It was the first time FCA’s Australian dealers had been audited and the dealers were in shock last June following audits of sales bonuses earned in 2014 and 2015 which prompted the OEM to seek clawbacks averaging $28,000 from 19 dealers – but in one case was as much as $267,000.

Dealers feared that once the whole network was audited the total amount in clawbacks could have amounted to a $2.75 million hit.

GoAutoNews Premium was told of a June meeting with senior dealers, Australian management including president and CEO Steve Zanlunghi and an audit team from the United States led by the head of international audit for FCA, Bill Chin.

The auditors had claimed that dealers were liable to repay the bonuses because their claims made during 2014 and 2015 were not made to the strict letter of the bonus rules. But the dealers said that during those two years they were only doing what sales staff at FCA was telling them to do to meet targets.

The meeting was called to stop the matter heading for court.

At that meeting, FCA management was presented with documents backing up dealers’ claims that they were being penalised for only doing what FCA management had asked or induced them to do to meet sales targets during those years.

The dealers said they would give FCA time to review the documents which they claimed would form the basis of a lawsuit “that you will lose” if FCA chose to pursue the clawbacks.

Since the June meeting, FCA Australia management has been working with its national dealer council and the audit office in the US to hammer out a solution.

With the solution ironed out in the new year, management decided to surprise the dealers at the most recent national dealer meeting in February and posted a slide to say that every dealer who had been charged back under the sales audit was being refunded.

The solution meant that the 19 audits completed to that point would be regarded as “consultative audits” where dealers would be counselled about the rules regarding demonstration vehicles and delivery timing of cars sold to customers.

The remaining 81 dealers are now undergoing “consultative audits” where any faults found will be documented and remedial action taken but no clawback applied.

FCA says it has, since Mr Zanlunghi was appointed in 2016, changed the rules applying to volume bonuses and the company says that, unlike many OEMs, it no longer pushes dealers to register cars or use other devices to meet bonuses.

The company has since commenced a nationwide training program to spell out volume bonus policies and procedures to avoid falling foul of any future audits.

But the clawback last year had stunned the FCA network with the whole dealer group shocked at what befell the first 19 dealers to be audited and fearful of what the remainder would face once the audit team swept through.

FCA’s Australian dealers claimed that demands for payments so large on a franchise that had made no profit for three years would weaken the network through a mass handing back of the franchise.

Dealers said this would damage the franchise at a time when the company was trying to rebuild both the Jeep and Alfa Romeo brands in Australia.

GoAutoNews Premium was told that 19 FCA Australia dealers had been audited for 2014 and 2015 and that the auditors had taken a particularly hard line on sales claims by dealers, many of which receive large bonuses from FCA Australia for meeting various monthly or quarterly sales targets.

These payments were so significant that in many cases dealers could not afford to miss their target because the profit margins from the actual sales of vehicle alone were so thin.

Because there was so much money at stake, it was therefore common practice at FCA at the time, and also across the industry, for dealers to call or “register” cars as sold to meet the target and then scramble to get a buyer into the car later. Dealers would also hold over sales from previous months to put them towards meeting targets in following months.

Management was encouraging these practices because last-minute calling of cars as sold helped those managers to meet their own internal incentive bonuses and there was often pressure on dealers in the form of last-minute addition dollars to call cars as sold in the last days of the month so the OEM managers (as well as dealers) got their bonuses.

However, dealers had certain time limits to sell the cars that had been called and if they missed the time limits the company clawed back the bonuses.

FCA dealers claim that during the 2014-2015 audit period it was common practice for FCA Australia sales personnel to put so much pressure on dealers to call cars that the cars were often not even in stock in dealerships, or still in transit, and it was physically impossible for many cars to even reach the retailer before the time limit ran out.

One dealer said at the time of the June meeting that Jeep dealers were “travelling very badly and they have been losing very large sums of money for the past three years”.

“But what is incredible is the pressure that factories had put on dealers to report cars as sold when sometimes they were not even in stock,” the dealer said.

“FCA would change the status so they could get their own minimum or required targets and therefore the cars could never have been registered or called as retailed in a proper timeframe from the dealers’ point of view.

“So they have been reporting their wholesale performance to their head office registrations by inducing their dealers to play ball and to claim cars sold but now they have come in and said that every bit of money they gave the dealers they now want back.”

FCA Australia says that it has drawn a line in the sand and the company and its dealers have now put those sales bonus activities of earlier years behind them.

An FCA spokesperson told GoAutoNews Premium: “Since August 2018, FCA Australia has been collaboratively working with our national dealer council to find an amicable and mutually beneficial solution in relation to FCA Australia’s sales audit processes. A lot of work was put into finding an amicable solution between our dealer partners and us.

“FCA Australia is pleased with the outcome and looks forward to continuing to work with our dealers to move our collective businesses forward,” she said.

By John Mellor