When the Auto Parts Wal-Mart’s ‘W’ Goes Up in Smoke

On Friday, Walmart’s (WMT) stock dropped as much as 1% following a report that a supplier to the retailer had used a false claim about a new auto parts supplier.

On Sunday, the company announced that the supplier, Autoliv, would be buying its shares from the US government, which could impact the retailer’s stock price.

Auto Parts retailer Smith AutoParts, which manufactures parts for auto manufacturers including Volkswagen, Ford, and GM, had been the target of an investigation into claims it was involved in illegal child labor.

According to a statement from Smith, the investigation had been initiated by the US Department of Justice (DOJ) “after a complaint by the Auto Workers Union (AWU).”

In the statement, the DOJ said that it was investigating “whether Autoliva engaged in child labor and child labor violations in connection with the manufacture of vehicle engines for the Ford F-150 pickup truck and other vehicles.”

Autolivas’ parent company, General Motors (GM), is also under investigation.

In a statement, Smith said it “has always taken our manufacturing practices very seriously.”

In a follow-up post, Smith added that “we continue to work to restore confidence in our suppliers, and are working with the DOJ and other stakeholders to develop a new policy to address allegations of child labor.”

Smith said that its decision to terminate Autolivia was made on “pilot basis” and that it will now use its stock to “improve the quality and performance of our supply chain.”

Smith, however, did not say how it will pay for the “reinstatement of Autolavas shares.”

The stock fell below $40 a share for the first time in six months as the company struggled to deal with the investigation and the news that Autolavia will be buying shares.

Smith said the decision to end Autolava shares was made “on pilot basis.”

“We will continue to provide our full support to the company, and will provide additional information to shareholders in due course,” Smith said.

Autolives shares closed at $37.94 a share on Monday.

“Smith has been a leader in the auto industry for nearly 50 years and continues to innovate, innovate, innovate and innovate in our supply chains to meet the growing demand for quality automotive parts,” Steve Molloy, vice president of sales for Autolive, said in a statement.

“This new investigation by the government, coupled with Smith’s efforts to improve our business practices, has made the company a stronger and more attractive investment for our shareholders.”

Autoleves shares fell below the $40 mark on Monday as investors worried about the company’s future.

The stock had climbed more than 4% in 2017, and is now down more than 1%.

Smith’s shares closed below the average price of $40 for the year, which is down more.