Stellantis Faces Lawsuit Over Alleged Fraud, Stock Drop

Stellantis, the multinational automotive manufacturing corporation, is facing a legal battle with its US shareholders. The shareholders have filed a lawsuit, alleging that the company engaged in fraudulent practices by concealing rising inventories and other underlying issues, leading to a significant drop in its stock price after a disappointing earnings report.

The complaint, filed on Aug. 15, 2024, in Manhattan federal court, accuses Stellantis of artificially inflating its stock price throughout much of 2024. Shareholders claim that the company offered "overwhelmingly positive" assessments regarding inventories, pricing power, new products, and operating margins, creating a misleading picture of its financial health.

The core of the lawsuit centers on Stellantis' first-half earnings report, released on July 25, 2024. According to the complaint, Stellantis reported a 40% drop in adjusted operating income, totaling €8.4 billion (US$9.2 billion). This result fell short of the €8.8 billion expected by analysts. Additionally, Stellantis acknowledged that its adjusted operating income margin had dropped below its targeted double-digit figure for the year.

Following the earnings announcement, Stellantis' US-listed shares plunged, falling by US$1.94, or 9.9%, to US$17.66 over two trading days. This sharp decline in share price triggered the lawsuit, with shareholders seeking unspecified damages for those who held Stellantis shares between Feb. 15 and July 24, 2024.

Stellantis, which oversees 14 automotive brands, including Alfa Romeo, Citroën, Dodge, Jeep, Maserati, Opel, Peugeot, and Ram, has been in the spotlight for other operational challenges as well. Just last week, the company announced potential layoffs of 2,450 employees at a suburban Detroit truck assembly plant, where production of the Ram 1500 Classic truck is scheduled to end.