NY dealer sues Stellantis for diverting inventory

A dealership outside New York City is accusing Stellantis of giving illegal “secret discounts” to competing stores and cutting its vehicle shipments as retaliation for a previous legal victory over the automaker.

The lawsuit filed by Larchmont Chrysler-Jeep-Dodge-Ram, located about 20 miles northeast of Manhattan, seeks damages for alleged violations of federal antitrust laws and New York state dealer laws as well as for what it calls a breach of Stellantis’ duty of good faith and fair dealing.

“A decades-old, family-run dealership is facing its demise through no fault of its own,” the complaint said. Larchmont is owned by Alfredo Gulla, while day-to-day operations are handled by daughters Eleanor and Silvana Gulla.

“Stellantis’s goal is to starve Larchmont of inventory as retaliation for asserting its legal rights,” the suit said, referring to a New York Department of Motor Vehicles administrative proceeding that Larchmont won.

Larchmont spent several years fighting Stellantis’ predecessor, Fiat Chrysler Automobiles, over what it argued were flawed sales quotas. An administrative law judge sided with the dealership, and the DMV’s appeals board upheld the decision in 2021, shortly after FCA merged with PSA Group to form Stellantis.

Stellantis spokeswoman Jodi Tinson declined to comment because the case is pending. The automaker has until March 6 to file a response with the court and has not yet done so at the time of publication.

The complaint accuses Stellantis of a variety of illegal practices amid “the largest inventory crunch the car industry has ever faced” resulting from the coronavirus pandemic and global microchip shortage.

Among those practices, Larchmont alleges, is diverting promised “ready-to-ship” vehicles to other dealerships and replacing them with “not-yet-built” allocations of vehicles that the store could not sell.

The suit said Stellantis reduced Larchmont’s allocation by 38 vehicles in summer 2021, 22 in fall 2021 and 16 in November 2021, each time sending them to a different dealership. In August 2021, for example, the dealership says it received 20 percent fewer vehicles than anticipated.

“Larchmont is given later-than-normal delivery windows while competing dealerships get priority inventory,” the suit said.

In the previous case it filed with the New York DMV, Larchmont challenged FCA for not adjusting its Minimum Sales Responsibility metric to reflect local market conditions, including competitors’ brokering activities. The judge ruled that the metric was unreasonable, arbitrary or unfair as a sales performance standard and prohibited FCA from continuing to use it to determine whether Larchmont was complying with its sales agreement.

The newly filed lawsuit contends that replacing vehicles in the store’s allocation with to-be-built inventory or products further behind in the pipeline count “sabotages Larchmont’s ability to earn new allocation.”

It also accuses Stellantis of using high-volume “bargain-basement brokers who have become prevalent in the tri-state area.” Larchmont said dealers from as far away as Pennsylvania have been selling into its territory through brokers who receive extra and more popular vehicles, secret discounts and below-invoice pricing.

According to the suit, a former employee of two “favored” dealerships near Larchmont told the DMV about the secret discounts to facilitate brokering. “One or more” of those stores’ dealer-principals negotiated lower prices with Stellantis executives, it said. “These dealers take special meetings and make secret deals with Stellantis executives in Michigan, securing inventory at volumes and on terms unavailable to other dealerships.”

These discounts, the complaint said, give favored dealerships a substantial and unfair pricing advantage that Larchmont is unable to match.

A lawyer for the dealership said he isn’t authorized to discuss the case.