No, stitches aren't part of raw leather. That is damage to the skin of the hide that the re-dye or original dye was trying to hide.
On pigmented seats (which you have) the seats are spray painted from the manufacturer (of the seat) to a color.
Your original pigmented coating became damaged from use.
Somebody (likely the dealer) resprayed parts of the seat with a cheap coating.
That cheap coating is now peeling off, reveling the damage they tried to hide.
I really hope this makes sense; there is no mystery here. :xyxthumbs:
Agree 100% with your assessment, Todd. That's exactly what it looks like to me as well.