Shares in Fiat Chrysler Automobiles tumbled in Milan and New York on Thursday after two U.S. dealerships filed a lawsuit accusing the carmaker of inflating car sales in the United States.
The suit, filed by two dealerships under the Illinois-based Napleton Automotive Group, charges that FCA incentive programs rewarded dealerships that falsely reported higher car sales, inflating the auto giant’s results.
In afternoon trade, FCA shares in Milan were down 7% after earlier plummeting more than 10%. On Wall Street, US-traded FCA shares dropped 3.9% in opening trade.
The suit was filed in federal court in Illinois and charged FCA with racketeering and fraud, and said the company’s practices unfairly harmed the two Napleton dealerships based in Illinois and Florida. FCA said the suit was unfounded and would be vigorously contested.
“While the lawsuit has not yet been served on FCA US, the company believes that 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,” the company said in a statement emailed to AFP.
According to the suit, the fake sales “create the appearance that FCA’s performance is better than, in reality, it actually is. …These results are reported to the public at large and investment community. FCA has every reason to continue to be opaque about this issue as it would not be helpful for the truth to come to light at the same time as FCA may be pursuing mergers and other business opportunities.”
FCA announced on January 5 that it had sold a record number of vehicles in December thanks to strong demand for its Jeep sport utility vehicles. Its U.S. sales for 2015 were reported at 2 million vehicles, a rise of 7% on the previous year.
FCA CEO Sergio Marchionne, having already merged Italian company Fiat with Chrysler, has favored additional consolidation to strengthen the company’s financial position.
Copyright Agence France-Presse, 2016
