The world's fourth-largest automaker is in trouble.
Stellantis, the Netherlands-based conglomerate that currently owns iconic American brands like Chrysler, Ram Trucks, Dodge and Jeep, expects third-quarter sales to be dismal.
Dodge's reputation for performance also suffered. In what world would it make sense to eliminate the Chargers and Challengers?
The company reported Wednesday that sales would be down 20% compared to the third quarter of 2023 and 17% for the year.
Investors are heading for the exit.
Worse than coronavirus
The company's third-quarter global sales won't be released until the end of this month, but there's little reason to expect an upside. Production in Italy has fallen sharply, falling 41% to about 238,000 units so far this year, Bloomberg reported.
That's less than the amount of vehicles it manufactured in 2020, when factories were shut down due to the coronavirus pandemic.
Even more dire numbers:
The stock is down 12% this week and 40% since the beginning of the year. At the beginning of the year, the company's market capitalization was $70 billion. It now stands at $36 billion, a loss of $34 billion in value in just 10 months.
Bad year for Tavares
This is a big change in fate. Last year, Stellantis was one of the most profitable full-line manufacturers with double-digit profit margins, and Carlos Tavares was hailed as one of the best CEOs in the industry.
But this year he has managed to antagonize everyone: dealers, unions, employees and even the Italian government. The board is also actively searching for a new CEO whose contract expires in 2026.
And he probably won't last very long. The board may need to buy him out, if only to prove it's upholding its fiduciary duties.
There might even have been a V8!
Consider one of the company's most obvious failures. It removed the Hemi V8 from two of its most valuable brands, Jeep and Ram, while pouring more money into electric cars that people don't buy.
Dodge's performance reputation also suffered. In what world would it make sense to eliminate the Chargers and Challengers?
With that platform, Dodge could have sold the Challenger in comparable numbers to the Mustang for another 10 years, especially if there was no competition from the Camaro.
The Challenger and Charger were moneymakers. The profit per unit over 20 years on the same platform is unparalleled. Sadly, a combination of heavy government regulation and an inability or unwillingness to understand the American market led to this situation. And Dodge may soon follow suit. Stellantis clearly needs Lee Iacocca.
The Italian sports car brand followed suit, removing both Fiat and Alfa Romeo performance models from the U.S. market. It may not be long before Maserati joins the Stellantis portfolio.
To combat this downturn, Stellantis plans to reduce logistics costs by 25% in the second half of this year.
Labor union predicament
Significant reductions in personnel costs are also planned, which is sure to further deteriorate already strained relations between the company and labor unions.
The UAW put a lot of pressure on Stellantis during the final strike. After reaching a settlement, the company ended up moving some of its production to Mexico to save costs. Stellantis filed nine lawsuits against the UAW last week seeking to block an attempted strike over promises made in the 2023 contract.
brain drain
There are also concerns about the resignation of executives under Mr. Tavares. Key U.S. talent such as Jim Morrison and Tim Kunikis, as well as several other top talent, have left the company, giving up decades of experience.
That Mr. Tavares allowed this to happen suggests incompetence, indifference, or arrogance. An example of the latter was seen before at DaimlerChrysler, where German executives overestimated their understanding of their American brands. If Stellantis can learn from the past.
This week, Stellantis employees (some of whom I know personally) received early takeover offers. This means more high-quality, long-term talent is leaving the company.
change one's tune
The most disappointing thing about Stellantis' current situation is that Tavares got off to a promising enough start.
He frequently tells the truth about EVs and warns EU politicians about the folly of the EU7's emissions regulations. He was very good at walking the line between being “green” and being profit-driven.
But in recent months, he seems to have changed his tune — at least considering his public statements about: Preparing for “migration” Bringing the industry into compliance with new sustainability standards. While other companies are moving to a mix of hybrids, plug-in hybrids and electric vehicles, Stellantis is going all in on EVs. People are talking behind the scenes and things are clearly getting worse after July and summer sales numbers were abysmal.
Stellantis expects the launch of a total of 20 new models across its vast brands to help automakers in the second half of 2024. The question is whether they can find the leadership needed to properly handle them. We will continue to monitor the situation and keep you updated.
