Stellantis, the automotive giant formed from the 2021 merger of PSA Peugeot and Fiat Chrysler Automobiles, is grappling with a significant sales decline in the U.S. while struggling with challenges in Europe. CEO Carlos Tavares acknowledged the difficulties but assured that the company is taking the right steps to address these issues. Speaking to reporters at the Paris Motor Show, Tavares admitted Stellantis fumbled a marketing plan earlier this year but is now on track for recovery. “If I don’t want that responsibility, I should do something else,” he said, emphasizing his leadership through both the company’s failures and successes.
Restructuring to Address Sales Decline
To tackle the company’s struggles, Tavares has implemented a significant management shake-up, including the replacement of the chief financial officer and the chief operating officers for North America and Europe. In the U.S., where sales have slumped by over 17% in the first nine months of 2023, Stellantis is working to reduce high dealer inventories and implement a fresh start for 2024. Tavares revealed that the company had reduced its U.S. vehicle inventory by 52,000 units, aiming to lower it to 350,000 by the holiday season. Despite these efforts, the company’s missteps in launching a new marketing strategy earlier this year led to a 20% sales decline in the second quarter, while the rest of the auto industry posted a 1% gain during the same period.
Industry analysts have pointed out that Stellantis lacks the affordable models that many U.S. consumers now seek. Ivan Drury, director of insights at Edmunds, noted, “They don’t have anything in that realm.” The pandemic and chip shortage had masked these issues for a while, but as the chip crisis has eased, buyers are shifting toward practical, lower-priced vehicles.
Struggles in the Electric Vehicle Market
In Europe, Stellantis is navigating a difficult landscape, including cuts to electric vehicle (EV) subsidies and fierce competition from Chinese automakers. The company is also working to meet the European Union’s ambitious goal of cutting greenhouse gas emissions by 55% by 2030. However, sales have been underwhelming as the EV market remains highly competitive and subsidy reductions have stymied growth. The EU has planned tariffs on Chinese EV imports, adding another layer of complexity to Stellantis’ European strategy.
Tavares, who reiterated his intention to retire when his contract expires in 2026, described the current automotive market as a “Darwinian period” and said that nothing, including plant closures or brand shutdowns, is off the table. “When you are fighting for survival, you have to consider everything is on the table,” he added. The company’s financial struggles have led to a sharp revision of its full-year forecast, with net profits for the first half of the year down 48% compared to 2022. Stellantis now expects a negative cash flow of €5-10 billion ($5.6-11.2 billion) by year-end.
Labor Disputes and Production Issues
As Stellantis works to regain its footing, labor disputes have emerged on both sides of the Atlantic. In Italy, unions are preparing for a one-day strike in protest of production cuts. Meanwhile, the United Auto Workers (UAW) in the U.S. is threatening strikes at multiple plants, accusing Stellantis of failing to meet its commitments to build vehicles and reopen factories. UAW President Shawn Fain has been particularly vocal, accusing Stellantis of delaying the reopening of its Belvidere, Illinois, plant, which was promised in a contract to start producing gas and electric pickups by 2027. Fain expressed frustration over the company’s actions, calling it “gross mismanagement by top executives.”
Stellantis, however, has denied claims of reneging on its commitments, stating that the Belvidere plant’s reopening has been delayed due to market conditions, not canceled. The company also rejected reports that production of the Dodge Durango SUV would move from Detroit to Canada. Despite these reassurances, union grievances have continued to mount, with local offices filing complaints and Stellantis filing lawsuits seeking damages should strikes occur.
The Path Forward: Can Stellantis Bounce Back?
Industry experts agree that Stellantis faces an uphill battle in both the U.S. and European markets. Sam Abuelsamid, mobility analyst for Guidehouse Insights, noted that Stellantis’ product lineup is aging, with few recent updates. Even the company’s top-seller, the Ram pickup, only received a modest refresh this year. “They don’t necessarily have the right products in the right segments,” Abuelsamid said, adding that while Stellantis has a range of new products in the pipeline, they are not expected to hit the market anytime soon.
Tavares remains optimistic that the company’s new leadership team will drive profits and improve customer satisfaction. One potential bright spot is Stellantis’ upcoming $25,000 small electric Jeep, which could help the company tap into the growing demand for affordable EVs. But as Drury pointed out, even with price cuts and incentives, rolling out new vehicles to meet shifting market demands takes time. “Aside from incentives and price cuts, not really,” said Abuelsamid on what Tavares can do to fix the situation quickly.
A Rocky Road Ahead
As Stellantis navigates through market challenges, restructuring, and labor disputes, it faces a long and uncertain road to recovery. While the company’s management shake-up and efforts to reduce inventory are steps in the right direction, broader issues—such as a lack of affordable models and intense competition in the EV market—are harder to address quickly. With the UAW threatening strikes and European sales under pressure, Stellantis must find a way to balance short-term fixes with long-term strategies.
The next few years will be critical as the company works to regain its position in the global automotive market, with Tavares at the helm, steering through what he has described as a Darwinian era in the industry.
