores in Columbia, S.C. and Fort Myers, Fla.
For years, FCA has acknowledged that it uses "stair-step programs" that provide dealers with bonuses once they hit certain monthly volume targets. Smaller dealers tend to dislike those programs because it is harder for them to meet the targets.
"I've heard that other dealers have been asked to take extra vehicle and then unwind them, but I don't do that," Galeana said. "Have we sold a car where it didn't go to the Secretary of State for registration and we had to take it back? Yes."
