U.S. Markets closed

BMW Investigated By SEC Over U.S. Sales Reporting Practices

Gabrielle Coppola and Gregory Mott

(Bloomberg) -- BMW AG is being scrutinized by the U.S. Securities and Exchange Commission over its sales reporting practices, months after the regulator extracted a penalty from Fiat Chrysler Automobiles NV over similar issues.

The German automaker has been contacted by the SEC and will cooperate fully with its investigation, Phil DiIanni, a spokesman, said by phone. The agency doesn’t comment on the existence of any probes, SEC spokesman Kevin Callahan said.

The inquiry creates a new headache for BMW just as it shows signs of recovering from a series of stumbles. The company last month reported a jump in earnings under new Chief Executive Officer Oliver Zipse as he presses ahead with a cost-cutting program after a slump in European car sales.

Last month, BMW agreed to pay a 28 million-euro ($31 million) fine to settle a German antitrust investigation of the industry’s steel-buying practices. The company has also set aside 1.4 billion euros for a European Union probe into alleged collusion by the country’s automakers to delay the rollout of cleaner-emission cars.

BMW has been in a tight race with Daimler AG’s Mercedes-Benz for leadership of the U.S. luxury auto market. While Mercedes has owned bragging rights the last three years, BMW leads by fewer than 3,300 units this year through November. Bernhard Kuhnt, who took over as president of the latter automaker’s North America business in early 2017, has reinvigorated sales with an onslaught of new sport utility vehicles.

Dealers have criticized BMW in the past for pressuring them to buy vehicles from the manufacturer to stock their fleets of car loaned out to customers who are having their vehicles serviced. Bloomberg News reported on bonuses or allowances the company paid to dealers in late 2015 and mid 2012 that helped inflate sales results.

Dealers are required to mark the cars as sold. To re-sell them to consumers as used models, they typically have to do so at depressed prices. In the meantime, the retailers also have to foot the costs of carrying the cars in inventory.

Fiat Chrysler agreed in September to pay a $40 million penalty related to years of sales reports the SEC said were fraudulent. The Italian-American automaker misled investors by wrongly claiming a years-long streak of monthly gains and inflated results by paying dealers to report fake sales, according to the agency.

The Fiat Chrysler practices came to light following a dealer lawsuit filed in January 2016. Some carmakers have backed away from monthly U.S. sales reporting since last year.

BMW’s American depositary receipts fell 1.3% to $26.96 in New York trading on Monday. Financial markets are closed Tuesday in Germany.

The Wall Street Journal reported on the SEC’s investigation of BMW earlier.

(Updates with earnings, other probes in paragraphs 4, 5.)

--With assistance from Tim Loh.

To contact the reporters on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net;Gregory Mott in Washington at gmott1@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Eric Pfanner, Chester Dawson

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.