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Fiat Chrysler to Pay $110M as Settlement Despite Disagreement

Zacks Equity Research

Fiat Chrysler Automobiles N.V. FCAU is about to pay $110 million to settle a lawsuit filed by the U.S. investors in 2015, per Reuters. Shareholders charged the automaker on claims that they were misinformed that the vehicles were in compliance with diesel emission and federal safety regulations.

Further, the investor group claimed that they lost money when shares tumbled on reports of Fiat Chrysler’s failure to properly undertake the vehicle recall. The settlement for investors who bought shares between Oct 13, 2014, and May 23, 2017, must be approved by a federal judge, per Bloomberg.

Despite paying the settlement, Fiat Chrysler disagrees with claims issued by the investor group in the lawsuit. Its insurance will be used to pay for the settlement.

Fiat Chrysler Automobiles N.V. Price and Consensus


Fiat Chrysler Automobiles N.V. Price and Consensus | Fiat Chrysler Automobiles N.V. Quote

Prior to this, the company agreed on a settlement with Environmental Protection Agency (“EPA”) that cost it roughly $800 million in January 2019. EPA sued this automaker on charges of using illegal engine-control software in diesel vehicles to pass emissions tests in 2017.

These settlement charges along with frequent vehicle recall costs are hurting Fiat Chrysler’s profit margin. Also, stiff competition in the SUV and truck market is another headwind. The automaker expects 2019 earnings per share to be €2.70, owing to higher costs and softening demand in China. In 2018, its earnings were €3 per share.

Over the past three months, shares of Fiat Chrysler have underperformed the industry it belongs to. During the said period, shares of the company have lost 1.4% compared with its industry’s decrease of 1.1%.


Zacks Rank & Stocks to Consider

Fiat Chrysler currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader auto sector are CarGurus, Inc. CARG, Fox Factory Holding Corporation FOXF and General Motors Company GM. CarGurus and Fox Factory currently carry a Zacks Rank #2 (Buy) while General Motors sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CarGurus has an expected long-term growth rate of 5%. Over the past three months, shares of the company have gained 10.5%.

Fox Factory has an expected long-term growth rate of 15.1%. The stock has gained 16% in the past three months.

General Motors has an expected long-term growth rate of 8.9%. Over the past three months, shares of the company have gained 11%.

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