Investors and bankers familiar with the matter said Monday that outgoing CEO Carlos Tavares will quickly turn around the struggling U.S. business by cutting costs rather than focusing on long-term strategy. The company revealed that it had clashed with Stellantis' board of directors over the plan.
Shares in the makers of Jeep, Fiat and Peugeot fell as much as 10% as investors worried that Tavares' departure on Sunday would leave a vacant position at the top of the world's fourth-largest automaker, with shares in the maker of Jeep, Fiat and Peugeot falling as much as 10% in July 2022. It was the lowest price since March. It closed 6.3% lower in Milan trading.
Stellantis has struggled to rid its key North American market of overcapacity and bulging inventories as global demand remains weak and competition from Chinese rivals intensifies, particularly in the electric vehicle sector. There is.
In addition to its woes in the U.S., the company's focus on raising prices at mass retailers has alienated customers hit by inflation in Europe, another key market.
Shortly after announcing the shock profits in September, Stellantis announced that Tavares would step down at the end of his current term in early 2026. The process to select a new CEO was originally scheduled to be completed by the final quarter of next year.
Interviews with six shareholders, bankers and analysts have since revealed disagreements between Tavares, long one of the auto industry's most respected executives, and the board over how to resolve the crisis. This shows how quickly the situation deepened.
An investment bank executive briefed on the matter said Monday that the board is becoming increasingly concerned about Mr. Tavares' strategy to turn things around.
The banker said that in recent months, the CEO, who has just over a year left on his contract, has been primarily focused on cutting costs. The board was concerned that this would not only lead to quality issues, but also strain the company's ability to develop and design new models.
The banker said customers and dealers were outraged by Mr. Tavares' strategy.
The launch of some key models has been delayed, including a new version of the popular Peugeot 3008 mid-size SUV and the affordable Citroen C3 city car with the electric version of the e-C3.
Sources told Reuters on Sunday that the board felt Tavares was more focused on finding short-term solutions to protect his reputation than working in the company's best interests. He said tensions were high.
Stellantis declined to comment, and Reuters was unable to reach Tavares on Monday.
Stellantis' board of directors is considering Antonio Filosa, head of North American operations, and Maxime Picat, head of procurement, as internal candidates for the CEO role, sources said on Monday.
Problem
Analysts said Mr. Tavares' cost-cutting efforts particularly hurt relations with U.S. dealers and the United Auto Workers union.
Kevin Farish, chairman of the Stellantis National Dealer Council, said in a Sept. 10 letter to Tavares that the pursuit of short-term profits has led to the “rapid deterioration” of the Jeep, Dodge, Ram and Chrysler brands. “You created this problem,” he complained.
The UAW has threatened to go on strike against the automaker over investment delays, and Stellantis has filed a lawsuit accusing the union of breach of contract.
Massimo Baggiani, founder of Niche Asset Management and shareholder of Stellantis, said another bottleneck for investors was the European Union's upcoming emissions restrictions as EV sales slow. Tavares said he took a strong stance while setting goals.
That “scared” investors and major shareholders, he said.
CEO Tavares repetition It affirmed Stellantis' commitment to meeting EU targets and said last-minute regulatory changes or postponements, such as those proposed by European car lobby ACEA, would be unfair.
Starting January 1, the new rules, known as Corporate Average Fuel Economy (CAFE), will require the company to generate about 21% of its total sales in 2025 from electric vehicles.
If they fail to meet their targets, they must either pay other companies with lower emissions to pool their emissions and reduce their average carbon footprint, or pay a fine.
Stellantis' current EV sales share in the EU is approximately 12%.
Jean-Philippe Imparato, head of the European Commission, warned in an interview with Italian newspaper Milan Finanza last month that failure to comply could result in fines of up to 3 billion euros (approximately 310 billion yen). did.
Bernstein analyst Steven Reitman said Tavares' early departure, despite his determination to turn things around by 2026, showed how deep the group's problems were. Ta.
“This shows what we've been saying for a long time: the problem is so deep-rooted that it's not easy to solve now,” he said.
