Magna International Made Bogus Claims About European Profit Margins, Class Says
Magna International Made Bogus Claims About European Profit Margins, Class Says
By DEE MOORE
By DEE MOORE
(CN) - Magna International made "materially false and misleading statements" and failed to disclose the company's true financial condition which resulted in weak European margins, pricing and operational issues, shareholders claim in a class action.
Magna is one of the largest and most diversified suppliers of automotive components, systems and modules world-wide, the complaint states, and has manufacturing, engineering and sales operations in 26 countries. Its principal offices are in Ontario, Canada.
Lead plaintiff City of Taylor General Employees Retirement Fund filed the action in the U.S. District Court Southern District of New York and named founder and former chairman of the board Frank Stronach, CEO Donald Walker and CFO Vincent Galifi as defendants.
According to the complaint, while Magna's European market was floundering, company operatives continued to make positive and optimistic statements about the company's financial status, but "lacked a reasonable basis for their positive statements about the Company's European operations and business prospects."
The complaint cites numerous examples of the company issuing mixed messages claiming that these "presented a misleading picture of Magna's business and prospects."
Magna issued a press release in which Walker stated that, "As 2011 begins vehicle production is poised for future growth in a number of important markets for us . . . Accordingly our outlook reflects significant sales growth including expansion in high growth markets in the next few years ... We also have the balance sheet, cash flow generation, engineering and manufacturing, technologies and motivated workforce to support out growth initiatives around the world."
Meanwhile that same day, CFO Galifi, who spoke at the January 2011 Deutsche Bank Securities Global Auto Industry Conference, had a very different message.
"Our European segment has - underperformed recently and we're taking some actions to improve results there and we're going to see improvements in '11 and in the coming years ... In Europe, while we have returned to profitability margins in total have not met our expectations."
When Magna's financial situation finally came to light, shares which had traded at $61.55 in January 2011 fell to $39.42 by August 2011.
The class is represented by Samuel Rudman and David Rosenfeld of Robbins Geller Rudman & Dowd LLP of Melville, N.Y. and Thomas Michaud of VanOverbeke Michaud & Timmony of Detroit.
Copyright Courthouse News Service 2012
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