The major auto manufacturer Fiat Chrysler Automobiles N.V. was recently hit with a securities class action suit.
The lawsuit, filed in the U.S. District Court for the Eastern District of Michigan, alleges that the company made false or misleading statements to its investors as to the state of its business, operations, and prospects. These allegations stem from a revelation made earlier in the year that Fiat Chrysler had miscounted sales figures for years, and therefore did not actually see the number of autos it sold rise for 75 straight months – a run of more than six years – as it previously reported. The class period for this suit is from October 2013 through July 18 of this year.
What happened here?
All this came to a head when a federal investigation into how FCA was reporting its sales numbers, and caused the company to revise its estimates downward, according to a report from The Wall Street Journal. When that happened, it was found that the streak of month-over-month sales growth the company enjoyed actually came to an end almost three years prior, instead ending after 40 months of growth back in September 2013. A number of other months also received revised sales numbers. That now-revised run was a record in the auto sales industry, and after the change, it seems Subaru holds the high mark at 55 months of growth.
The company had previously faced lawsuits from individual dealers saying that it had inflated sales numbers, prompting investigations by the U.S. Department of Justice and the Securities and exchange commission, the report said. For its part, though, Chrysler says it did not purposely misstate its sales figures, but rather had a few issues in its counting systems that led to the erroneous monthly and annual reports. Some of these stemmed from sales made in one month which then fell through when would-be buyers couldn’t secure financing or later stepped out of the sale for other reasons.
Further, it notes that the number of sales it had to deal with in the revisions came to about 4,500, but that during the five-year period in question the company sold about 7.7 million vehicles, the report said.
The affect on stock prices
As a result of these issues, which were first reported in late July, Chrysler Fiat’s stock took a minor hit, according to Google Finance. A few days prior to the revelations, it was trading at an even $7 per share, but that number fell to $6.08 per share by early August. And throughout August and September, it hasn’t yet gotten back to that previous price. The stock’s high price for the year was observed in early January, when it was trading at about $9 per share, and as recently as late April, it was north of $8 per share. As of Sept. 27, it was back in the low $6 range.
For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or email@example.com.