Stellantis CEO to visit US to craft delayed profit turnaround plan, source says By Reuters

By Giulio Piovaccari, Gilles Guillaume and Nora Eckert

DETROIT (Reuters) – Stellantis (NYSE: ) CEO Carlos Tavares will visit Detroit this week, where he will look to develop a strategy to fix the European automaker’s struggling North American operations and reassure employees and investors, said a person familiar with the plans.

The strategy is likely to be developed by the end of this week, said the source, who asked not to be identified.

While Tavares typically visits North American operations every four to six weeks, according to the source and a second person, one of them added that the CEO’s visit this week during his summer vacation was intended to send a clear signal.

“He wanted to make it clear that he was dealing personally,” the source said. “The North American operations basically fund the rest of the group.”

Tavares, who described Stellantis’ first-half results as “humbling,” said the Franco-Italian automaker’s North American business suffered from a mix of high vehicle inventories, production issues and a lack of “refinement ” in the way he approached the local market. . As a result, Stellantis shares are down nearly 50% from their March highs.

A spokesman for Stellantis declined to comment.

During this week’s visit to American’s offices in Auburn Hills, Mich., Tavares will initially meet with top managers before formulating a strategy by the end of the week to fix things, the source said.

Stellantis’ operating income in the first half of the year fell 40%, mainly due to the poor performance of its North American business, its profit strength. Vehicle sales in the region for Stellantis’ top brands, Ram and Jeep, both fell at least 33 percent from the first half of 2019 to the same period this year, according to research firm Cox Automotive.

“We were arrogant”

Tavares blamed himself for not being quick enough to act as problems at the group’s North American operations piled up and, when he presented first-half results, said he would spend part of his summer vacation there to solve them.

“We were arrogant,” he said earlier this year at the Stellantis investor day in Michigan. – I’m talking about myself, about no one else.

These results came on the heels of Tavares enjoying a compensation package for Stellantis’ 2023 results of up to 36.5 million euros ($40.6 million), a 56 percent increase from the previous year.

Stellantis’ main mistake in North America was to keep raising prices in an attempt to increase margins even though the market signaled that customers were not ready to pay, which made some Stellantis models too expensive, a said Jefferies analyst Philippe Houchois.

“They lacked the pragmatism to immediately address the inventory build, they should have done more tactical pricing to avoid that,” Houchois said.

Massimo Baggiani, founder at Niche Asset Management in London, said Tavares remains “the best executive in the industry”.

“Now it’s critical for him to maintain financial discipline. He has to prove he can grow car sales without squeezing margins, losing money and burning cash,” Baggiani said of Tavares.

Stellantis has already moved to cut costs by cutting its US workforce.

It announced this month that it will lay off up to 2,450 workers at its Warren Truck Assembly plant outside Detroit as the automaker ends production of the Ram 1500 Classic truck. In late July, the company said it would also offer a round of voluntary buyouts to U.S. salaried employees.

Tavares also said there were particular inefficiencies at two U.S. plants, but declined to specify which ones. In July, he told reporters that the run rate at the Sterling Heights assembly plant in Michigan was low.

Tavares’ visit comes amid growing unease among some investors and union workers about the North American struggles.

United Auto Workers President Shawn Fain has threatened that the U.S. union representing U.S. factory workers may strike if the automaker does not honor investment commitments outlined in last fall’s labor agreement. Relations between the union and the automaker have been strained as Stellantis has laid off hourly workers at the plants this year.

Meanwhile, a group of shareholders sued Stellantis last week, saying it defrauded them by hiding rising stock and other weaknesses before posting disappointing earnings that sent its stock price tumbling.

The company said the lawsuit was “without merit” and told the UAW it had not violated the terms of their bargaining agreement and that the union could not legally strike.

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