Could The FBI’s Investigation Into FCA Spell The End For Dealerships As We Know Them?

Earlier this year, a fairly large American auto dealership group brought a racketeering suit against Fiat Chrysler Automobiles. The suit, brought forth by Napleton Automotive Group based near Chicago, claimed that FCA offered incentives - AKA a crapload of money - to specific dealerships if they falsely reported more monthly sales. FCA responded by basically saying the claims were ridiculous and that the lawsuit should be dismissed.

Flash to a couple weeks ago, when word came out that the FBI and the Securities and Exchange Commission (SEC) launched an investigation into FCA for their sales reporting practices. By “launched an investigation” I mean they apparently raided offices and homes of current and former FCA employees, not to mention paying a visit to FCA headquarters in the Detroit suburb of Auburn Hills.

This story has been rocking all the major auto sites since it broke. I’m not here to give you a play-by-play of the action because that crapola is positively boring. But I think it does raise an interesting look at what could be the much anticipated demise of the old way major manufacturers sell cars. Let me explain.

The FCA investigation is ongoing, but the facts aren’t really in FCA’s favour right now. We have a lawsuit filed against them for fluffing sales, followed by FCA’s rebuttal that specific dealerships within the group had been underperforming in sales and not meeting FCA quotas, and that this suit was simply a baseless retaliatory strike and smear campaign.

In 2015, Napleton Auto Group sold 22,670 cars for a total revenue of $1.49 billion dollars. Yes, billion. I’ll just that number sink in while we all reconsider the definition of “underperforming.” And then of course FCA comes under federal investigation for its sales reporting practices.

I’m not saying FCA is guilty. But this is starting to look like a college weekend of bad decision making followed by a slow unraveling of your alibi, with your girlfriend standing at the door demanding an explanation.

Here’s the thing. Auto manufacturers have always tried to stack the sales deck in their favour. “Punching” is a common term used for dealers buying cars at the end of a month or quarter to pad sales figures for themselves, and subsequently, for manufacturers. If it sounds sketchy, it is. But it also happens to be legit. Dealers buy the cars, registrations are set, and warranty clocks start ticking even if the car just sits on the lot as a demo or loaner until it’s sold to an actual customer.

Should the claims against FCA be true, then the company definitely crossed a line from sketchy to shady, possibly going all the way to downright ugly. More importantly, I see it as a kind of last gasp for the old-school manufacturer/dealership mindset for sales that has existed since the car was invented, despite the global evolution of business into the information age.

What is that mindset? Shovel sales numbers and loads of crap down peoples’ throats and they’ll buy, because they don’t know better. If you don’t think that’s a viable tactic, ask yourself this: would Ford have sold over 3 million Pintos if Google and Facebook had been around in the 1970s?

Now consider this: after a very public and messy government-backed Chrysler bankruptcy (which was preceded by a very public and messy affair with Daimler, which was preceded by another bankruptcy in the 1980s), FCA has been on a roll. When the lawsuit became known back in January, FCA had recorded over five years of consecutive sales gains. When the FBI and SEC launched their investigation a couple weeks ago, that streak was up to 75 months.

75 months of continual sales improvement; the longest sales hot streak in the entire auto industry. That’s the sort of thing that can bring a company back from the brink of disaster. How convenient.

I won’t deny that FCA is making some neat cars that people want to buy, and I’m not saying their sales streak is fabricated. But for a company trying to get some mojo back after literally three decades of blemishes and a near-death experience in 2009, a 75-month winning streak is a huge deal, and FCA is leveraging it for every sales and marketing angle possible.

Unfortunately for FCA, this isn’t 1986. Consistently improving sales figures can’t distract people from learning about the same old Chrysler quality control issues like weak transmissions, electrical gremlins and rust-prone sheet metal that still plague their models, even after all these years. That information is at everyone’s finger tips, and if I may offer a moment of speculation, it could be motivation for FCA to falsify sales figures. Not to mention how much company investors and Wall Street types love to see continually improving sales. But now we’re getting into economics and stuff, and that puts me to sleep just as quickly now as it did in high school. There’s a reason I’m a writer and not an accountant.

I’ll just say this. Should these allegations against FCA be true, I think it could finally lead to a long-overdue modernization of the whole convoluted process of buying cars through double-talking dealerships, with the goal being to post good sales figures instead of, you know, actually selling cars. Admittedly it’s a stretch, but that is the eventual future for the auto industry, and if you need proof, just look at Tesla’s ongoing battle in the States to sell cars directly to consumers.

I suspect this future is closer than major auto manufacturers would like to admit. And frankly, it’s about damn time.