has a legal hearing set to start Monday related to a product liability case that resulted in a $1.7 billion punitive award against the auto maker. Investors seem to be a little nervous about the Georgia case. They probably don’t need to be — yet.
The award was part of a jury verdict that held, in part, Ford (ticker: F) was responsible for insufficient roof strength of its super-duty trucks. Two people were killed in 2014 after their super-duty truck rolled over. Ford maintains that its design is sound.
The hearing covers Ford’s post-trial motions requesting a new trial and requesting that the $1.7 billion award be reduced or eliminated.
Compensatory damages under the award were set at roughly $40 million. Punitive damages are generally less than 10 times compensatory damages, according to Carl Tobias, a law professor at the University of Richmond, adding that is only a guideline and varies by state.
As for a new trial, Ford said the judge instructed the jury to assume the truck was responsible even though there was no finding that the truck was to blame during the original trial.
Reemergence of the trial news seems to be unnerving investors. Ford stock fell 2% in early trading Monday. The
was down 0.2%. The
Dow Jones Industrial Average
rose about 0.2%.
The issue for investors is the size of the award, the largest ever in Georgia. That amount of cash is material to Ford. Its market capitalization is about $48 billion. Wall Street expects the company to generate about $8 billion in free cash flow in 2022.
Results of the hearing likely won’t be known for weeks. When decisions are made investors can reevaluate the impact on Ford stock.
Ford shares have fallen about 43% this year. Most of the decline is due to the impact of inflation and rising interest rates, which have hit car-related stocks harder than most.
(GM) shares have dropped about 39% in 2022.
Write to Al Root at email@example.com