Stellantis Faces Shareholder Lawsuit Over Alleged Earnings Deception

Stellantis NV, the multinational automotive manufacturing corporation, finds itself embroiled in legal turmoil as shareholders file a lawsuit in Manhattan federal court. The legal action, initiated on August 15, 2024, accuses the company of misleading investors about its financial health during the first half of 2024.

The lawsuit alleges that Stellantis artificially inflated its stock price by presenting an overly optimistic view of its inventory levels, pricing power, new product lines, and operating margins. This positive portrayal allegedly persisted from February 15 to July 24, 2024.

The truth, according to the plaintiffs, emerged on July 25, 2024, when Stellantis revealed its first-half financial results. The company reported a 40% decrease in adjusted operating income, totaling 8.46 billion euros ($9.28 billion), falling short of analysts' expectations of 8.85 billion euros. Additionally, the adjusted operating income margin dropped below the company's full-year target of double digits.

This announcement led to a significant decline in Stellantis' U.S.-listed shares, which fell by $1.94, or 9.9%, to $17.66 over the following two trading days.

The lawsuit names Carlos Tavares, the Chief Executive Officer, and Natalie Knight, the Chief Financial Officer, as defendants alongside the company. As of the filing date, Stellantis had not provided an immediate comment on the allegations.

It's worth noting that Stellantis, formed in 2021 through the merger of Fiat Chrysler and France's PSA, has quickly become a major player in the global automotive industry. The company operates 14 distinct brands, including well-known names such as Alfa Romeo, Citroen, Dodge, Jeep, Maserati, Opel, Peugeot, and Ram.

"We are investing €30 billion in electrification by 2025 and aim to have 70% of our European sales and 40% of our U.S. sales be low-emission vehicles by 2030."

This legal challenge comes at a time when Stellantis is navigating various industry pressures. Just a week prior to the lawsuit, the company announced potential layoffs affecting 2,450 employees at a suburban Detroit truck assembly plant, coinciding with the end of production for the Ram 1500 Classic truck.

As the sixth-largest automaker globally by sales, Stellantis operates in over 130 countries and employs approximately 300,000 people worldwide. The company has been actively investing in software development and exploring alternative fuel technologies, including hydrogen fuel cells for commercial vehicles.

The outcome of this lawsuit, filed under the case name Long v Stellantis NV et al, U.S. District Court, Southern District of New York, No. 24-06196, remains to be seen. It serves as a reminder of the challenges faced by major corporations in maintaining transparency and meeting shareholder expectations in a rapidly evolving automotive landscape.