When auto manufacturers fail to comply with safety regulations, they put their customers and others on the road at risk. They can also do some financial harm to their investors.
In 2015, a group of investors filed a federal lawsuit against Fiat Chrysler Automobiles N.V. claiming that the company misled its shareholders about a number of safety issues, made false claims that it was in compliance with safety laws, minimized investigations into problems with its vehicles and delayed recalls. The investors claimed that when the company admitted its lack of compliance, the stock price dropped and they lost money.
Initially, Fiat Chrysler sought to have the case dismissed. However, it has now agreed to settle the suit and pay $110 million to investors who purchased stock in the company between Oct. 2014 and May 2017. The settlement still needs the approval of a judge.
The agreement doesn’t require the company to admit to any wrongdoing. In fact, the company released a statement saying that it “continues to vigorously deny the allegations of wrongdoing made in this lawsuit.” Its insurance will cover the cost of the settlement.
This isn’t Fiat Chrysler’s only recent legal issue. Earlier this year, it settled an antitrust suit alleging that it pressured dealers to report false sales figures. In January, the company agreed to pay some $800 million to settle legal actions brought by the U.S. Department of Justice, individual states and consumers. Those lawsuits alleged that some of the auto maker’s diesel vehicles violated clean-air regulations.
When the actions of a company violate the law and/or damage consumer confidence, stock prices can plunge and investors are at risk of losing a considerable amount of money. Those investors impacted by the company’s actions have the right to go to court to try to recoup their losses.