When two dealerships owned by a U.S. dealer group last week accused Fiat Chrysler of falsifying sales reports, it did two things: cratered FCA's share price and launched yet another discourse about the industry's integrity.
A civil racketeering suit filed in Chicago by two stores in the Napleton Automotive Group alleges FCA US offered dealers large sums of money to report unsold vehicles as sold. FCA vigorously denied the allegations, calling them "baseless" and "the product of two disgruntled dealers who have failed to perform their obligations" within their dealer agreements.
But the suit set off alarms. Dealers take carmakers to court all the time in the U.S., so why did this one lawsuit strip more than $1 billion from FCA's market value?
Analysts say it's largely nervousness -- about FCA's ability to complete its ambitious goals by 2018 and over whether the entire scandal-plagued, plateauing industry can be trusted.
"In our opinion, the emergence of these allegations point to a possible weakness in sales quality," said David Lim, senior analyst with Wells Fargo Securities. "We would not be surprised if other OEMs followed a similar tactic to varying degrees."
The plaintiffs, Napleton Arlington Heights Chrysler-Jeep-Dodge-Ram in suburban Chicago and Northlake Chrysler-Jeep-Dodge-Ram in Lake Park, Florida, are part of the Napleton group of Westmont, Illinois, owned by Edward Napleton. The group, which operates dealerships in Illinois, Florida, Pennsylvania, Missouri and Indiana, ranks No. 32 on Automotive News' list of the 150 top U.S. dealership groups, with 2014 retail sales of 21,550 new vehicles.